The global oil and gas industry is moving into a period of dramatic change.
There are a number of underlying determinants that will continue to put pressure on the price of oil well into the foreseeable future. At present, global supply and demand are finely balanced with little spare capacity to cope with increasing demand.

In spite of high prices, demand for oil continues to grow unabated. Even changing Western attitudes are doing little to neutralize organic growth and there continues to be a growing demand for oil in China, India and many other developing countries – even when prices are at more than $70 per barrel. Whilst demand is currently being met, new industry dynamics are emerging.

One of the most significant is the changing relationship between international oil companies (IOCs) and national oil companies (NOCs) with the latter now competing directly for supply access to foreign reserves, companies, people and technology. This is forcing IOCs to find new ways to work, simply because NOCs control 90% of known oil reserves and 70% of the world’s known gas reserves. IOCs are also having to take on more environmentally challenging and costly projects in an effort to find new reserves.

Rising prices are also the net effect of significant supply side factors including; supply chain resource constraints, reserve replacement challenges and mature field decline rates. These increasing pressures are already driving restructuring in the industry with an increase in the premium for assets and, just as importantly, skilled people. This is where the industry has a big challenge – attracting the next generation of skilled engineers and leaders in an industry with an aging workforce.

All of these challenges provide opportunities. The supply chain is prospering financially, with many companies making record profits. However, capacity constraints are emerging which need to be addressed to maintain recent growth levels. There is no room for complacency. The industry needs to take advantage of the momentum of change. To succeed in the future, innovation and development of new business models will be more important than ever.