The transition to cleaner energy continues, but there is growing recognition of the enduring role of oil and gas, which is tempering the pace. The ‘longevity’ of fossil fuel-based energy sources has recently been acknowledged – albeit cautiously – by the industry’s major players.

For example, companies such as BP and Equinor have made public announcements in relation to their shift in focus back to traditional oil and gas production, tempering their previous renewables ambitions. Notably, the International Energy Agency (IEA) forecasts continued growth in global oil and gas demand until at least 2030, followed by a long period of ‘only’ modest decline in demand.

However, one challenge for hydrocarbons companies in 2025 will be maintaining and replenishing their reserves. This could be through traditional exploration and development activity, with potential hotspots including Africa’s Atlantic Margin and the Mediterranean.

Alternatively, mergers and acquisitions (M&A) will be a strategic short-cut. Given the high costs and risks associated with exploration (particularly deepwater exploration), companies will increasingly turn to M&A to acquire reserves. For example, US independents are looking further abroad, with a particular focus on South America, the Middle East and Africa, after many years of investing in shale plays in North America.

Similarly, the M&A landscape in 2025 will likely see a shift away from the mega-deals of the past 12–24 months toward smaller, more strategic acquisitions. We expect this to promote a rise in mid-market M&A, driven by companies seeking scale.

The International Energy Agency forecasts continued growth in global oil and gas demand until at least 2030, followed by a long period of only modest decline in demand.

Outside the US, many of the larger independents are grappling with valuation challenges, which could result in some public deals to improve their portfolios, primarily looking at targets with development and/or producing assets to drive economies of scale.  

Within the US, following the significant consolidation within the Permian Basin, it is likely that the remaining independents that have performed well in recent years, such as those focused on low-cost, high-efficiency drilling, will look to expand their asset bases and move towards more niche mid-market plays, including in the Uinta Basin, the mid-continent area in Oklahoma, the Eagle Ford shale, and the Haynesville and Utica shales.

Several significant Gulf of Mexico projects, including Shenandoah and Whale, set to commence production in 2025, could fuel M&A activity in the region. Following the integration processes driven by the mega-mergers, the enlarged entities may seek to streamline their portfolios by shedding non-core assets.

Access to capital remains a central concern for many companies as access to traditional forms of financing, such as public equity markets and reserve-based lending, continues to be difficult. The industry will turn to a broader array of funding sources.

With some traditional lenders distancing themselves from fossil fuels, alternative sources like private credit institutions, family offices and hedge funds are expected to become progressively more influential in the sector’s capital structure. Traders will continue to fill the gap in the market by offering prepay and offtake financing structures. We also predict an increase in activity from banks in the Middle East and Africa as they step into the traditional lending space that has been partly vacated by Western banks.

Continuing the regional focus, national oil companies (NOCs), particularly those from the Middle East, China and other emerging markets, are undergoing a renaissance. These companies are now again expanding internationally, seeking acquisitions and strategic partnerships to boost their reserves and market influence. China’s NOCs are also increasing their presence in international markets, often targeting regions where they can exert geopolitical influence, such as Africa and South America. The participation of the Chinese NOCs is likely to be linked to forecast improvements in the Chinese domestic economy.

NOCs will focus not only on traditional oil and gas projects but also on diversifying into low-carbon technologies, including renewables and carbon capture and storage.

The power of collaboration 
Strategic incorporated joint ventures have become an increasingly common strategy in the sector, allowing companies to optimise their portfolios, share risks and unlock value from non-core assets. Whilst unincorporated joint ventures at individual asset level have long been part of the oil and gas industry structure, significant incorporated multi-asset joint ventures are a more recent innovation.

Several major joint ventures have been formed recently, such as the collaboration between BP and Eni in Angola, and the combination of Shell and Equinor’s UK North Sea portfolios to create the UK’s largest independent producer.

In addition to large-scale partnerships, smaller and more localised joint ventures will become common in domestic markets. US companies may partner with international players to tap into smaller but lucrative opportunities.

Companies may also explore innovative joint venture structures, such as ‘co-buyer’ arrangements, where non-operating players take part in acquisitions to decrease up-front costs.

Globalisation of LNG 
LNG is becoming a global commodity due to rising demand from Asia, Europe and other regions. US LNG exports have played a key role in this shift and, as demand grows, LNG will continue to play an important role as a cleaner alternative to coal and oil.

As LNG markets become more global, companies will seek greater flexibility in their contracts. Short-term, spot-based sales agreements will replace long-term contracts, offering more flexibility in meeting fluctuating demand. Floating LNG technologies will gain greater traction as a means of commercialising smaller or more remote gas fields. Countries such as Guyana, Suriname and Argentina will become key players in global LNG markets as they look to expand their gas commercialisation strategies. Mozambique and Tanzania will continue to face challenges with their LNG projects.

Shale oil and gas production is now expanding into new regions. Saudi Arabia’s Jafurah Basin represents a massive potential development, with international players likely to become involved in the project. Meanwhile, other unconventional reserves in countries such as Australia (Beetaloo/McArthur Basin), Argentina (Vaca Muerta) and Algeria are also attracting attention.

Under a new US administration calling for ‘drill, baby, drill’, the oil and gas industry is expected to benefit from fewer regulatory restrictions and faster approval for infrastructure projects, including pipelines and export terminals. One of President Trump’s first acts was to declare a national energy emergency, aiming to expedite the development of fossil fuel resources, lower energy prices and increase exports. However, a more nationalistic ‘America First’ agenda could create challenges for international companies.

For the second time, Trump has withdrawn the US from the Paris Agreement and other international climate commitments. This may assist US energy companies focused solely on hydrocarbons, but will complicate the investment landscape for those with a broader range of energy investments.

• Further reading: ‘BP pivots away from energy transition’. BP has reset its corporate strategy in favour of production of oil and gas, and away from renewables. It has cancelled its target to reduce oil and gas production by 40% in 2030, is investing in new oil and gas projects, and cutting funding to its transition business. These changes come amid other cost-cutting actions.
• Emerging sources of natural gas are shifting established patterns of supply and demand in Africa and the Middle East. In Saudi Arabia, crude burn – the direct use of crude oil in power plants and industrial facilities, primarily for electricity generation – has long been commonplace. The Kingdom burns significant volumes of oil to meet domestic electricity demand, which hovers around 171 TWh. However, analysis from Rystad Energy shows the upcoming Jafurah shale gas field, set to start production in 2025 and said to be the largest of its kind globally, could dramatically shift this dynamic.