Big spenders The outlook for the oil and gas industry in 2012

Big
spenders
The outlook for the oil and gas
industry in 2012
A report from the Economist Intelligence Unit

Commissioned by
© The Economist Intelligence Unit Limited 2012

1


Big spenders The outlook for the oil and gas industry in 2012

About this
report

Big Spenders: the outlook for the oil and gas industry
in 2012 is an Economist Intelligence Unit report which
analyses the oil and gas industry outlook from the point
of view of top-level operators, including CEOs and other
board-level executives and policymakers. The report has
been commissioned by GL Noble Denton.
The Economist Intelligence Unit bears sole responsibility
for the content of this report. Our editorial team
executed the survey, conducted the interviews and wrote
the report. The findings and views expressed do not
necessarily reflect the views of GL Noble Denton.
Our research drew on two main initiatives:

David Knox, chief executive officer, Santos
Helge Lund, chief executive, Statoil
John Richels*, chief executive officer, Devon Energy
Christof Ruehl, chief economist, BP
Carl Sheldon, chief executive officer, Abu Dhabi
National Energy Corp
Jon Tait, head of global attraction, BP
Donald C Templin, senior vice president and chief
financial officer, Marathon Petroleum Corp
Mehdi Varzi, president, Varzi Energy
Gonzalo Velasco, communications manager, Repsol
*Comments from these executives were obtained from conferences
and company conference calls.

2

© The Economist Intelligence Unit Limited 2012


Big spenders The outlook for the oil and gas industry in 2012

Contents

1

About this report

2

Executive summary

A look at the industry’s investment plans for the year ahead

11

After a tumultuous couple of years for the sector, how are attitudes to risk evolving?

13

Implications from a year of turmoil in the Arab world

15

Is unconventional gas really the game changer industry players think it is?

Refining

18

A focus on downstream investment prospects

Skills

20

What are companies doing to plug the skills gap?

© The Economist Intelligence Unit Limited 2012

3


next 12 months, whereas in last year’s survey that
figure was just 49%. There has also been a shift in
where companies see the greatest opportunities for
revenue growth. Last year South-east Asia came top of
the pile, with North America second, the Middle East
and North Africa third and the Far East fourth. This
year the rankings have changed, with North America
top, the Far East second, South-east Asia third and
Latin America fourth.
Rising operating costs emerge as the main barrier
to growth. When questioned in detail about costs,
more than 50% of respondents say that they expect
an increase in wages over the next 12 months.
The second-biggest concern is the rising cost of
contractors, with 54% expecting costs to increase,
compared with only 11% anticipating a decline.
The upstream remains the core focus for spending.
A majority of respondents identify the upstream as the
key area for business growth in 2012, meaning that
exploration will be a major beneficiary of increased
investment. Our survey shows that 41% of industry
professionals expect to see increased investment
in exploration activities over the year, with only 4%
anticipating a decline.
Risk remains a key challenge. A combined 55% of
respondents confirm that in the aftermath of the 2010
oil spill in the Gulf of Mexico, drilling permits have

become harder to obtain. Even more decisively, an
overwhelming majority of respondents (82%) agree

© The Economist Intelligence Unit Limited 2012

5


Big spenders The outlook for the oil and gas industry in 2012

1

The oil and gas industry barometer
Findings from the Economist Intelligence Unit’s survey
of oil and gas industry professionals

Key points
• Optimism is high across the industry.
• The biggest challenges are rising costs for both labour and contractors.
• Skills shortages are a growing concern and regulation has remained a key issue.
• The Far East (including China, Japan and Korea) has emerged as the key area for revenue growth, leapfrogging three places from last year’s survey.
• In the aftermath of the 2010 Gulf of Mexico oil spill, executives are pessimistic about the regulatory impact.

Figure 1
How confident are you about the
business outlook for your company
in the next 12 months?
(% respondents)

2011

34%


As figure 1 shows, most of the increase is attributable to a large rise in the
share of respondents who describe themselves as highly confident about the
next 12 months. Only 8% of respondents say they are pessimistic about the
outlook for the coming year.
Optimism is high across the industry, but confidence levels vary significantly
between regions. In North America 90% of respondents describe themselves
as highly or somewhat confident, in Asia-Pacific the figure falls to 81%, and in
Europe it drops to 70% (see figure 2).

Somewhat confident

16%

This second Economist Intelligence Unit oil and gas barometer shows that
industry confidence is rising. In last year’s survey 76% of respondents said
they were either highly or somewhat confident about the business outlook for
their company over the next 12 months; in this year’s survey, that figure has
grown to 82%.

pessimistic

1%

Highly pessimistic

Figures for 2011 were collected at the end of 2010.
Figures for 2012 were collected at the end of 2011.

Increased optimism looks set to feed an expansion in capital expenditure
during 2012. According to our survey, nearly two-thirds (63%) of respondents

in the next 12 months?

71%

90%

(% respondents)

Asia-Pacific

81%

Source: Economist Intelligence Unit

the industry is likely to be the strongest source of business
growth over the next 12 months. Upstream activities were
the most popular choice for this question last year, and they
have become even more heavily favoured this year, with
the share of people selecting this option rising from 42%
to 56%. Downstream activities are also expected to provide
a stronger source of growth than last year, rising from 10%
to 14%. Meanwhile, marketing has declined significantly,
falling from 22% to 8%.
Continued challenges
Of course, growing optimism about the future does not
mean that companies are sanguine about the challenges
they are likely to confront. For the second year running,
rising operating costs come out as the top barrier to growth
in the industry (see figure 6). When questioned in detail
about costs, more than 50% of respondents said that they


33%

33%

11%

4%

43%

22%

9%

3%

Invest
somewhat
less

Invest substantially
less (At least 25%
annual decrease)

2012:
20%

Invest substantially
more (At least 25%

36%

North America

30 %

Far East (including China)

31%

Middle East and North Africa

29 %

South-east Asia (including India)

29%

Far East (including China)

26 %

Latin America

26%

Latin America

23 %


10 %

Western Europe (including Scandinavia)

12%

Central America
Source: Economist Intelligence Unit.

6%

Central America

8%

Figure 5
Which sgment of the industry do you expect to see the strongest business growth in the next 12 months?
Select one. (% respondents)

2012:

2011:

42%
Upstream

56%

17% 10% 22%
Midstream Downstream


34%

Competitors

28 %

Increasing regulation

31%

Limited new areas for exploration

25 %

Limited access to capital/finance

23%

Shortage of skilled labour

25 %

Limited new areas for exploration

20%

Increasingly limited areas of “easy” production

20 %

16%

12 %

Ensuring adequate safety measures—for
environmental risks

10%

Source: Economist Intelligence Unit. Note: Figures do not add up to 100% because respondents are asked to
select their three top barriers to growth.
8

© The Economist Intelligence Unit Limited 2012


Big spenders The outlook for the oil and gas industry in 2012

2

Key points

2

Big spenders The outlook for the oil and gas industry in 202.

Investment prospects

A look at the industry’s investment plans
for the year ahead

zone crisis will have a major impact on investment.
in the euro zone, the oil and
gas
industry
showing
growing
of Mexico, liquefied natural gas (LNG) in Australia, tight gas
sense of confidence about the future investment outlook.
in North America, traditional plays in the North Sea, and its
worldwide
exploration
programme.
an increase
in capital
spending, compared with
Growing investment
More than four-fifths of respondents (82%) say they are either
only 55% in North America and 57% in Europe.
Despite the difficult economic climate and fears of
highly or somewhat confident
about the business outlook for
In general, the Anglo-Dutch supermajor sees a robust demand
recession in the euro zone, the oil and gas industry
their company over theisnext
12 months.
Translating
this into aboutoutlook
fordesire
oil andtogas,
andalso

Figurein7our industry, rather than driven by short-term
they are either highly or somewhat confident factors,” says Shell’s chief financial officer, Simon Henry.
If your company is involved in
business
outlook
for their company
Upstream activities areabout
seenthe
by the
majority
of respondents
exploration, does it plan to increase
over the
next 2
months.
Translating
as the key area for business
growth
over
the next
year, so itthis into Figure 7
or decrease the frequency or intensity
corporate
action,
a significantly
share of
of itsisexploration
activities over
should come as little surprise
that

(%
respondents)
with
49%
last
year)
say
their
firm
plans
to
increase
exploration
activities
over
the
next
12
months?
Select
one.
that 41% of industry professionals expect to see increased
(% respondents)
investment over the next 2 months.
investment in exploration activities over the course of 2012, with
Significantly
only 4% anticipating aUpstream
decline (see
figureare
7).seen by the majority

spending,
compared
shows
that %
of industry
professionals
with only 55% in Northexpect
America
and
57%
in
Europe.
to see increased investment in exploration

38%

Don’t know/
not applicable

30%
Somewhat

activities over the course of 202, with only %

The desire to invest also
varies between
companies.
Majors
anticipating
a decline

© The Economist Intelligence Unit Limited 2012

17%

Stay the same

3%

Somewhat
decrease

Source: Economist Intelligence Unit

9


Big spenders The outlook for the oil and gas industry in 2012

Bullish in the US
The oil majors are generally more confident about the investment
outlook than their smaller rivals. Over the next two years the
US firm ConocoPhillips plans to execute a US$28bn capital
programme, almost 90% of which has been allocated to
exploration and production (E&P) supporting the company’s
100%-plus reserve replacement target.
In geographical terms, the US is absorbing the largest amounts
of capital in the current market. According to Barclays Capital, it
pulled in 21% of US$529bn in global E&P spend in 2011, with the
capital commitment of US$110.7bn representing an 18% increase
over 2010 spending levels.


Source: Economist Intelligence Unit

10

There is, however, evidence of a more cautious approach in
the Middle East. For example, Carl Sheldon, the CEO of Abu
Dhabi National Energy Company (TAQA), sees the company
spending US$2bn in 2012, a small increase on the previous year:
“Essentially we have a capital spending programme that started
in 2010 and goes up to 2013. For each of those years we’ll spend
roughly US$2bn each year in five major programmes – drilling in
Western Canada, drilling in the North Sea, the Bergermeer gas
storage project in the Netherlands and two power projects in
Morocco and Ghana.”
Like other companies, TAQA is prepared to cut spending should
the price climate become less inviting. “If prices went south
in a big way it is pretty easy for us to toggle our Canadian
expenditure down, because we drill a lot of wells in the onshore.
We drill 70-100 wells a season in Canada, whereas in the North
Sea we might drill just 8-12,” says Mr Sheldon.
The threat of another major downturn in the global economy
could see this happening, warns Hamid Gayibov, the
managing director of Xenon Capital Partners, which advises
on Russian energy merger and acquisition (M&A) deals. “I do
see there being some increase in capex, and the momentum
is there. However, there is big uncertainty regarding the
global oil market, and if there is a major dislocation in the
global economy, we could see the oil price collapsing and
fundamentals continuing to weaken. In that event there

3

Risky business
How are oil companies’ attitudes to risk evolving?

Key points
• Across the board, oil companies confront a wider array of risks.
• The post-Macondo environment has seen operators seeking to offload risks onto contractors.
• In the context of troubled finances, governments are seeking to tax the industry more heavily.

Risk is integral to the investment process in the oil and gas
industry. As the supply-demand gap drives oil companies
towards resources that are more difficult to develop and
increasingly located in politically challenging terrain, the risk
challenge is gaining in intensity.
Our survey bears out the sense of heightened risk and
regulation. A combined 55% of respondents confirmed that
in the aftermath of the 2010 oil spill in the Gulf of Mexico,
drilling permits have become harder to obtain. Even more
decisively, an overwhelming majority of respondents (82%)
agree that the in the post-Macondo period, regulatory issues
have become more important.
From the secular trends shaping the industry – the steady
move into deep water, the tapping of tight hydrocarbon
formations – to the “black swan” events like the Deepwater
Horizon disaster of April 2010, oil companies must confront
an environment where risk is far more prominent.
“The outlook for upstream is shifting as the reserve
base addition is becoming increasingly complex and
unconventional. Complex hydrocarbons make up

royalties, as part of a wider overhaul that includes reform of
the state oil company.
Above-ground risks increase
Many of the regulatory bugbears are familiar. The oil industry
has been heavily regulated for years, more than the natural

© The Economist Intelligence Unit Limited 2012

11


Big spenders The outlook for the oil and gas industry in 2012

gas sector. “Oil prices are higher for ‘above-ground’ reasons,”
says Christof Ruehl, chief economist at BP. “It is because of
politics, and the cartels.” Reflecting this, our survey shows
that increasing regulation is regarded by more than 30% of
respondents as the main challenge for their company over
the next 12 months, exceeded only by the impact of rising
operating costs and the shortage of skilled professionals.
New sources of risk
Issues like Macondo will also exert a lasting impact because
of the ways in which governments and oil companies must
now formulate new responses to mitigate or disperse the
heightened risk profile.
Companies acknowledge the necessity of instituting greater
remedial measures to prevent the recurrence of such events.
For example, large oil companies, including BP, ExxonMobil,
Shell, Chevron and ConocoPhillips, joined forces in 2011 to
spend US$1bn to establish the Marine Well Containment

for North Sea exploration in early January 2012, including
awards for the French major Total, suggesting that the impact
of the tax change might not be as significant as some had
feared.
Nevertheless, industry insiders remain hostile. “In an era when
the government has to adopt far-reaching austerity measures,
this was a quick way of hitting a constituency that doesn’t have
any votes,” says Mr Sheldon of TAQA, which has a number of
production assets in the Brent system of the North Sea.
“However, in the long run it was not a very well thoughtthrough thing to do. Hopefully they will take a more pragmatic
approach going forward and will try hard to incentivise further
investment in the basin - and understand that is not going to
come from the supermajors.”
The political risk premium
Inconsistent regulatory approaches remain a cause of
consternation across the industry, with broad agreement
among industry leaders on this point. Jean-François Cirelli, the
vice chairman and president of GDF Suez, told the European
Autumn Gas conference in Paris in mid-November 2011 that EU
regulations were creating an unstable investment climate that
was discouraging essential energy investments.
“Governments do not hesitate to take decisions that are not
totally based on economic rationale,” he said. “European
political risk has become a major concern to energy companies
and investors and will clearly impede our ability to invest in
Europe.”
This concern about the damaging effects of government action
is widely shared. The largest US refiner, Valero, is keeping
a close eye on is the implementation of California’s carbon
dioxide cap-and-trade regime, known as AB 32. Rules have

one-quarter of our survey respondents (25.9%) believe that
government and/or NOC policies towards IOCs will become more
restrictive, whereas about one-fifth (20.5%) think they will
become more favourable, and nearly four out of ten (37.3%)
think approaches will be broadly unchanged.

The Arab Spring will take time to settle,
but it will bring with it a lot of opportunities
because one reason it happened is that
many of these countries have young,
growing populations with rising expectations.
You cannot contain those expectations –
they have to be met.


Carl Sheldon,
chief executive officer, Abu Dhabi National Energy Corp

In an attempt to thwart the spread of the uprisings into the
Arabian peninsula, major MENA oil producers such as Saudi

Arabia have massively ramped up social spending, and with
it the oil price they need to balance the state budget. The
kingdom, which at the end of 2011 was pumping nearly 10m
barrels/day (b/d), has seen its target budget figure rise
to above US$90/b, as it seeks to increase revenue to fund
additional US$130bn in spending programmes aimed at raising
living standards for ordinary Saudi citizens.

Arab Spring’s mixed results

of properties in oil, gas and power and water sectors.
“The Arab Spring will take time to settle, but it will bring with it a
lot of opportunities because one reason it happened is that many
of these countries have young, growing populations with rising
expectations. You cannot contain those expectations – they have

14

to be met. And within that bunch of expectations is economic
advancement – better living standards, access to clean water,
power, better economics,” says Mr Sheldon.
The Arab Spring is far from over, and 2012 will see continued
political risk impinging on oil company strategies in the Middle
East-North Africa region. In the long term, industry fundamentals
will reassert themselves more strongly. Says Mr Sheldon: “The
upheaval and lack of certainty make it harder to put a lot of
money at risk quickly, but over time, as things stabilise, the basic
dynamics will be the same, whoever leads.”

© The Economist Intelligence Unit Limited 2012


Big spenders The outlook for the oil and gas industry in 2012

5

In focus
Is unconventional gas really the game changer industry
players think it is?


over the next 12 months.

Talking ‘bout a revolution
The foundations of this unconventional “revolution” were laid
in the US, where advances in technology such as horizontal
drilling and hydraulic fracturing have dramatically increased
production. Unconventional US output soared to 10bn cu ft/
day in 2010, around one-quarter of the country’s total. By
2035 this proportion could rise to one-half, according to the
US Energy Information Administration.
Oil companies active in this terrain acknowledge the
transformative impact of unconventionals on the industry,
particularly natural gas. “We are in the midst of a structural
revolution. There are now three times the number of gas wells
being drilled compared to oil wells. The debate is no longer,
‘are we running out of gas?’ The debate is, ‘do we now have 100
or 200 years of gas supply in the US?’,” says Thomas Ahlbrandt,
the former vice president of exploration at Falcon Oil & Gas.
North America’s unconventional revolution rests on a
confluence of favourable factors — a “perfect storm” in
the words of one executive. Most important is the strong
geological resource base, estimated by the US Energy
Information Administration (EIA) at 862,000bn cu ft. Also
important are the US’s provision breaks, a stable regulatory
regime, private ownership of mineral rights and the existence
of a strong service industry.

© The Economist Intelligence Unit Limited 2012

15


Big spenders The outlook for the oil and gas industry in 2012

Big spenders

Figure 9 Figure
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Figure 9

Figure 9

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for E&P at OMV.
where oil industry consensus is distinctly lacking. “Over time,
if you look at the marginal cost of producing shale in volume,
Slow progress
only the very best properties in the big shales in Haynesville,
Europe’s unconventional developments will advance at a
Barnett and Horn River can be produced for US$4. Everything slower pace than those in North America. “No significant
else is in the range of US$5.5 to US$6,” says Mr Sheldon.
production contribution is expected within this decade, as
16

© The Economist Intelligence Unit Limited 2012


Big spenders The outlook for the oil and gas industry in 2012

activities are at best at the technical pilot stage,” says
Mr Huijskes, whose company has access to interesting
unconventional acreage in Central Europe, Tunisia
and Pakistan.
“E&P is, however, by its very nature, a long-term, capitalintensive and risky business. It is definitely too early to
say if commercial production of unconventional gas/shale
gas in Europe is possible,” says Mr Huijskes.
Look East
China has been talked up as a major future source of
unconventional developments with estimated reserves
at 1,275trn cu ft – greater even than North America’s
combined 1,250trn cu ft. Beijing held its first shale gas
licensing round in June 2011, with several exploration
blocks awarded to domestic companies.

The migration to liquids-rich projects has served to
heighten competition for staff and equipment on these
fields. The result is that companies are factoring in much
larger capex spend in 2012. The chief executive of Apache,
Steven Farris, says his company saw cost inflation on the
scale of 10% to 15% in the oil-rich Permian Basin in West
Texas and New Mexico during the first quarter of 2012. For
the industry as a whole this could lead to 10-12% growth
in spending in the next 12 months in the region and high
single-digit increases annually through to 2015.
Strong project economics has incentivised greater spend
on shale plays compared with conventional natural gas
projects, which are still compromised by the generally
weak price environment for gas.
Hess, a significant US integrated company active in the
Bakken shale, is meanwhile spending nearly half of its
US$7.2bn capital budget on unconventional development,
up from 16% two years ago. With Bakken production
alone expected to more than triple to 120,000 b/d by
2015, Hess sees unconventionals contributing
40-50% of its production and reserve growth over the
next five to seven years.
Despite the rapid advance of unconventional energies in
North America, its capacity to transform the long-term
global natural gas supply picture is still unproven. The
horizontal drilling and fracking technologies that have
brought these volumes of unconventional gas on stream
remain highly controversial. And the conditions that
have made these projects viable in the US are not easily
replicated in other geographies. Time will tell as

refiners
will
continue
to cutgenerally
capacitystronger.
in 2012.

• Gasoline consumption is stronger, with international demand for products driving growth.
• Many refiners will continue to cut capacity in 2012.

respondents believe that downstream margins will
After a dismal few years the downstream sector is
higher in late 202 than in the previous year,
showing
some
signs
of
life.
Refining
profitability
After a dismal few years the downstream sector is showing some Marginbecall
with
a combined
8% expecting
to be eitherto reverse
has
improved,
particularly
in
the

2%
who
expect
them
to 2011
consumption
of
refined
products.
consumption of refined products.
become a theme. Conoco, for example, announced in July
significantly
or somewhat
worse. operations during
that itbe
would
shed its refining
and marketing
After fouroil-products
years of declining
oil-products
use,
After four years of declining
use, US
demand was
upUS 2012 in order to create a new company, to be called Philips 66.
was up
by at
2%19.148m
in 200 over

fuels
in
200
grew
by
0,000
oil
companies
to
reverse
a
strategy
of
410,000 b/d, or 2.2%, the highest rate of growth since 2004.
operations undertaken by Marathon Petroleum Corporation
b/d, or 2.2%, the highest rate of growth since 200.
(MPC).
In the third quarter of 2011 US Gulf Coast gasoline margins
Figure 10
In the
third
quarter
of 20byUS
GulftoCoast gasoline
per barrel vs Louisiana
Light
Sweet
increased
89%
Figure 10 Do you expect downstream margins

2010.
A US Gulf
Coastrising
refinery
(% respondents)
catalytic cracking yield
have
monthly
margins
to running (% respondents)
a typical mix of crudes for the area to a catalytic
US$21.45/b in July – the highest figure recorded for a cracking
cracking yield would have monthly margins rising
refinery by Jacobs, a downstream consultancy.
Significantly
Don’t
to US$21.45/b in July – the highest figure recorded
better
1% know
for
a
cracking
refinery
by
Jacobs,
a
downstream
Significantly
International demand, particularly in the developing markets,
worse

with a combined 23% who expect them to be significantly or
somewhat worse.

22

© The Economist Intelligence Unit Limited 202

18

© The Economist Intelligence Unit Limited 2012

22%

31%
Somewhat

Somewhat
worse

better

30%

No change

Source: Economist Intelligence Unit


Big spenders The outlook for the oil and gas industry in 2012


companies, and didn’t have a close peer. Now the spun-off
Marathon Petroleum and ConocoPhillips refineries will be of
a size closer to what Valero is. But we were already competing
with them anyway,” says company spokesman Bill Day.
Rationalisation of capacity looks to be a major theme in 2012,
with more refinery closures due. There have been continued
announcements of delays and cancellations of large refinery
expansions and new-build projects. The 2012-14 period may
see further capacity closures announced by refinery operators.
For example, Conoco intends to divest “non-core” refineries
and reduce the company’s refining capacity by 500,000 b/d by
the end of 2012.

In Europe, many refineries have been put up for sale as
companies undertake a rationalisation of capacity. Shell has
significantly scaled back its refining exposure. In March 2011 it
sold its 270,000 b/d Stanlow refinery in the UK and associated
local marketing businesses to Essar Oil for US$1.3bn.
According to Shell’s downstream director, Mark Williams, the
decision to sell Stanlow is part of its drive to concentrate the
company’s global manufacturing portfolio on larger assets and
means that the supermajor will have reduced its global refining
exposure through a combination of asset sales and closures by
a total of 1.6m barrels since 2002.
Switzerland-based Petroplus Holdings, Europe’s largest
independent refiner, announced that it would start the
temporary economic shutdowns of three of its five refineries
in January 2012, given the limited credit availability and the
economic climate in Europe. The highly cyclical nature of the
refining industry, European refiners’ weak cash flows since

Big spenders The outlook for the oil and gas industry in 2012

7

Skills
What are companies doing to plug the skills gap?

Key points
• Skills shortages are a key barrier to growth and are of increasing concern.
• Following the example of BP and Shell, companies should consider delinking recruitment drives from the oil price cycle.

Skills shortages are becoming more acute and emerge from
our survey as one of the biggest barriers to growth over the
next 12 months. Last year, skills issues came fifth on our list
of barriers and were only identified as a top-three issue by
25% of respondents. This year, the issue has risen to second
on the list and has been identified as a key barrier by 34% of
respondents.
The lack of suitably qualified labour is a global problem. In
Western Australia, where a number of resource plays are
under way to meet growing Asian demand, it is estimated that
by 2015 there will be a shortage of roughly 150,000 people
needed to develop projects in the north of the state.
In the UK, engineering skills shortages threaten to
undermine growth in the development of the maturing

20

North Sea acreage. Some of the majors active in this area
have hinted at problems recruiting enough people to fuel

universities and then into our organisation.”
The cyclical nature of oil and gas industry hiring – with periods
of depressed prices traditionally yielding reduced hiring – is
something that companies like BP are looking to break out of.
“What you’ve seen in the industry is a direct correlation between
hiring and the oil price, and what BP is trying to do is regardless of
the oil price ensure we have the right pipeline of talent coming to

our organisation,” says Mr Tait.
Graduate recruitment is critical. BP recruits thousands of
experienced and lateral hires [recruited from other oil companies]
every year, but in terms of growing talent in the organisation the
company is looking to have the right feeder stock of talent coming
in at graduate levels.
Vocational training is a key component of BP’s employment
offering, with a US$500m annual budget earmarked for training
and development purposes globally.
“In the UK we have an educational services resource centre
that provides tools for interactive teaching and lesson plans for
teachers. And we have the BP UK Schools Link programme which
was set up in 1968 and now covers 194 schools and enables BP
employees to work with local schools and help enhance their
curriculum especially in the science and engineering space,”
says Mr Tait.

Case study: Shell
The energy industry needs a deep pool of motivated workers with
technical expertise in a range of disciplines, from microbiology
to lean manufacturing. The highly skilled nature of many of
these jobs means that recruitment can be a challenge. To

university.
“Every year our engineers and scientists visit universities to
discuss career possibilities and conduct interviews in person.
That’s helped to improve our standing as an employer of choice
among students, ensuring we consistently attract the top talent
in every field,” says Mr Henry.

© The Economist Intelligence Unit Limited 2012

21


Big spenders The outlook for the oil and gas industry in 202.
Big spenders The outlook for the oil and gas industry in 2012

Appendix

Survey results
Do you operate in the oil/gas sector? Select all that apply.
(% respondents)
Oil
46

Gas
42

Neither
43

Which of the following aspects of the sector do you operate in? Select all that apply.

Don’t know
0

28

© The Economist Intelligence Unit Limited 202

22

© The Economist Intelligence Unit Limited 2012


Big spenders The outlook for the oil and gas industry in 2012

Big spenders The outlook for the oil and gas industry in 202.

Does your company plan to make more or less capital investment in dollar terms over the next 12 months?
(% respondents)
Invest substantially more (>25% increase year on year)
19

Invest somewhat more
45

Keep investment the same as before
22

Invest somewhat less
7


Increase substantially

Increase somewhat

Stay the same

Decrease somewhat

Decrease substantially

Don’t know/Not applicable

Exploration
19

43

17 2

19

Transmission and distribution
10

33

37

3



91

12

Operating expenditure
12

27

47

10

5

11 1

4

13 2

4

Contractors
11

31

42

10

23


Big spenders The outlook for the oil and gas industry in 2012
Big spenders The outlook for the oil and gas industry in 202.

Which of the following regions do you think will offer the greatest opportunities for your business in terms of revenue growth
over the next 12 months? Select up to three. Can we ask why?
(% respondents)
North America
35

Far East (including China)
33

South-east Asia (including India)
29

Latin America
24

Middle East and North Africa
21

Eastern Europe and CIS
18

Australasia


If applicable, do you think the replacement rate of your company's oil/gas reserves will improve or decline in the next
12 months?
(% respondents)
Significantly improve
10

Somewhat improve
34

Stay the same
19

Somewhat decline
7

Significantly decline
0

Don’t know/not applicable
30

24

© The Economist Intelligence Unit Limited 2012

© The Economist Intelligence Unit Limited 202


Big spenders The outlook for the oil and gas industry in 2012

Increasingly limited areas of "easy" production
15

Ensuring adequate safety measures—for environmental risks
9

Developing operations in regions with less mature infrastructure
9

Disputes over sovereignty and legal status of operations
8

Developing new technologies to support operations
7

The need for closer collaboration with partners
6

Ensuring adequate safety measures—for personnel
5

Weakening relationships between NOCs and IOCs
4

Other, please specify
1

To what extent do you agree or disagree with the following statements regarding the aftermath of the 2010 oil spill in the
Gulf of Mexico?
(% respondents)

35

5

3

Drilling permits have become more difficult to obtain in the last 18 months
33

21

20

6 2

19

The oil and gas industry needs to develop a unified response to technology failures
40

38

12

61

3

41