Oil and gas leaders identify opportunities and risks for 2012News // April 18, 2012
A group of European oil and gas industry leaders have expressed heightened confidence in the development of the sector this year, following an impressive start to 2012. However, executives said that success will rely on more than the high price of oil, growth in energy demand or even a recovery in economic conditions.
The comments were made at an exclusive roundtable event held recently in London by GL Noble Denton, an independent technical advisor to the industry.
The discussions follow the publication of “Big Spenders: The outlook for the oil and gas industry in 2012”, the second Economist Intelligence Unit report commissioned by GL Noble Denton, which sets the scene for a year of increased investment, according to a survey of more than 180 senior energy executives across the world at the end of 2011.
According to the discussions at the GL Noble Denton roundtable event, oil and gas sector leaders’ confidence in increased investment has continued to grow during the first quarter of this year, thanks to the improved prospects for global economic growth.
However, Economist Intelligence Unit Senior Editor Chris Webber warned that a potential further rise in the sector’s confidence might be overshadowed by the risk of ‘black swan’ events such as political conflicts, and major oil and gas accidents.
Other key findings from the discussion included rising optimism for UK activity, but much can be learned from Norway. Participants agreed that prospects are looking better for the UK Continental Shelf.
However, some oil and gas executives argued that the UK still had a long way to go if it was to compete with the progress being made by its Norwegian neighbours. Others suggested that incentives being offered by the Norwegian government could have an adverse affect on the UK oil and gas industry in other areas, while there was also uncertainty expressed over the long term future of the UK North Sea.
Energy price predictions: participants heard that events such as political conflict in the Middle East could lead to a damaging oil price spike that would derail the fragile economic recovery. Also, with the growth of a global gas glut and an increase in oil demand, the cost of the two resources may become less connected in the future.
Skills shortages are becoming more acute. The challenge in plugging the oil and gas industry’s gap in skilled professionals was identified as a major issue in “Big Spenders”. Participants at the roundtable event recognised that the accelerated learning programmes, introduced by some oil companies to speed up the time it takes for new graduates to develop necessary skills, were important.
However, some argued that more needed to be done now to meet the industry’s immediate need for more experienced workers in their 30s and 40s, and suggested bringing in personnel from other industries. Others claimed such a measure could increase the risk profile of projects and affect funding. Particular skills shortage hotspots were identified in Brazil, Tanzania and Australia.
Securing tomorrow’s energy supply today: participants agreed that the continuing high price of oil has led to little likelihood of energy being secured from alternative sources – such as hydrogen and nuclear – in the short term. The Fukushima DaiiChi nuclear disaster in Japan has led some countries to turn their attention away from nuclear power, but it was thought that nuclear still had a part to play in global energy supply.
Some executives suggested the rise in unconventional gas, particularly from shale reserves in North America, Europe and China, had impacted upon the development of alternative energy sources. However, others questioned how successful the development of shale gas reserves would be outside of the US.
Peter Russell-Smith, Executive Vice President Business Development and General Manager of GL Noble Denton, said: “The first few months of this year have revealed that the executives surveyed for Big Spenders were right to forecast improved performance for the oil and gas industry in 2012. But the industry leaders who attended our event in London have clearly articulated that the sector has not overcome all of its hurdles yet.
"The discussions that took place have given us a real insight into the opportunities and pitfalls that our clients expect to face during the remainder of the year and beyond.
“It is clear that, alongside the oil and gas industry’s confidence for the future, there is an element of uncertainty over a wide range of issues."