Oil prices play a large role in sentiment towards the industry, as gas supply contracts have historically been negotiated using oil prices as a benchmark
Melbourne, Australia (PRWEB) January 12, 2015
The Petroleum Exploration industry provides onshore and offshore drilling and exploration services. The downstream Oil and Gas Extraction industry uses these services to establish a portfolio of future projects, while exploration-only companies seek to identify reserves that are attractive to larger players. With considerable year-on-year volatility, industry revenue is forecast to grow at a compound annual 1.8% over the five years through 2014-15, to $4.2 billion. According to IBISWorld industry analyst Caroline Finch, “the volatility in industry revenue reflects the role that commodity prices and sentiment have in funding for exploration, which is inherently risky and capital intensive.” Rising commodity prices unlock funding that flows to the industry, in the form of potential benefits to exploration companies for identifying a reserve. Industry exploration activities can be cancelled quickly when funding dries up or diversified players shift their attention to other markets or commodities. These kind of shifts in sentiment are especially pertinent to exploration-only companies that rely on equity funding.
The interplay of these factors is demonstrated by the industry's performance following the emergence of stronger supply in world oil and gas markets in 2013-14. As the world price of crude oil declined, the industry started to contract. “Oil prices play a large role in sentiment towards the industry, as gas supply contracts have historically been negotiated using oil prices as a benchmark,” says Finch. This is forecast to be followed by a sharper contraction in 2014-15. The contraction, and ongoing declines in the next five years, will occur in the context of changes in global energy markets, and a reduction in capital expenditure in downstream industries in Australia. The use of new technologies for extracting resources like coal seam gas and shale oil has increased global supply of hydrocarbons. Countries that are large producers of oil, such as Saudi Arabia, have increased their output to maintain market share in response, putting downward pressure on prices and limiting the incentives to search for new supply. Domestically, the Oil and Gas Extraction industry has started to pivot towards production, away from exploration, as it focuses on completing construction of liquefied natural gas (LNG) export terminals.
The Petroleum Exploration industry has low market share concentration. The industry is highly fragmented, with a number of small players active in exploration. Lacking the funds to develop the reserves, these so-called junior miners or pure-play exploration companies look to prove resources. Once assets are established within the industry, these smaller players take them to market or enter joint venture arrangements to develop them further. Large oil and gas extraction companies also fund exploration. These companies are involved in the exploration, development, marketing and extraction of resources.
For more information, visit IBISWorld’s Petroleum Exploration industry in Australia report page.
Firms in this industry explore for crude petroleum and natural gas.
Follow IBISWorld on Twitter: http://twitter.com/#!/ibisworldau
IBISWorld industry Report Key Topics
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.