Oil and gas industry’s capital spending continues to increase


The oil and gas industry has invested heavily in new production equipment in recent years.

The need to explore for new fuel reserves in increasingly remote and geologically challenging regions has necessitated ongoing reinvestment on the part of the energy industry. At the same time, a combination of several factors – including low interest rates and high oil prices driven by increasing demand in developing countries – has ensured that oil and gas companies have sufficient capital on hand to finance much-needed investments.

In 2012, the industry spent more than $450 billion. This figure represented a modest 6 percent increase over the previous year's total, but was almost 60 percent higher than the amount invested by oil and gas companies in 2007, which means there was an average annual growth rate of almost 10 percent during this period of time.

These numbers are likely to continue growing as companies identify new areas in which they can achieve a substantial return on investment. In a 2006 report, the International Energy Agency (IEA) asserted that oil companies will need to invest approximately $4.3 trillion by 2030 in order to meet rising global demand.

Upstream investments in technology used for exploration and production are expected to account for more than 70 percent of total investment in oil. The majority – about 75 percent – of this capital will be used to fund projects that are needed to maintain existing production capacity. During the same period, investments in gas production are expected to total approximately $3.9 billion.

The investments being made by the industry include the procurement of advanced oil production equipment, as well as the construction of expanded transportation and storage infrastructure in burgeoning production areas. While it may seem paradoxical to some that oil and gas companies are increasing their spending during a time when global economic growth remains weak, those familiar with the industry are well aware of the rationale behind companies' focus on investing in capacity improvements.

New spending needed to support increase in domestic exploration and production activity

In essence, the industry is investing more because it has to expand its capacity in order to capitalize on the opportunities that currently exist in the market. High oil prices and stimulative monetary policies have made it economical for companies to explore new regions that were previously viewed as being too expensive to develop. The use of new technologies has also been critical in unlocking these "unconventional" reserves, which emphasizes one area where oil and gas companies are committed to making new investments.

The hydraulic jet pump is one of the most exciting innovations in contemporary oil production technology. This solution is valued by well operators for its simplicity and versatility. It can be used to quickly complete drill stem testing and initiate production at new sites, or maximize output from established wells.

The jet pump can also be serviced easily, as it has no downhole moving parts. Maintenance and optimization can be performed without wire line or work-over-unit service. The pump's unique design allows it to be retrieved by manipulation of surface valves and reverse circulation of fluid, which means it can repaired or adjusted with minimal disruption to operations.