It should be pointed out that the increase in costs is not simply because of geography and terrain. It is also because of general inflation in the costs of materials, equipment and technical personnel. The Cambridge Energy Research Institute (CERI) has estimated, for instance, that such costs have ratcheted by over 60 per cent over the period 2001-2006. And even then, the items are not readily available. A relatively new phenomenon confronting the oil industry is the longer lead times involved in accessing essentials like drilling rigs, etc. The CERI has estimated that these lead times have increased by 50 per cent over the past year. A further concern is the looming ‘skills deficit’. About 50 per cent of the technocrats in the oil/gas industry are of an age group that will retire sometime between 2010 and 2015. Companies may well find a ‘trained’ replacement but they will be hard pressed to secure the relevant operational experience. The consequential impact on design and execution will place further pressure on project economics.

The fundamental questions that an oil company executive must be thinking of even while declaring record profits are: where should the company invest? How can it grow in the face of increasing ‘resource nationalism’, complex geology, harsh geography, rising costs and cut throat competition. And perhaps most worryingly, how can the company meet the expectations of its shareholders and at the same time provide the energy needs of society on a sustainable basis?

The debate on climate change is substantively over. People may query the precision of the temperature hike and the time frame over which it will occur but few will oppose the assertion that fossil fuels are a significant contributor to global warming and that the world must shift towards a cleaner and more efficient energy economy. Equally, however, there is no escaping the reality that the world cannot do without fossil fuels for the foreseeable future. Certainly the reign of gasoline and the internal combustion engine does not look like coming to an early end. Yes, there are glimpses of alternatives — cellulosic biofuels converted from straw and other vegetable wastes and electric vehicles powered either by batteries or hydrogen fuel cells — but a lot more development and technological breakthroughs are still required for them to become competitive and reliable substitutes.

... contd.