Why automation investments are needed

Oil Sector Invest in Automation

The global financial crisis has had a profound effect on the oil industry. Demand has dwindled which has driven down prices, which in turn has led to firms making drastic cut backs to improve their bottom line, and inevitably exploration and production have subsequently suffered.

This means that huge investments are now needed, as the crisis seems to be easing, to ensure the industry has enough production capacity to meet future demand. Hence, companies are putting millions of dollars into automation, including exploration, production, and pipelines, are expected to grow at a compounded annual growth rate (CAGR) of nearly seven percent over the next five years, according to a new ARC Advisory Group study, reports Automation.com.

Since record oil prices gave the sector a huge boost before the recession hit, the oil and gas sector has seen investors running scared. But oil prices have shown recent signs of recovery, and despite cutbacks implemented to ease the effects of the downturn companies now planning to to make major investments in coming years to build capacity for an inevitable increase in demand over the long term.

"Dial back capital investments"

"With the global economic downturn as a backdrop, it would be understandable if oil companies were to dial back their capital investments as a response to reduced demand and falling oil prices. However, many of the major oil companies are maintaining their capital spending plans into 2009 and beyond," according to Analyst Allen Avery, the principal author of ARC's Automation Expenditures in Upstream Oil & Gas Worldwide Outlook.

The production segment is being driven by challenging capital projects as oil companies aim to replace their reserves in remote areas that are much less hospitable and more dangerous - both environmentally and politically - as they now only have access to a small percentage of proven reserves.

Therefore, companies are stepping up exploration efforts in tar sands, shale oil, and coal-to-liquid gas, that will require new midstream and production facilities to be developed, increasing demand for automation systems and field devices.

According to estimates, global demand for petroleum products will soon increase significantly as the economies in developing regions improve and per capita energy consumption increases.

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