The Relationship Between Finance and the Energy Sector

The gas industry is fast evolving with a boost in supply and price cuts. As a result, finance professionals are facing challenges when dealing with these changes. If you are a buyer, the prices of gas and oil have never been this attractive. When the price of oil drops, the cost of liquefied natural gas (LNG) also drops. Additionally, the prices of LNG could also be affected by the rise in the available gas for shipment. According to a report by ACCA, our country will soon become one of the world’s major gas producers. Here are some of the roles of finance in the evolving energy market. 

Impact of the Spot Market 

70% of the global gas demand comes from Asian countries like Japan, China, and South Korea. As a result, USA is likely to become the leading exporter in the world. The prices of LNG have been able to remain stable for an extended period because they have been indexed to the oil prices. Once our country becomes able to produce cheaper LNG, there will be a differential in price in the market for the first time. As a result, the spot market will gain strength. By the year 2020, there will be a different LNG market. Since the client’s point of view is being put into consideration, the gas sector in general and financial professionals will have to adjust. 

The Perspective of the Sell-side

When gas prices are low, suppliers and investors get worried. A drop in the oil prices would result in a drop in the gas prices. If the prices of oil continue dropping, some LNG proposed projects could end up stalling around the world. Even the most successful oil and gas companies have suffered some serious overruns. Gas has some setbacks when compared to oil. 

A good example is the fact that gas wells cannot be turned on and off easily when prices fluctuate. Additionally, the infrastructure needed to transport and store gas is more complicated and costly. Investing in a gas project requires a lot of patience because it is considered a long-term commitment. Therefore, investing in oil is a better idea because the likelihood of getting returns is higher, and it takes a shorter time if you do it well. If you live in Texas and have an interest in investing in oil, you should check out Oil Project Investment Opportunity Texas

The impact on Financial Professionals 

As the gas market evolves each day, so does the roles of the financial professionals in the same sector. These professionals have to pay more attention to the needs of the shareholders. According to ACCA, the roles of financial professionals in the energy industry will be highly affected by the developments in prices, mergers, and acquisitions. The pressure that comes with increased prices will have an impact on accountants as well in huge companies. With such developments, finance professionals undergo stress because they have to evaluate the current contracts and come up with new ones. It is hard for a finance team to come with new projects and convince investors. 

 

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