Deloitte energy and resources predictions for 2012DOWNLOAD
8 November, 2011: The world’s energy and resources sector is confronting a period of increasing complexity where the convergence of global issues such as the end of ‘easy’ oil, increased geopolitical risk and the debate over climate change are combining with emerging new energy sources and technologies to present both challenges and opportunity for the industry, according to the latest Deloitte report, Energy and Resources Predictions 2012.
Deloitte’s Energy and Resource Leader in Australia, Keith Jones said the pace of change affecting the sector had significant implications for government, industry and consumers.
"Secure energy sources are fundamental to our social and economic development. While new energy sources and technologies are offering cost effective alternatives to current sources, they also pose a potential threat to our environment and we’re seeing governments step up their regulation of these industries as a result.”
“Energy supply is no longer a stand-alone issue. Environmental management, consumer demand, smart networking and the cost, not only in dollars but in alternative resources, have all become increasingly relevant,” Mr Jones said.
"Issues that a few years ago seemed unrelated such as nanotechnology, rare earths, carbon management and water supply are at the forefront of emerging trends that will affect our energy future. For example, we are now seeing potential applications for nanotechnology that could substantially alter and improve the way our energy sources are produced, stored and distributed.”
“The impact of geopolitical issues is likely to escalate industry concerns over energy security, with recent Middle East unrest, and the ongoing territorial tensions over security and resources in the South China Sea and the Arctic continuing to simmer. Closer to Australia, we’ve witnessed the delays caused by the debate with East Timor over the development options for the Sunrise gas fields in the Timor Sea.”
“Oil and gas companies are used to dealing with risk, but increasing demand for resources has led companies searching for new reserves to begin exploration in areas without well-defined borders, such as the South China Sea and the Arctic, where territorial disputes are more likely to occur,” he said.
Key themes in energy predictions are:
Oil & Gas: Striking the right balance
Mr Jones said many oil and gas companies were likely to experience significant change in coming years with the report suggesting that some may decide to shift away from the vertically integrated model that has reigned supreme for the last fifty years with additional splits or demergers occurring to release shareholder value.
“By owning all parts of the value chain, oil and gas companies are able to control the entire spectrum of activity. This model has served the industry well but we’re likely to see some big changes to the way some of these companies structure themselves as they struggle with slow economic growth and the flow-on effects of the global financial crisis. Some are challenging the status quo by splitting their upstream and downstream operations into separate units and increasing their value as a result,” he said.
The report concluded that the complexity of the offshore value chain would continue to grow substantially over the next decade and that may trigger a new round of industry consolidation
“With the days of ‘easy’ oil coming to an end, the future of oil field services is also on the cusp of real change. Complexity will be the new normal as companies seeking quality assets step up their interests in emerging economies and deep water projects,” he said. “As a result, it’s likely the days of oil field companies shifting the risks of these projects on to the oil companies and governments via reimbursable contracts are long gone and we’ll soon see lump sum contracts making a comeback – possibly for good."
Nanotechnology: A little something to make your energy go further
Mr Jones said continuing advances in the application of nanotechnology could be a game changer for the renewable energy sector.
“Not only could it help improve efficiency in the production of these energy alternatives at their source, it’s got real potential to improve our ability to store that energy locally and transmit it from the remote regions, where renewables generally operate, to high population areas where the energy is most needed,” Mr Jones said.
“The ability to store energy locally would reduce the amount of electricity that needs to be transmitted over power lines to meet peak demands, allowing the downsizing of base load capacity and increasing the penetration of renewable at reasonable economic and environmental costs,” Mr Jones said.
Water management: Stemming the flow in the resources sector
Mr Jones said many of the world’s largest companies have identified water reduction targets, as have some high-tech multinational companies, and it was becoming increasingly important for resource companies to also consider their water footprint.
“Resource companies are huge water users. A typical 500MW coal-fired power plant draws about 8.3 billion litres of water each year to create steam for turning its turbines and it takes up to 49.2 million litres of water to open up a single gas well in the Eagle Ford shale region in Texas.”
“We’ve seen energy and resources companies adjust their energy usage to lower their carbon footprint and, with water management now one of the key issues facing the mining and oil & gas sectors, those companies need to consider their water footprint in the same way and begin looking at strategies to better manage their water use.”