Industry Summary

So far North Sea production has turned out 34 billion barrels of oil equivalent, but it is estimated that there could be another 25 billion barrels to be commercialised.

There is a growing worldwide demand for energy, and with certain markets, such as China and India, developing into major economic powers, the demand for crude oil is increasing all the time. It is predicted that by the year 2030 the world's energy needs will be almost 40% greater than they were in 2006.

The oil industry has historically invested a lot of resources in exploration, leading to the worldwide production of oil – from Alaska to the North Sea to the Gulf of Mexico.

Renewable energy sources, such as wind, wave, solar and biofuels are expected to experience strong growth over the next 25 years, but experts predict that these will only meet 2% of the world's energy needs in 2030. This will leave conventional fossil fuels (oil, natural gas and coal) to continue to meet the majority of the world's energy demands by 2030. To accomplish this, an investment of over $300bn a year will be required.

World oil assets

The oil industry has a massive number of service companies relying on it with a range of heavy engineering specialities to build rigs, ships, pipelines and refineries.

Geologists have predicted that the earth has over three trillion barrels of recoverable oil and a further one trillion barrels of heavy oil and oil sand / shale resources. So far there have been only one trillion barrels of crude oil recovered in the entire history of the oil industry.

There is a worry that the North Sea may well be past its best and on the decline as a viable oil source. So far North Sea production has turned out 34 billion barrels of oil equivalent, but it is estimated that there could be another 25 billion barrels to be commercialised. However, recent tax increases by the UK government could cast some doubt on economic viability.

It is estimated that there are 71 billion barrels waiting for discovery in the Gulf of Mexico deep waters. In addition estimates show there are a further 85 billion barrels off the coast of West Africa. The Spratly Islands in the South China Sea is also another discovery hotspot that could yield 300 billion barrels.

The oil industry and political instability and insecurity

There are also politically unstable areas of the world where the oil industry is a little more precarious. A prime example of this is Iraq, where crude oil production has still not come back to pre-Saddam Hussein levels, seeming to be stuck at two million barrels a day. Iraq's refineries are antiquated and in desperate need of investment, which will not be forthcoming until the security issue is solved.

The oil industry is not short of money for investment into new plant or technology but there has to be a guaranteed return on investment in a known timescale. Fiscal regimes in oil are very strict and margins strongly dictate whether the oil is worth extracting. There is no doubt there is oil still to be discovered in the world – it's just a question of its quality and how much investment is required to recover it.