Asia Pacific oil and gas leaders fear increased operating costs will derail growth

GL Noble Denton

Rising operating costs will be the biggest barrier to oil and gas companies’ growth in Asia Pacific next year, according to new research on the outlook for the industry in 2013 by GL Noble Denton.

While the sector’s rapid growth is bringing huge new opportunities to the region, the research, which will be published in an in-depth report by the independent technical advisor to the oil and gas industry in January, shows that significant challenges remain.

According to initial results from GL Noble Denton’s survey of nearly 400 senior industry professionals, over half of those from the Asia Pacific region (53%) identified rising costs as one of their three biggest concerns for 2013, and a serious threat to the growth of their business.

This represents a substantial increase compared to last year when, in a similar survey, just 39% of respondents from the region forecast increased operating costs as a top three barrier to business growth in 2012.

Commenting on the trend, Richard Bailey, executive vice president for GL Noble Denton’s operations in Asia Pacific, said: “Increasing operating costs are understandably a worry for Asia Pacific’s oil and gas leaders and, according to our research, they are more concerned by the trend than professionals in other production hubs across the world.

“The mounting cost of operations is largely down to an increase in the complexity of oil and gas projects, a surge in insurance premiums and the acute lack of suitably qualified professionals across the region.

“Add to this a rising tide of supply chain consolidation; a trend that’s making it harder for smaller companies to secure work on large ventures with high capital expenditure, many of which are in Australia. To this end, the game is definitely becoming one that increasingly favours Asia Pacific’s big players. The smaller outfits, which may not have the same track record and process experience, need to fight very hard to stay in the game.

See reports on Australia's oil and gas sector: Australia Part I and Australia Part II.

“Overall, there is every reason for the region to be bullish about growth prospects and the indications are that the industry will spend heavily next year. Projects are becoming ever more complex and inevitably the levels of investment required are huge. The results of our research show that Asia Pacific’s oil and gas leaders will put a sharp focus on improving the operational and cost efficiency of their assets in 2013.”

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