The Scenario Planning Service — A critical tool for long-term planning
Investments in the energy industry tend to have long lead times and long payout periods. Success or failure often depends on conditions five, 10, or more years into the future. PIRA has always been recognized for providing a clear, quantitative best-estimate of where energy markets are headed, near and longer term. That approach will not change. However, we
understand that many of our clients need to examine a wider range of plausible outcomes as part of their strategic planning processes. Testing against these alternative scenarios provides both an indication of the resiliency of their strategies and an opportunity to develop up-front contingency plans in the event that conditions materially change.
Who Can Benefit from PIRA's Scenario Planning Service:
- Oil and Gas Producers, Equipment Manufacturers, Drilling Companies, Shippers: Firms in these industries have always been risk takers and cannot let uncertainty prevent them from undertaking the investments required to grow their business. Nevertheless, some projects are more resilient to a range of outcomes than others. Other projects can be phased or staged in a way to minimize vulnerability. For companies involved in any aspect of long lead-time investments, both the scenarios and the ability to track them can be an invaluable tool.
- Electricity-Generating Companies: Will abundant natural gas be available at today’s prices or will a combination of rapidly declining production and LNG siting difficulties cause a price run-up? Considering the possibilities and consequences is critical to wise decision-making in the power industry. The Scenario Planning Group will work closely with PIRA’s
Natural Gas,
Electric Power and
Emissions groups to define realistic scenarios with meaningful consequences for the industry.
- Refiners and Marketers: The downstream business will evolve differently under alternative scenarios on oil price, availability, government policy, and end-use technology. The
SPS quarterly tracking reports and annual roundtables will provide regular updates on developments in energy policies and automobile technology with the potential to influence longer-term trends.
- Government Agencies (Energy, Environment, Finance, Commerce): Lawmakers and executive agencies need to debate the consequences of policies under a range of possible energy futures. Finance and commerce ministries will find SPS useful as well, since variation in the price and volume of oil and gas can have significant revenue and balance-of-payments consequences for both exporting and importing nations.
- Financial Institutions: As banks are called upon to provide debt for new energy projects, it will be imperative to analyze the profitability of projects
and investments under a range of reasonable scenarios. SPS will provide the quantification they need for their analyses.
- Large Energy Consumers: Choices have to be made on large energy-intensive capital equipment purchases by manufacturers, airlines, and vehicle fleet operators. Should I pay a premium for energy efficiency? Fuel-switching capability? Addressing these issues properly requires a realistic appraisal of the range of outcomes for fuel prices.
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