The evolving political situation in Libya, the increased stability in Iraq and the global push for shale gas will have a great impact on the oil and gas martkets next year, a report said.

The third annual Oil & Gas reality check report from Deloitte Touche Tohmatsu (DTTL), recently released at the World Petroleum Congress (WPC) in Doha, examines how the oil and gas sector could evolve in the coming year considering the potential impact of trends that emerged in 2011.

The governmental changes in Libya will have a deep impact on how its oil industry functions, as well as the extent of its participation in the global market, according to the report.

In Iraq, the increase in stability and decrease in violence could help the government ramp up its oil production capacity, but the country’s infrastructure may not be equipped to support an increase in production. Additionally, security concerns in both countries remain paramount, it said.

“It is expected that an increase of output by non-Opec nations will make up for rising demand in 2012, and while Iraq and Libya will undoubtedly play a major role in the global oil industry, both countries have obstacles to overcome that will likely have a major impact on the market in the year ahead,” said Carl Hughes, DTTL global head of energy & resources.

The report said that Brazil’s entry into the global oil production market - after an estimated 50 to 120 billion barrels’ worth of high-quality light sweet crude oil reserves were discovered offshore - has left its federal government, states, the majority state-owned oil company Petrobras, and international oil companies all wanting a share.

As the Brazilian government tries to determine how to maximise profit from these fields, the primary challenge that has emerged is how it can avoid jeopardising the billions of dollars in investment needed to develop the fields, as raising taxes and royalties on the oil reserves could deter foreign investment.

The production of shale gas has already transformed the energy industry in the US, and now a global push for the production of this resource has taken place, with Europe, Asia, and South America leading the pack. But there is still inconclusive evidence of the potential effects that hydraulic fracturing, the process used to extract the gas from the tight rock formations, has on groundwater resources, according to the report.

“The more emerging markets find shale gas, the more it will have an effect on the global gas industry,” said Ken McKellar, regional leader, energy & resources, Deloitte Middle East. “Energy demand in the emerging markets is on the rise, making energy security a critical priority.

“Therefore, these countries are less likely to be concerned with the environmental consequences of hydraulic fracturing. Shale gas could change their fortunes and make them into net exporters, which many analysts expect the US to be by the end of the decade,” he said.

The report also finds that oil and gas prices could decouple permanently, citing the globalisation of natural gas, companies that increasingly specialise in all facets of the gas industry value chain, and the emergence of shale gas. Further, according to the report, oil demand will remain high, keeping prices on a steady incline. And with the globalisation of natural gas, markets are able to set their gas prices based on market prices, not oil prices.

Among the other topics covered in the report are: labor issues faced by Canadian oil sands industry the American tight oil industry, the emergence of non-traditional consuming national oil companies, and WTI and Brent price gap. – TradeArabia News Service