Analyst Pin-board The Oil and Gas industry: Very few picks for 2021
As a relatively simple and fledgling value chain compared to other large petroleum corporations, Vietnam's oil and gas industry depends heavily on the fluctuations in world markets. Disadvantageous production costs of upstream projects reduce the motivation to invest in new oil and gas fields. Instead, decisions to spend on upstream projects are no longer based on economic benefits but depend entirely on political motivation. Therefore, the big picture looks rather cloudy, particularly considering the long-term impact of the pandemic. Many firms have made their business plans for 2021 assuming oil prices below $50/barrel, hence targeting conservative bottom lines. Based on companies’ expectation, we believe that 2021 will not be the year for oil and gas stocks. One of the rare positive points comes from the global liquefied natural gas (LNG) market. LNG prices dropping and staying low throughout 2020 have helped gas-fired power plants and numerous manufacturers benefit from lower input prices. We believe that the LNG industry outlook will be an important contributor in providing turnover for the domestic oil and gas value chain in the next ten years. Investors, contractors at gas fields and related infrastructure sites, importers and logistic service providers will be direct beneficiaries from the trend of using natural gas in electricity production and industrial activities.
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