A group of European oil and gas industry leaders have agreed that 2011 will see a positive upturn in investment into the sector, but warn that they still face significant challenges if they are to take advantage of the strong growth opportunities ahead of them.
The comments were made at an exclusive round table event organized by GL Noble Denton, the leading independent technical adviser to the oil and gas industry, to discuss key findings from a recent report on the future of the sector from the Economist Intelligence Unit. The event, which was held in London, was attended by more than 25 of Europe's oil and gas industry leaders.
The report, which was sponsored by GL Noble Denton, comprises the views of nearly 200 board-level executives and policymakers on a range crucial industry affairs, from new investment opportunities to future regulatory challenges and the rise of a new breed of 'internationalized' national oil companies over the next decade.
Each of the participants at the round table discussion - including representatives from well-known oil companies, energy distribution
corporations, technical suppliers and industry associations - offered strong opinion on where the industry is heading and the challenges that await.
Key findings from the discussion were:
- More needs to be done to develop the next generation of oil and gas professionals. Faced with a period of investment and expansion, the sector will come against challenges as a result of its failure to attract, recruit and retain highly talented people. The industry needs to work more closely together to address the skills problem, rather than trying to pursue each others' technical staff. With activity set to rise in the sector, companies need to focus on introducing and developing technical resource now, ensuring that the right talent is in place for the future.
- Increased regulation post Macondo should be "non prescriptive." While the majority of attendees agreed that government regulatory intervention in North America may leave the small players struggling to survive, none thought that the industry should be left to self-regulate; indeed the majority felt that the US should follow the non-prescriptive approach taken by European and other governments following the Piper Alpha disaster in 1988.
- In these instances, governments restructured their approach to offshore oil industry regulation completely by separating the regulator from the commercial operators, asking them to identify and reduce risks to "as low as reasonably practicable" and justify their actions to the an independent regulatory regime.
- Natural gas prices set to rise. Respondents to the Economist Intelligence Unit's research on the outlook for the sector agreed that the emergence of unconventional natural gas sources has caused gas to gain widespread credibility as a low-carbon "transition fuel", especially for electricity generation. Participants in the round-table discussions generally agreed that the industry will experience an increase of at least 10% in gas prices over the coming years, fuelled by the increasing demand for energy in Asia. While some attendees felt that unconventional natural gas' position as an industry "game changer" in the Economist Intelligence Unit report may be overstated, others agreed strongly with the study that gas will play a key role in the transition to greater dependence on renewable energy sources.
- Cautious optimism for the future. In the Economist Intelligence Unit's 2011 report on the outlook for the industry, executives expect to see an upturn in investment into the sector, despite fears of tougher regulation and a more costly operating environment. While this feeling of cautious optimism was matched at the round-table discussions in London this month, it was also clear that the industry still has hurdles to overcome if it is to take big steps forward.
"It is clear from the these round-table discussions that the oil and gas industry is focused on its future challenges and understands the need to find more innovative solutions to operating more efficiently and sustainably," said John Wishart, President of GL Noble Denton, who hosted the event.
"But in the face of uncertainty about the impact of post-Macondo regulation, anticipation over the true role of natural gas in future
energy economics and ambiguity over resourcing future projects, the oil and gas industry finds itself holding its breath over how these tough challenges will come to pass."