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Beth Mitchell – Co-author:


What Next for the Oil and


Gas Industry?


Technological evolution in oil and gas has hit the supply side too. Engineering advances have brought on the shale gas revolution and the ability to access oil from ultra-deep waters.


Beth Mitchell, co-author of the Chatham House report, What Next for the Oil and Gas Industry? has worked in asset management since 1989. She believes it is time for far-reaching changes.


“As a former fund manager I can see plenty in this sector that might concern investors and it is clear that while some players are examining their processes and internal structures, they are not necessarily doing so fast enough,” she says.


Big companies, big projects


The large company model – integrated companies trying to cover upstream and downstream activities – is well established. According to some commentators, they are a necessity given the sheer size of key projects within the Oil & Gas sector – tens of billions of dollars in some cases.


However, companies with strong fi nancial resources have a tendency to continue as they are, for far longer than it is wise to do so, Beth argues. We may soon see bigger companies splitting into more functional, better-focused units, she suggests.


“There is, I would argue, a strong case for one or two of the larger companies divesting all, or the vast majority, of their downstream activities to concentrate on becoming large-project, upstream outfi ts – still with a portfolio big enough to take on large exploration projects without betting the farm if any one of them is delayed,” she says.


Costs and expertise


Cost overruns are a signifi cant issue for investors. There is concern that companies are investing much more in these large projects, but for diminished returns, although it is certainly true that some cost increases refl ect the sharp rises in commodity prices of the past six to seven years – not an issue that the industry can be held accountable for.


© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.


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