2013 has seen the global oil and gas industry undergo fundamental change. With rising oil and gas demand, investment is forecast by the International Energy Agency (IEA) to reach some $20trillion between now and 2035.
As a result of this tremendous investment, the industry is facing a constant challenge of risks and opportunities.
Technological breakthroughs in unconventional gas production and major increases in North American natural gas reserves and production, have led to a significant supply growth. As a result, producers have sought additional sources of demand for these volumes.
This new global surge brings challenges for oil and gas companies, including the technical, commercial, financial and HSE aspects of their businesses.
These are further complicated by diverse global government regulations, uneven distribution resources and the lack of technological expertise.
More than $5trillion in capital expenditures will take place between 2012 and 2035 across unconventional oil ($2trillion) and natural gas ($3trillion) activity, according to IHS.
Oil developments reflect an uneasy global balance, where decelerating oil demand (particularly in Europe and the US, but also in emerging markets) with strong non-Opec supply gains continuously putting pressure on the organisation’s members to curb production. In addition, the geopolitical uncertainty in oil producing regions remains a constant area of concern.
While North American shale fundamentals are strengthening, the uncertainty over pricing leaves the industry with many questions.
Obstacles still surround the gas business, such as environmentalism, economic growth estimates, and the acute shortage of a skilled workforce.
Europe faces difficult energy policy and power politics, while Asia is confronted by supply and shale issues, conflicting mineral rights and controlled prices.
The oilfield services (OFS) segment depends on upstream spending.
According to recent reports, spending has been rising strongly over the last 10 years, driven by increasing activity as well as by CPI and service cost inflation.
Between 2002 and 2012, spending increased approximately 16% per year, or after inflation is excluded, about 9% per year. Spending growth is, however, slowing, with expected growth to average about 5% per year or about 3% after inflation is excluded.
OFS spending is shifting away from North America, with the largest gains expected in the broad Europe/CIS/Africa region. While onshore spending is expected to continue to dominate, spending is also moving more offshore, particularly to the deepwater plays.
The global oil and gas offshore industry is backed with E&P spending estimated to top $645billion this year, with 30% of oil production coming from offshore.
The main drivers of this relate to technological advancements, as well as the offshore drilling rig construction cycle.
Future trends will determine the direction of the industry such as supply vessel utilisation and fleet expansions which are currently under way.
Within the sub-sea market, more deepwater discoveries are expected, all made easier through increased technological capabilities which will also help to reduce costs.
Offshore construction will be devoted to building new needed infrastructure and pipelines for deepwater excursions. The challenges faced by E&P activity are the deeper waters, remote locations and harsh climates.
Dale Nijoka is the global oil & gas leader at EY
Recommended for you
