World Oil Outlook - Opec

Chapter 4
Upstream challenges
In looking ahead, there are many challenges for the oil industry, and it is clearly important
to continually gain a better understanding as to how these might evolve.
Clearly the economic environment is today particularly challenging and a source
of major uncertainties for the future. How the global economy will evolve in the coming
years is thus a key question, with huge impacts on the oil industry.
There are oil price fluctuations – as discussed in Chapter One – and the role of
speculation in this. There is clearly a convergence of views on the need to mitigate
extreme volatility and dampen excessive speculation.
The industry has also recently seen how quickly perspectives for energy supply
can change. For example, the Fukushima disaster changed nuclear prospects in some
regions, impacting in the short-term oil and gas markets, and changing country energy
policies in the longer term; and shale oil and gas have rapidly reversed the decline
of oil and gas production in the US, with dramatic consequences on gas, LNG, and
coal trade and prices. Energy policies have also become increasingly far-reaching in
their scope, with a number of countries and regions looking to significantly alter their
energy mix in the medium- to long-term.
In addition, skilled labour availability continues to be seen as a potential constraint
to the expansion of the industry. In past years, this publication has repeatedly
called for moves to address this.
And there is also the pressing issue of the environment and climate change,
and how this might impact the industry and future technological developments.
In fact, when looking at technology, in general, it can perhaps be viewed as the
source of the greatest uncertainty in terms of the long-term oil and energy outlook.
This is not an exhaustive list of challenges, but it does underscore some of the
uncertainties facing the industry. And this is further brought home when looking at
how much investment is required.
Investment needs in the petroleum industry are massive. For OPEC, and its
Member Countries, offering spare capacity in a climate of uncertainty (over how
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