Oil Industry Spend on Health, Safety and Environment Jumps 60% to $56 Billion in 2030

Lux Research

Upstream companies spend the most – nearly $0.70 per barrel of oil equivalent – as regulatory drivers boost HSE demand, according to Lux Research

BOSTON, MA – April 19, 2013 – Oil and gas companies’ spending to ease concerns on health, safety and environment (HSE) will balloon 60% to $56 billion in 2030 up from $35 billion in 2011, as heavily publicized environmental disasters have increased regulatory scrutiny, Lux Research says. The result should be a continued reduction in the rate of incidents, which has already been halved over the last decade.

“With producers shifting to extract resources from increasingly harsh environments, new technologies and drastic innovation are required to improve HSE practices, and make the production and transportation of hydrocarbons safer,” said Rick Nariani, Lux Research Analyst and the lead author of the report titled, “Using Technology to Drive Improvements in Health, Safety, and Environment.”

“Upstream producers will continue to lead the charge in HSE spending for the foreseeable future. However, pressures from the general public and regulators will force midstream providers to ramp up their spending,” he added.

Lux Research analysts studied oil producers’ approach to HSE issues, besides using the Lux Innovation Grid methodology to weigh technology developers best positioned to capitalize on sharply higher spending on HSE. Among their findings:

  • Upstream leads spending now, but midstream needs to grow. Upstream producers now bear the brunt of HSE cost, as they spend $0.70 per barrel of oil equivalent (BOE) – compared to midstream operators that spend less than $0.01 per BOE. However, midstream companies now need to navigate past interest groups and journalists before every major project, especially since Enbridge’s 2010 spill in Michigan, and will need to invest accordingly.

  • The U.S. will continue to dominate spending. Over 39% of all HSE expenditure is in the United States, where spilling a single barrel of oil currently costs producers $8,000 in penalties. Regulations from the Environmental Protection Agency (EPA) and others will keep the U.S. the largest HSE market for the foreseeable future.

  • Leak containment and detection is key market. Innovations focused on leak containment and pipeline leak detection are well positioned on the Lux Innovation Grid. Envirovault, AdOil, Synodon, Kimtron, Opgal and Creaform 3D, all tout deployable technologies that assist maintenance personnel.

The report, titled “Using Technology to Drive Improvements in Health, Safety, and Environment,” is part of the Lux Research Exploration and Production Intelligence service.