Energy - The New World Order- 2020s and Beyond

Decline in gasoline/diesel demand by 2025-2030 due to:

Electronic Vehicles (EV) penetration

• OEMs investing in EV-dedicated production lines; resulting in decreased production cost of EVs

• Potentially over 100 EV Models to be made available to consumers by 2022¹

• EVs to dominate high end vehicles segment²

• EU and US policy changes make EVs more cost effective³

• China EVs demand continues to grow; China continuing to invest in charging infrastructure⁴

• As a result, EVs potentially reaching 15% of new sales by 2025 – could result in ‘feels like zero’ growth in gasoline demand⁵

LNG production⁶

• Each unit of LNG displaces 30% of fuel oil demand and 70% of coal demand - expected energy from liquefaction by 2025 could reach 3MMBPD – which could displace 0.9MMBPD of fuel oil and 2.1MMBPD of coal

• LNG production also brings associated supply of ethane, LPG and condensate – this can lead to an incremental NGL supply of 1.0-1.5MMBPD by 2025

• Cost of LNG projects are also witnessing a rapid decline – from $2000/MT a few years ago down to as low as $500/MT

Neutralization of OPEC

• Guided by Maduro’s exit, Venezuela’s increased oil production expected to touch 2.5MMBPD by 2023⁷

• Venezuela’s interests to be re-aligned to its creditors- limiting its participation in OPEC production cuts – overall leading to increased supply to North America

• Recently discovered Guyana oil blocks have significant US company interest

• The increased supply from these quarters can make North America re-assert itself in the OPEC and can force Saudi and other GCC nations to adjust supplies and prices

Overall impact of above factors can potentially lead to decline of Brent oil price to $30 by 2025⁸.

Resultant investment opportunities

• Selected equities and bonds of energy driven enterprises - utility companies, independent power producers and natural gas producers

• Winners in technology space likely to be battery makers (serving EVs) owing to limited competition and benefits of economies to scale.

SOURCE:
¹Morgan Stanley, Goldman Sachs, GAMA estimates
²Car and Driver, Top Gear, Porsche Exchange, Porsche, Teslarati, WhatCar?,Motor1, New Atlas, Electrek
³UBS, GAMA estimates, Reuters, Bloomberg, California Air Resources Board (CARB), National Conference of State Legislatures, US Dept of Energy Alternative Fuels Data Center, Quartz
⁴Bernstein, Morgan Stanley, GAMA estimates
⁵Bloomberg New Energy Finance, GAMA estimates
⁶Peninsular Qatar, S&P Global, HSBC, GAMA estimates
⁷WSJ, Chevron, Bloomberg, Rystad Energy, HSBC, GAMA estimates
⁸GAMA estimates

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.