Successful oil and gas companies are focusing on ten opportunities within four core areas of growth:
- Customer Reach – the ability to increase market share
- Operational agility – the ability to respond to change
- Cost competitiveness – the ability to achieve capital efficiency
- Stakeholder confidence – the ability to secure resources to meet objectives
Overall, opportunities within these areas have increased over the last year, and are depicted in the graph below. The opportunity rank signifies whether or not the opportunity will increase or remain the same by 2013.
Source: Ernst & Young
Opportunity #1: Operating in Frontier Acreage
New technologies combined with improved seismic data and interpretation techniques have made previously inaccessible areas economically viable. Oil and gas companies are already moving into areas such as the Arctic, Greenland and ultra-deepwater off the coast of Brazil, and the industry “land grab” over these new oil rich areas is expected to continue for years. Health and safety will continue to remain a barrier to entry as oil and gas companies will have to balance protecting ecologically sensitive habitats at the risk of further regulatory oversight.
Opportunity #2: Producing Unconventional Sources
The development of unconventional energy sources (shale gas, oil sands, and coalbed methane) can reduce the dependency on foreign oil, as well as increase the production lifecycle of maturing fields. However, in the United States, technical advances such as “fracking” technology have outpaced the regulatory ability of managing possible environmental impacts. Oil and gas companies will need to continue to invest in operationalizing emerging technology and engaging in pro-active dialogue with stakeholders on the potential risks associated with the production of unconventional sources.
Opportunity #3: Conventional Reserves in Environmentally Sensitive Areas
New technologies will be a driver for competitive growth, allowing companies to reach reserves in environmentally sensitive areas, such as the Arctic, with less negative impact. Operating in these areas will require an investment in people management and environment specific safety systems to minimize incidents.
Opportunity #4: Rising Emerging Market Demand
Many Asian countries, especially China, are emerging as viable markets for the energy industry. In contrast, oil demand in Europe and Japan is declining. With their technological edge, companies can leverage access to technology in return for access to consumer markets. Despite tremendous opportunities for downstream growth, emerging markets can include significant risk as performance is often dependent upon pricing policies established by the government.
Opportunity #5: Partnerships between NOCs and IOCs
There has been an increase in partnerships between national oil companies (NOCs) of net-importing countries and international oil companies (IOCs). NOCs, while controlling centers of demand, want access to technology, resources and project management know-how. IOCs want access to known reserves and mitigation of risk. In a partnership, NOCs provide access to their regulated domestic markets, and IOCs offer cutting-edge technology to support upstream projects. Hostile operating environments (offshore, deepwater drilling) are more likely to see such partnerships in the future.
Opportunity #6: Investing in R&D
Technology is the driving factor behind many opportunities, and makes investing in research and development critical for oil and gas companies to be able to increase their competitive advantage. Areas of focus include technologies for new drilling techniques, lessening environmental impact, and developing unconventional energy sources.
Opportunity #7: Second Generation Biofuels
Biofuels can provide another potential revenue stream for oil and gas companies. While alternative fuels are not yet produced commercially in the United Sates, the interest in clean energy sources is high, and oil and gas companies should invest to position themselves for future developments.
Opportunity #8: Cross-sector Partnerships
Strategic partnerships with firms in other industries can help oil and gas companies learn from the innovations of other sectors. Examples include a partnership in the auto industry for the development of hydrogen vehicles, and benefiting from technology developments in the marine and shipping industries for improving environmental safety.
Opportunity #9: Excelling Within Regulations
Governments are increasingly involved in the oil and gas industry – not only in regulation, but in commissioning projects as well. When competing for contracts or forging partnerships, companies should actively demonstrate that they comply with regulations, and that they can anticipate which regulations are forthcoming.
Opportunity #10: Acquisitions and Alliances
Alliances or acquisitions can help a company expand their supply base, gain new technologies, and access new markets. For example, Asian NOCs have an interest in shale gas technology and have been forging alliances with US oil and gas companies with the goal of knowledge transfer.
Clover specializes in placing professionals in the oil and gas industry. If you are an Operator seeking to augment Project Teams, contact Jeff.W@clovergs.com
If you are an experienced professional looking for opportunities in the Upstream Industry (Alaska, Eagle Ford Shale Play, Bakken Formation, Deepwater Gulf of Mexico), send your resume in complete confidence to Chris.S@clovergs.com