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Increased operating costs in the Asia-Pacific region could derail growth

01.01.2013  |  Thinnes, Billy,  Hydrocarbon Processing Staff, Houston, TX

Keywords: [costs] [supply chain] [complexity] [construction] [oil and gas]

Rising operating costs will be the biggest barrier to oil and gas companies’ growth in Asia-Pacific next year, according to a 2013 outlook for the industry by GL Noble Denton. While the sector’s rapid growth is bringing new opportunities to the region, research shows that significant challenges remain.

According to initial results from a survey of nearly 400 senior industry professionals, over half of those from the Asia-Pacific region (53%) identified rising costs as one of their three biggest concerns for 2013, and a serious threat to the growth of their business. This represents a substantial increase compared to last year when, in a similar survey, just 39% of respondents from the region forecast increased operating costs as a top three barrier to business growth in 2012.

“The mounting cost of operations is largely due to an increase in the complexity of oil and gas projects, a surge in insurance premiums and the acute lack of suitably qualified professionals across the region,” said Richard Bailey, an executive vice president for GL Noble Denton. “Add to this a rising tide of supply chain consolidation—a trend that’s making it harder for smaller companies to secure work on large ventures with high capital expenditure, many of which are in Australia. To this end, the game is definitely becoming one that increasingly favors Asia-Pacific’s big players. The smaller outfits, which may not have the same track record and process experience, need to fight very hard to stay in the game.”

The report takes an overall bullish perspective on growth in the region and predicts substantial industry spending, given the complexity of the projects and the need to improve the operational efficiency of assets. HP

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