The ‘shale gale’
To address world energy demand, the energy industry has seen a recent resurgence in Oil & Gas production, led by the ‘shale gale’ of natural gas made available with hydraulic fracturing (fracking) and horizontal drilling in the US. Shale gas development is expected to be less of a growth factor in Europe, in part because of environmental concerns.
By 2040, 75 percent of the world’s population will reside in Asia Pacific and Africa. Access to Oil & Gas supplies in Indonesia, Malaysia and Australia will become increasingly important. In 2012, Asia Pacific oil consumption growth (at 47 percent) was the second highest in the world, and Asia accounted for 70 percent of the world’s LNG market. The world’s longest gas pipeline, costing US$22.5 billion, became operational in China in the last quarter of 2012. The pipeline carries natural gas from central China to Shanghai, Guangzhou and Hong Kong, bringing power to 500 million people and helping China deliver energy to meet increasing demand.
Today, over 75 percent of the world’s population has access to a mobile phone. Over 30 billion mobile apps were downloaded in 2011. Oil & Gas companies are leveraging these and other technologies to discover and deliver new energy sources as well as to improve operational efficiency and customer satisfaction.
The recent discoveries of unconventional Oil & Gas reserves available through fracking have been concentrated in developed countries — the ones that are most concerned about energy security. Based on current demand and new extraction technologies, the world now has 200 plus years of natural gas available. In the US, oil imports will fall for the next two decades, and North America is expected to become a net oil exporter by 2030.
Based on current trends, the amount of water needed for global energy production will grow twice as fast as energy demand. Water is required for the extraction, transport and processing of Oil & Gas, as well as chemicals that use petroleum feedstocks. With water consumption expected to rise 85 percent by 2035, water availability will be an increasingly important factor in the viability of energy and petrochemical projects, especially as population and economic growth intensify competition for water resources.
The Oil & Gas industry faces many regulations that add significant costs to doing business. Government policies designed to reduce greenhouse gas (GHG) emissions and other pollutants are increasing in scope and complexity. At the same time, Oil & Gas companies are recognizing the financial, social and environmental benefits of regulations supporting sustainability, which include reduced supply chain costs, enhanced brand management and improved energy efficiency.
The Oil & Gas industry is becoming more complex and is inherently dangerous. It is also subject to increasingly frequent extreme external events such as storms that affect offshore drilling and production platforms. Cyber threats are another significant and rapidly growing risk. Oil & Gas companies now report an average of 100 successful cyber attacks each day.
Supply chain efficiencies
Global energy trade is changing because of new gas production in the US and the increasing need for power generation in Asia. This is feeding into new industry and higher living standards. It is also changing existing trade flows as one fuel type is displaced for another in the energy mix. Thus shipping and storage are increasingly important components in the supply chain.
The supply chain is moving towards a more flexible model where companies are able to direct their end products to different markets depending on national consumption pattern requirements. Increased returns can be made by maximizing midstream efficiencies and enhancing margins due to the gaps between supply and demand.
Transit and buffer storage are playing major roles in the supply chain. Upstream companies are becoming investors in these assets, that as part of midstream portfolios, enhance their value chains.