Unless the Euro crashes and everyone’s worst fears come true, the oil industry seems to be moving into another significant growth phase.

 

Several reasons prompt me to strike an optimistic note amid the general gloom. While some organizations, such as the International Energy Association, are concerned about slowing demand and abundant supply, the economic development of emerging countries continues to create a seemingly insatiable appetite for all kinds of fuel, including oil.

 

Additionally, the need to replace reserves and production ensures that oil companies will keep making capital investments to explore and rebuild. This is borne out by the higher capital budgets drawn up by most oil companies for 2012. Upstream capital spending by oil companies is estimated to rise by 10 percent this year and reach as high as US$800 billion by 2015. Relatively smaller but substantial investments will also flow into downstream developments.

 

As most of the larger oil companies have very global portfolios, the Euro zone crisis is really affecting the smaller, independent oil companies that are relatively exposed to local markets and who need access to credit. There is also good news  for oilfield services companies (OFS), with a number of countries like Australia, Brazil, Canada, the USA and some countries in Africa, all demanding more rigs and services.

 

While oil companies are adept in factoring in volatility and risks in their long-term strategies, they could now find themselves in a complicated and evolving landscape that will require fresh approaches. Overall, those companies able to efficiently manage their capital projects will be differentiated. Read more on how Accenture can help oil companies achieve high performance in 2012.