Central Illinois Business Magazine
GLOBAL ECONOMY          October 2012

Global oil and gas capital expenditures rising


Morris Beschloss

By Morris Beschloss
CIBM Contributor

If there was any doubt as to the increasing surge of oil and gas capital expenditures (capex), the latest release by natural resource experts Global Data reporting a record-breaking $1,039 billion removes such apprehensions. This trillion dollar-plus amount eclipses last year's $916 billion, by a massive 13.4 percent increment.

The North American arena is covered primarily by production and deep sea drilling in America's vast land areas, plus Alaska's North Slope, Gulf of Mexico deep sea drilling, offshore Brazil and even new beginnings in the Arctic Circle.

Investor confidence is increasingly high in oil and natural gas futures, as exemplified by a recent peak of those two fossil fuel discoveries (242) last year alone. Higher prices and new technology are major factors in the surge.

North America is projected to generate the highest expenditures globally in 2012, with an expected $254.3 billion, representing almost 25 percent of the world's massive revenue outlay. This leading global position is enhanced by such unconventional oil and gas activities as Canadian oil sands and the surprising acceleration of both oil and gas shale sites in expanding areas throughout the United States.

Global Data predicts that the Asia-Pacific arena capex expenditures will follow right behind with $253.1 billion. The Middle East and Africa, once the world's kingpin, is destined this year for third place with $220.6 billion.

In regard to company groups and units, national oil companies are expected to be well out in front in capex leadership, accounting for 50 percent of the world's capex expenditures. Integrated publicly held oil companies comprise the rest. The leading national oil companies are headed by China Petroleum & Chemical Corporation, Brazil's Petroleo Brasileiro S.A. (Petrobas) and Malaysia's Petroliam Nasional Berhad, all of which are substantially increasing their explorations and production budgets well into next year.

When considering the longer 2012-2016 period, Petrobas ranks first among the nationals, whereas Exxon Mobil is tops among the integrated oil companies. These two plan to undertake massive oil and gas expenditures of $409 billion over the next five years.

Although these gigantic expansion plans will eventually bring impressive new oil and natural gas supplies on line, consistently higher prices and increasing demand will barely offset dry wells and such aging giant fields as Mexico's Cantarell or the 35-year-old Prudhoe Bay fields of Alaska's North Slope. It will require America's oil and gas self-sufficiency and even their exports to requite the world's needs for the rest of the century.

Morris R. Beschloss writes a blog for the Desert Sun at mydesert.com/beschloss. He also discusses world events, economics and foreign and domestic politics in weekly radio and TV appearances in Palm Springs, Calif. Beschloss is a University of Illinois journalism graduate.



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Fresh edition of CIB

By Bridget Broihahn

Hello everyone. My name is Bridget Broihahn and I'm the new editor for CIB. I look forward to getting to know more about the businesses in Central Illinois. This issue has been exciting to create.

Spring is finally here, and business in Champaign County is alive and well, ready to take on the outdoor season.

That is certainly true for BRG Sports, our feature story. This outstanding company just keeps breaking records and winning awards in business. Led by energetic and enthusiastic general manager Lewis Hornsby, this crew makes hard work look easy as they gear up for the bicycling season. His energy level had me motivated, and the employees left me energized.

I also hope you'll check out the article on Scientific Animations Without Borders, better known as SAWBO. Barry Pittendrigh and Julia Bello-Bravo came up with a great way to share information worldwide through animation. It's free, and a great resource for the world community.

The dedicated businesspeople I had the chance to share some time with for this issue inspired me. This includes Steve Tarrant of State Farm. He's one of those people who pulls up a chair, cracks open a soda and lends you a hand. He makes your peace of mind his business.

Additionally, I had the chance to hang out with the game designers at Volition. This unique group made its mark in the video gaming industry, and has made Champaign home. They even gave this mom of a teenage boy some cool points, if just for a little while, anyway. That's no small feat!

Bridget Broihahn is editor of Central Illinois Business magazine. She can be reached at 217-351-5695 or bbroihahn@news-gazette.com.