Upstream capex ready for takeoff

February 1, 2012

Despite some concerns over the global economic outlook, oil & gas industry leaders are expecting improved performance and higher capital expenditures in 2012, according to an annual survey of top industry executives and directors.

The study, Big Spenders: The outlook for the oil & gas industry in 2012, was conducted by the Economist Intelligence Unit and commissioned by GL Noble Denton. The poll of 185 board-level directors and industry policy makers found that 82% of respondents are confident about the business prospects for their companies in 2012, up from 76% who expressed confidence in last year's survey.

Nearly two-thirds (63%) of those surveyed plan to invest somewhat more or substantially more in 2012, compared to 49% in 2011. 

Some 41% of respondents foresee increased spending on exploration, with just 4.3% expecting a decline.

‘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. 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 era.'

More than 50% of respondents expect wages to increase over the next year and 54% said the cost of contractors will be higher in 2012. A full 82% said regulatory issues have become more important in the wake of Macondo, with 55% reporting that drilling permits had become harder to obtain. About 30% of those surveyed listed increasing regulation as their main challenge in 2012.

Pekka Paasivaara

The survey also found increasing concern about a skill shortage among the workforce, with 34% identifying skills as a ‘key barrier' to growth. In the 2011 survey, skills were cited as a challenge by 25% of respondents, placed fifth among perceived barriers.

‘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,' Paasivaara said.

Upstream activities were mentioned as the most promising area of growth by 56% of respondents, up from 42% last year. Downstream rose somewhat, with 14% expecting the sector to provide growth in 2012, compared to 10% last year. Marketing however dropped from 22% to just 8% as an expected source of business growth.

Executives cited North America as the most promising region for growth, followed by the Far East, Southeast Asia and Latin America, GL Noble Denton said.

The new findings mark a shift from last year, when Southeast Asia ranked highest, followed by North America, the Middle East, North Africa and the Far East. RM



Current News

Floating WInd Tech: TetraSpar Demonstrator Starts Operation Off Norway

Floating WInd Tech: TetraSpar Demonstrator Starts Operation Off Norway

Report: Halliburton Offers to Buy Exxon's Stake in Iraq's West Qurna 1 Oilfield

Report: Halliburton Offers to Buy Exxon's Stake in Iraq's West Qurna 1 Oilfield

Ørsted Reaches FID on Two German Offshore Wind Farm Projects

Ørsted Reaches FID on Two German Offshore Wind Farm Projects

UAE's ADNOC to Invest $127B in 2022-26 as Oil, Gas Reserves Rise

UAE's ADNOC to Invest $127B in 2022-26 as Oil, Gas Reserves Rise

Subscribe for OE Digital E‑News

Offshore Engineer Magazine