Oil and Gas Executives Discuss 2012 Outlook

Confidence for improved margins and higher capital investment has returned to the oil and gas industry this year, according to a group of industry leaders.

 

However in the long-term, the energy sector faces unprecedented challenges that could have a lasting impact for years to come.

The comments were among those made at an exclusive roundtable event held recently in Houston by GL Noble Denton, an independent technical advisor to the industry.

This event followed 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, for which more than 180 senior energy executives across the world were surveyed at the end of 2011.
 
According to the discussions at the GL Noble Denton roundtable event, the industry continues to enjoy a period of recovery, a confident outlook that was highlighted by the 20 senior industry representatives in attendance. They agreed that this optimism has been fuelled by the return of drilling in the Gulf of Mexico (GoM) and North America’s shale gas revolution, which has seen production levels ramp up.

Other key findings from the discussion included:

Uncertainty over ‘inconsistent’ regulatory reform Participants agreed that public reaction to the Macondo incident has caused a dramatic shift in America’s oil and gas regulatory landscape. The US government has undertaken significant reform and reorganisation of the agencies responsible for the regulation and oversight of the country’s oil and gas industry, in a bid to avoid the possibility of future conflicts of interest. Safety frameworks have also been rapidly revised, with industry executives left uncertain over which guidelines to use. Attendees at the roundtable dinner suggested that the interpretation of new legislation has been inconsistent and that this had impacted on both the cost and efficiency of operations.

Resourcing a growing market The growing shortage of skilled professionals remains a common concern among industry executives, who say this is endemic across every region, from Australia to Asia and Europe. While this has not bypassed America, it seems less acute than elsewhere. Economist Intelligence Unit senior editor, Chris Webber, presented the findings of Big Spenders, which showed that only 28% of North American respondents identified the issue as a top three concern. However a senior US-based representative from a national oil company said that, in Houston, skills shortages are only perceived to be less of an issue. He added that this is because the city offers a greater ‘reservoir’ of oil and gas talent in a single, concentrated area than other places. Although attendees noted that oil and gas companies were working hard to attract the best talent early, there was general agreement that the strategy of some companies in fast-tracking the development of young engineers could, in the long term, prove damaging to the industry.

Central and South America – a land of opportunity? The development of Latin America’s hydrocarbon resources has long been considered uneconomical; the result of technical and political challenges, coupled with unavailability of reliable deepwater technologies. Changes in these circumstances, however, have led to a much greater focus on the potential of the region, with a recurring topic of debate at the round table being how to break into the Brazilian market. One attendee stated: “It’s a difficult place to do business if you don’t have a relationship with the national oil company and you have to demonstrate a long-term commitment to the local market if you want a chance of succeeding there.” Discussion also focused on Mexico, considered as presenting even greater challenges for international operators.

Commenting on the discussions, GL Noble Denton’s executive vice president, Arthur Stoddart, said: “It is becoming increasingly apparent 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 Houston have made it clear that there are still abundant challenges facing the worldwide energy sector.

“Change is clearly afoot across the oil and gas industry, no more so than in the U.S. Industry leaders have concerns about the direction in which the country’s regulatory landscape is heading, how operations will be resourced over the coming decades, and the impact that developments in the Central and South American energy markets will have on their businesses.

“The oil and gas industry’s regulatory and financial challenges have been brought into sharp focus over recent years. While there is strong optimism for industry growth, success will hinge on companies’ ability to operate to best practice in asset safety, integrity, and performance in a changing market. With more than 140 years of experience GL Noble Denton prides itself on delivering the independent technical advice that helps our clients do exactly that.”

The GL Noble Denton roundtable event was the second in a series of executive briefings organised in key energy centres across the world. They are designed as a means of gaining a deeper understanding of the issues that affect the industry from those who lead it.