Roadmapping the future – Oil and Gas industry
Roadmapping is a Global WorkPlace Innovation project to predict key trends that are likely to impact the way in which our clients do business.
The oil and gas industry is one of the most critical industries to the global economy and over recent years the price of our energy has fluctuated dramatically. In July 2008, the price of a barrel of crude peaked at $145, only to fall to just above the $30 mark five months later. Supply and therefore price is set by countries and can be massively affected by political unrest. Demand globally has also been fuelled by the economies of India, China and Brazil, which have further industrialized and created burgeoning middle classes.
A key trend having a significant impact on the oil and gas industry is the depletion of economically viable resources. Some analysts estimate that peak oil reserves will be reached by 2020. However, as existing fields run out and new reserves become increasingly difficult to find, oil will be in short supply, making it much more expensive.
As a result, oil and gas companies are looking to new reserves in more remote and inhospitable locations, such as the Arctic and deep in the Atlantic Ocean. Some offshore drilling platforms have pipes that extend nearly two miles in depth – a feat that would have been both unthinkable and economically unviable years ago. Another location of interest is the oil sands of Canada, an unexplored area of sand-oil which contains one of the largest oil resources in the world.
Another emerging trend is the divestment in the downstream activities, which is the refining of crude oil, and the selling and distribution of natural gas and products derived from crude oil. Downstream activities historically produce small profit margins, while upstream activities, the recovery and production of crude oil and natural gas, drive larger profits – despite the fact that they require a large capital investment. The divestment in downstream activities allows companies to streamline operations and invest more heavily in upstream, where the potential for growth and higher profit margins are greater.
With the rise of upstream activities and increased demand for natural gas as an energy source, the energy industry is reshaping. One of the major trends is that an increasing number of new fields are gas fields, not oil. This brings a different challenge, as much more infrastructure is required at the point of extraction, which is usually in a hostile environment, and also often in an emerging market. At the same time, the on-site infrastructure has to be maintained to a high standard.
The overall trend of major oil and gas companies moving out of downstream to invest in upstream activities shows that energy analysts are confident that the price-per-barrel will not fall below the $60 - $70 mark for a number of years, as this is the price that makes the more difficult fields viable. Some analysts believe that capital spending in the global upstream sector in 2013 could be in excess of $500 billion – a huge increase from 2009.
Johnson Controls GWS, Vice President Oil and Gas Market, Paul Morgan, said: “Workplace safety and regulatory compliance have always been issues for the industry to manage, but are possibly even more important given the fact that new oil and gas reserves will be located in more hostile locations in emerging markets. This could lead energy companies to seek the support of risk specialists with experience of managing complex plant and buildings in harsh environments. We are very well established in the retail sector of the industry, but are also developing and delivering specialist services for the upstream sector, which is a huge opportunity for Johnson Controls GWS.”
Increasingly utility and oil and gas companies are converging into ‘energy’ companies and implementing smart grids - electricity networks that use digital and advanced technologies to monitor and manage the transport of electricity from all generation sources to meet the varying electricity demands of end-users’. It essentially offers more control on how energy and utilities are delivered to consumers. Smart grids also allow for remote monitoring of operations, which is increasingly important for oil and gas companies working in far-off locations.
Climate change, rising energy prices and technology advances have had a major impact on consumer behavior. Consumers today are highly informed, concerned with environmental responsibility and want to play in active role in how they use power. The automotive industry has made great strides to satisfy consumer demand for more energy efficient card with hybrid vehicles, more energy efficient engines and start / stop technology. A huge amount has also been invested in alternative fuels and energy sources, such as biodiesel, propane, hydrogen, advanced batteries, ethanol, solar, as well as wind and sea power, but none, to date, has emerged as a realistic challenger to the dominance of oil and gas.
If you would like further information on the Global WorkPlace Innovation Roadmapping Project, please visit www.globalworkplaceinnovation.com or email Hannah Hahn