Recovery of US Economy Crucial to Increase Crude Oil Demand

SINGAPORE, Jan. 6 /PRNewswire/ -- 2008 was a historic year for the Oil & Gas industry as oil prices hit a record high of close to US$150/barrel and fell steeply to below US$50/barrel in a matter of 3 months.

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According to Frost & Sullivan Asia Pacific Research Manager of Energy & Power Systems Practice Subramanya Bettadapura, Exxon Mobil and Shell reaped a record third quarter profit of US$14.8 billion and US$8.45 billion, while other industry sectors had their market cap and profits evaporate, which led to a huge outcry regarding the unregulated oil & gas futures trading markets.

He added that Singapore and Malaysia have immensely benefited from the oil & gas boom of 2008 as it translated into more order bookings for offshore rigs, platforms, Floating Production Storage & Offloading (FPSO) vessels, and crude oil.

However, the global financial crisis and slowing down of the US economy will have an impact on the Oil & Gas industry in Asia for the coming year.

"The recovery of the US economy is crucial for crude oil demand to increase as the US imports far more crude oil than China or India. Demand from these two countries alone is not enough to keep prices above US$100 per barrel as was earlier speculated when oil prices were at a peak of US$147 per barrel," Bettadapura said.

In terms of industry specifics, Bettadapura says that there will be cancellation of large oil & gas projects across the globe because of the decrease in crude oil prices. "However, the Southeast Asian region is not affected as most of the investments in oil & gas projects are government funded," he adds.

He continues to say that the current cutback on investments into the upstream segment will have a negative impact on future supplies as crude oil price is likely to be very steep when demand recovers.

According to Bettadapura, there will be an increase in Malaysian upstream Oil & Gas investment in 2009 as PETRONAS is keen on increasing domestic reserves and production. The Oil & Gas industry in Singapore for the coming years sees encouraging activity as well.

"The order booking for marine vessels and drilling rigs are complete till Q1 2011. This should keep the shipyards in Singapore busy till then. However, new bookings in 2009 for the supply period beyond Q2 2011 might suffer," he added.

One of the hot sub-sectors for 2009 to 2011 identified by Bettadapura include marine support vessels which cover offshore supply vessels, diving support vessels, and ROV support vessels, as increased offshore exploration and production activities will lead to an increase in demand for such vessels.

Other areas include a strong demand for the supply of drilling rigs in the Asian region, especially India, and an increasing demand in Brownfield services where there is a pressing need to retain current levels of production in mature fields in Malaysia.

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