Oil, Gas EHS Spending: 60% Jump Predicted

Oil and gas companies’ spending on environment, health and safety issues will balloon 60 percent to $56 billion in 2030, up from $35 billion in 2011, as heavily publicized environmental disasters have increased regulatory scrutiny, a Lux Research study says.

Upstream oil and gas producers — the companies that pull the raw material from the earth — currently lead EHS spending and will continue to lead the charge for the foreseeable future, Lux says. However, pressures from the general public and regulators will force midstream providers — those firms chiefly concerned with storing, transporting and marketing oil and gas — to ramp up their EHS spending, according to Using Technology to Drive Improvements in Health, Safety, and Environment.

Upstream producers now bear the brunt of EHS cost, as they spend $0.70 per barrel of oil equivalent, compared to midstream operators that spend less than $0.01 per barrel of oil equivalent. 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 report says.

The US will continue to dominate spending. More than 39 percent of all EHS expenditure is in the US, where spilling a single barrel of oil currently costs producers $8,000 in penalties. Regulations from the EPA and others will keep the US the largest EHS market for the foreseeable future.

Leak containment and detection is a key market, the report says. 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 is part of the Lux Research Exploration and Production Intelligence service. Last October, the research firm published a report that found the cost of replacing a barrel of produced crude rose from $6 per barrel in 1998 to $27 per barrel in 2011. The cost increase comes as exploration and production companies  are forced to look to harsher climates and deeper seas to replace reserves and make up for declining production from mature fields, the report says.