Oil and gas industry leaders have forecast improved
performance and higher levels of capital expenditure in 2012
despite concerns over global economic instability, according to
a new report on the future of the sector.
Increased investment across the industry will focus on
exploration activity, with North America emerging as the area
with the greatest opportunities in 2012.
The outlook is
the Economist Intelligence Unit's second annual industry
barometer, commissioned by GL Noble Denton, an independent
technical advisor to the industry with insight into many issues
faced by those operating in the oil and gas sector.
Of the 185 board-level directors and industry policy makers surveyed for the
report, 82% are either highly or somewhat confident about the
business outlook for their company, compared with 76% last
Just 8% of those polled described themselves as pessimistic
over performance in 2012.
Findings from the research also show that nearly two-thirds
(63%) of executives plan to invest either somewhat or
substantially more over the next year, in contrast to 49%in
Meanwhile, 41% of industry professionals expect to see
increased investment in exploration activities over the next
year, with only 4.3% anticipating a decline.
There remains a caveat, however; if global economic
conditions deteriorate, oil and gas companies will have to
scale back their spending commitments where they can do so
without creating damage to their wider portfolios.
Other key findings from the research, as reported by the
Economist Intelligence Unit, include:
Rising operating costs emerge as the top barrier to
growth. More than 50% of respondents say that they
expect there to be an increase in wages over the next 12
months. Moreover, 54% of respondents also expect the cost of
contractors to increase, compared to only 11% anticipating a
Risk remains a key challenge. An
overwhelming majority of respondents 82% either
strongly or somewhat agree that regulatory issues have become
more important in the post-Macondo period. Increasing
regulation is regarded by more than 30% of respondents as the
main challenge for their company over the next 12 months.
Skills shortages are becoming more acute.
According to the Economist Intelligence Unit's research, this
issue comes out of the survey as one of the major obstacles to
growth over the next 12 months. Last year, skills issues came
fifth on the list of barriers and were only identified as a top
three issue by 25% of respondents. This year, the issue has
risen to second on the list, and has been identified as a key
barrier by 34% of respondents.
Unconventional gas: A global game changer?
The advent of projects like the Marcellus,
Barnett, Haynesville and Fayetteville shales have created a
supply glut that has affected global prices. Yet there is
widespread doubt as to whether the shale gas revolution can be
exported outside North America.
Scope for optimism for refiners: After a
dismal few years, the downstream sector is showing some signs
of life, at least in the US. Refining profitability has improved
where robust margins have resulted from a revival of
consumption of refined products. But Asia and Europe remain in the doldrums.
"The second annual Economist Intelligence Unit oil and gas
industry barometer sends a clear message: Companies are
preparing to spend big in 2012, despite a slower growth in
demand for oil and gas during the second half of last year, and
concerns over the future of the global economy," said Pekka
Paasivaara, member of the GL executive board.
"But this doesn't mean that our clients are sanguine about
their prospects for the year ahead, he continued.
Findings from the report highlight a wealth of barriers
to success, from rising operating costs to the worry of an
impending shortage of skilled professionals and an uncertain
regulatory environment in the post-Macondo
"While capital expenditure looks set to take off, industry
leaders will need to invest selectively this year, keeping
operating risks low during a period of prolonged uncertainty.
Their success will be defined by an ability to develop
innovative approaches to operating more safely, efficiently and
sustainably than ever."
Download the full report by visiting the GL Groups website.