ARC says Oil & Gas sector will invest in automation | Automation.com

ARC says Oil & Gas sector will invest in automation

ARC says Oil & Gas sector will invest in automation
October 21, 2009: The economic downturn has had a pronounced impact on demand and the price of oil. Despite this, massive investments are still needed to ensure the industry has enough production capacity to meet future demand. 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 seven percent over the next five years, according to a new ARC Advisory Group study.

After a challenging 2008, which saw plummeting demand and a collapse in once lofty oil prices, the industry is looking ahead as the economy begins to come out of the recession, and oil prices recover some of their lost gains. Though oil and gas companies have made some adjustments in response to the downturn by stepping back from some large projects, they still plan to make major investments in coming years to build capacity for an inevitable increase in demand over the long term. “With the global economic downturn as a backdrop, it would be understandable if oil companies were to dial back their capital investments as a response to reduced demand and falling oil prices. However, many of the major oil companies are maintaining their capital spending plans into 2009 and beyond,” according to Analyst Allen Avery, the principal author of ARC’s “Automation Expenditures in Upstream Oil & Gas Worldwide Outlook.”

Many Challenges to Meet Future Demand
An increase in demand over the long term will continue to drive significant growth in capital investments and automation expenditures in the global oil & gas industry. 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.

According to 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.

Asia and Latin America to Lead Growth
Regionally, the highest growth rates will occur in Asia and Latin America. Asia’s share of sales will reach 25 percent, and while expenditures in Latin America will nearly double over the forecast period, the region will still remain a relatively small portion of the overall market. 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. North America’s upstream business, because it relies on non-conventional projects such as the Canadian Tar Sands, will trail the market.

About ARC: Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing, Energy, and Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. 4

MORE INDUSTRY NEWS

VIEW ALL

RELATED