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Lack of People, Equipment Challenge Energy Industry, Says Consultant

Growing energy demand, colliding with oil and natural gas shortages, is pointing to an offshore activity boom, the CEO of UK-based energy consultant Douglas-Westwood said Thursday. However, the energy industry faces "major challenges," especially in the near term, with a lack of people, rigs and vessels leading the list of woes.

"The gathering energy storm is not about reserves but about how to increase world oil production," said John Westwood, speaking before the Society for Underwater Technology in Houston on Thursday. "We need to vastly increase capital expenditures on exploration and production. And we need to address the chronic people shortage." However, "within these big problems lie even bigger opportunities."

The oil majors are "awash with money," but they are facing a big problem of their own: "where will they get their future oil from?" National oil companies (NOCs) also are growing globally, which is changing the dynamics of the industry. "A major power shift is underway, and 80% of the known reserves are now held by NOCs. NOCs need technology and know-how...[which is] not necessarily the oil majors."

The Western hemisphere is facing more supply problems than the rest of the world. Because the vast majority of resources are in the eastern part of the world, "security of supply is the challenge," said Westwood. However, all of the countries are competing against each other. "There has been an unprecedented growth in world energy three years, China's energy demand has grown by 81%."

Global "primary" energy consumption, which includes oil, natural gas, nuclear energy, hydroelectricity and coal -- recorded the strongest incremental growth ever in the past year, rising by 4.3%, Westwood estimated. Growth was above the 10-year average in all regions and for all fuels..

Even with a secure supply, "without the people we can do nothing," he said. An estimated 13% of the current petroleum workforce will have retired by 2007; 33% by 2012. "There is a structural weakness in the labor market...lack of adequately skilled professionals between 30 and 40 years of age." And these "chronic skills shortages are a real risk to delivery."

Research indicates "the era of cheap energy has ended." The price jolt is partly due to supply security, which has become more acute as tensions have mounted in the Middle East. "We are going to need all the oil and gas we can produce," he said. "To access this, we need more experienced people. We need consistent political polices. Global offshore production will increase, and will focus on small fields and deepwater. Underwater technology will be of growing importance."

Westwood sees no end to higher commodity prices. According to Douglas-Westwood research, energy supplies "will remain tight, and this will support prices over the medium term...a super cycle that could last until 2012."

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