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Rising energy demand drives upstream oil and gas market

Driven by continued strong demand and record high oil prices, the oil & gas industry made robust capital expenditures in automation in 2011.

Though oil prices have been in a slump following a period of extraordinary growth and demand has been reined in by the economic downturn, the oil & gas industry still enjoys a favorable investment environment.

The upstream segment will continue to see strong project activity. The industry faces some key issues.

These include the increasing cost and difficulty of extracting oil from both older developed deposits and from newer non-conventional finds, the shrinking availability of knowledgeable personnel, and a need for real-time production data across the enterprise to enable quick, well-informed business decisions.

Automation expenditures by the upstream oil and gas sector, which includes exploration, production, and pipelines, are expected to grow at a compounded annual growth rate (CAGR) of nearly 8 percent over the next five years, according to ARC Advisory Group’s Automation Expenditures for Upstream Oil & Gas Industry Global Market Research Study.

In addition to market analysis and forecasts, the study covers the current market nuances, strategic issues, and the future outlook. The report also highlights the factors that influence the global upstream oil & gas market and its dynamics.

Allen Avery, Senior Analyst ARC Advisory Group, and co-author of this study says, “As economic conditions improve, increasing demand and rising prices for natural gas and crude oil will continue to drive significant growth in the global oil and gas industry.”

He adds, “With access to only a minority percentage of proven reserves, integrated oil companies must attempt to replace their reserves in remote areas that are much less hospitable and more dangerous — both environmentally and politically. This is driving huge expenditures in large, complex, and difficult capital projects in the production segment.”

Rising Energy Demand Drives Global Upstream Oil & Gas Market.According to the estimates, demand for petroleum products will increase substantially as the economies in developing regions improve and per capita energy consumption increases.

Today’s production and processing capacities struggle to keep ahead of the demand curve and both upstream and midstream facilities will need to be expanded.

New sources, such as tar sands, shale oil, and coal-to-liquid gas, will require new midstream and production facilities to be developed, increasing demand for automation systems and field devices.

Regionally, the highest growth rates will occur in Asia followed by Latin America. The energy demand will be driven primarily by emerging economies, such as China and India, which will see its need for energy rise significantly as its industrial production and population grows.

Despite the strong growth in developing regions, the Middle East, home to the world’s largest conventional oil and gas deposits, will grow at average rates.

However, it will still hold the largest share of sales of automation and field device systems. North America’s upstream business, because it relies on unconventional projects such as the Canadian Tar Sands, will trail the market, and will grow at an average rate.  

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