By Michael Bellamy
General Manager
Marketing

Oil prices, which breached the $100/barrel barrier in January, are primarily a reflection of strong demand growth from emerging markets, led by India and China. Geopolitical uncertainties, helped along by investors hoping to profit from the economics of shortage, add further to the upward pressure. But, in the end, the consistently upward trajectory of oil prices comes down to a fundamental issue of supply and demand – and therein lies both the challenge and the opportunity.

Although gas prices haven’t shown the same peaks as oil, they have nevertheless remained firm, supported by increasing demand from the major importing markets of North America, Europe and Asia. This strong market outlook has stimulated growth in intercontinental pipelines and LNG infrastructure projects to transport the gas needed to satisfy the world’s growing appetite for energy.

High prices over recent years have stimulated significant investment in upstream exploration; it’s also the case that reserves are becoming more difficult to reach and to extract. Of increasing importance are reserves in harsher environments (deeper water, subsea and arctic) as well as hydrocarbon sources previously considered unconventional (oil sands, biofuels, NGL). All of which pose new technology and logistics challenges to be overcome by the industry.

And it’s not only the oil and gas sector, but the whole world that is experiencing a huge infrastructure boom. Trillions of dollars are being spent on investments in roads, ports, railways, mines, airports, power generation and industrial capacity, all putting enormous strain on the global supply chain – construction equipment, skilled labor, transportation and engineering services are all in scarce supply. In turn, project development and start-up costs are on the rise, causing the economics of some Oil & Gas projects to be questioned. Managing the supply chain is a critical factor for future success.

This is why GE’s Oil & Gas business has been extremely focused on improving supply chain efficiencies. We are building capacity outside our traditional bases - recruiting talent and developing specialist engineering capability in Poland and India, for example. We’ve also invested significant resources to extend our proven Lean Manufacturing processes to our suppliers so that their capabilities, processes and efficiencies are in line with our own. Thus we are working to develop and extend expertise, efficiency and increased capacity in our operations around the globe.

Another significant area of interest for both GE and our customers is climate change. I believe 2007 was a tipping point in the climate change debate, signaling a shift in global consciousness on the issue. Moreover, I see the oil and gas industry at the forefront of the search for sustainable and environmentally responsible solutions to this challenge. This new awareness will change the way investments are made, technologies developed, and resources allocated. It will change everything.

This also fits perfectly with our mission. GE’s ecomagination program, launched in 2005, strives to create solutions that match this new reality. Many of the products we’ve introduced in recent years, whether ecomagination certified or not, are helping customers improve operational efficiency and reduce emissions. I’m thinking of advances such as our new hot gas expanders, our ongoing investments to improve compressor efficiency, and our exploration of systems for low-grade heat recovery in cooperation with GE’s Global Research Center. And we’re making equally significant adjustments to the way we operate, reducing our own greenhouse gas emissions by 50% and our energy usage by 35% compared to our baseline year 2004. We are 100% committed to continuing down this path.

Many things have changed since I started working in this industry and many more will change by the time I retire. The vision that permeates every part of our organization is to do everything in our power to make sure things change for the better.