Global oil and gas sector consolidation may accelerate

by Benoit Faucon

Consolidation in the global oil and gas sector may accelerate as companies face rising resource nationalism and competition for reserves, Moody's Investors Service said in an outlook.
However, credit ratings in the global integrated oil and gas sector are set to remain stable, "underpinned by strong cash flow generation on the back of sustained high oil and gas prices and resilient refining margins," the credit rating service said.

Moody's said, however, that positive factors are "tempered by long-term reserve replacement and production growth challenges with the emergence of economic nationalism leading to the growing influence of resource-rich national oil companies from producing countries." In addition, high oil and gas prices and increased competition for reserves have led to industry-wide cost inflation, some project delays and a growing skill shortage in the industry, it said.
"This, combined with reserve replacement issues, may lead to a continuation and even acceleration of the industry consolidation", Moody's added.