The global upstream oil and gas sector ended 2023 on a weak note. Despite the geopolitical tensions and other factors like production cuts, oil prices remained lower during the year as compared to 2022 prices. And the outlook for 2024 has been somewhere near moderate growth.

The optimistic lot of the global market is eyeing moderate growth for the upstream oil a gas sector in 2024. This outlook comes despite the significant announcement in COP28 to move towards Net Zero as the proponents and producers of oil and gas sector believe that countries will continue to rely on oil and gas. This could be true as the demand for oil and gas is rising, which means that the supply will continue to propel to mee it. Deloitte in its outlook has highlighted that the oil and gas sector should prioritize low-carbon projects to navigate the changing demand landscape that will potentially be led by geopolitical uncertainty, global macro economy, policy and emergence of clean technologies.

The domestic oil and gas exploration and production sector has lost its shine over the years as it grapples with various challenges. The sector is marred with depleting reserves, declining production flows and smaller discoveries. While some of the slowdown in the sector is the natural decline in resources, the challenges that the sector faced in terms of policy inconsistency, policy redundancy and policy unattractiveness, circular debt accumulation along with security situation– and recently, the shortage of dollars - are factors that have aided the sector’s sluggishness. This can also be seen in flight of capital and foreign investment from the sector.

The sector’s profitability has mostly been driven by the path international oil prices have taken along with Rupee depreciation. As recent as FY23, the sector’s performance was marred with continued decline in oil and gas production despite higher oil prices. In 2024, the profitability of the upstream oil and gas sector is likely to soften due to lower hydrocarbon sales particularly that of natural gas. What hold positive for the sector are the expected energy sector reforms and the circular debt management plan. Also, the sector has witnessed eight new exploration licenses in the bid round towards the end of 2023, which will propel growth in the sector.