Increased consumption of energy resources by faster growing economies of India, China, Brazil and other emerging nations has posed a great deal of uncertainty in the oil markets. Today the gas prices in the US have crossed USD 3.5 a gallon and are likely to increase further.
In order to see how trends have worked with and against each other in shaping the destiny of oil and gas, several key factors need to be considered. Taking them one by one, the first and the most important of all factors is 'the demand'. The demand of oil and gas is rising because of its ease of use and flexibility to enhance our lives in multiple applications. The fact is that oil and gas are very important elements to sustain economic growth and prosperity of the world. But the point, we need to consider here is that, while the demand is increasing continuously; the existing production is declining and it directly points to the increase in production cost.
In recent decades, new discoveries in Africa and parts of the former Soviet Union coupled with the vigorous exploration and production in other parts of the world have helped to meet the world's fuel needs. Gas demand was driven by major discoveries in Russia, the Middle East, the Netherlands and Indonesia. The slight increase in resource additions in recent years reflect access to areas previously off-limits to industry, and technology advances that enable us to make drilling economically feasible in more challenging operating environments.
Another important factor to be included in the supply and demand history of oil and gas over the last century is the, price. Technology and geopolitics are the 2 important factors which will help in controlling the prices in future.
The future role:
Success in the future of oil and gas will require continued adaptation, as the demand for oil and gas will continue to increase. Oil and gas are expected to remain the leading energy resources for some time to come. We should expect and work on exploration of additional areas as our technologies evolve. Prices can only be controlled by keeping production costs low. No doubt that maintaining the exploration success will require the development of new and better technology. A key example, and one of today's more exciting prospect, is technology that directly detects and distinguishes the presence of hydrocarbons.
The major challenges faced by the industry in this context are:
1. To ensure that both new and discovered resources can be produced in an economically and environmentally sound manner to meet increasing demand and offset natural field decline.
2. Environmental fears have already led to restriction to explore places such as Alaska and other parts of the world. Concerns over potential climate change have led to demands for greater control of energy use and could well impede our ability to produce adequate amounts of energy.
3. New supplies which are located at increasing distances from consuming markets are posing problems.
4. Lowering the operational costs and increasing the operational efficiency in order to control prices.
Industry has the resources to meet future global energy demand for the some considerable time. Technological advances will continue exploration, development and production. Our future discoveries will not just come from new frontier areas, but also from proven areas, as evolving technology improves our ability to virtually 'see' and distinguish the oil and gas before we drill.
We need to be optimistic as well about maintaining constructive relationships among producing countries, consuming nations and energy companies.