Investing in the future

Head of Kenda Capital, Erik Vollebregt, explains the impact of the global economic crisis on oil and gas investment and how the sector is set to change in the coming year.

O&G. What impact has the global economic crisis had on oil and gas investment? What impact has it had on Kenda Capital?
Erik Vollebregt. Many capital investment programs were put on hold in 2008 with the collapse in oil price and drilling activity and uncertain economic climate. The resulting underinvestment in the industry as a whole is cause for longer-term concern. The majority of the companies under Kenda Capital have not been as badly affected. They tend to be startup companies, introducing new and disruptive technologies to the market that can reduce cost or increase productivity. Such technologies are attractive whatever the industry cycle, and operators now have more time to properly evaluate new solutions, arrange trials and implement appropriate changes to their operations.

O&G. Although your primary focus is on the upstream oil and gas sector, what areas are you currently exploring and why?
EV. We focus on various technical themes in the industry such as; improving drilling performance to improve the economics of unconventional reserves, tight gas, shale gas plays and deepwater; improving reservoir monitoring and well productivity to improve the recovery of complex and mature reservoirs; new gas processing techniques and gas transport solutions to help unlock stranded and sour gas reserves; solutions that reduce the cost of acquiring exploration data so that field development plans may be optimised earlier in their lifecycle. Individually the technologies are useful and valuable, but when used in combination they can enable a significant step change in efficient reservoir recovery.

O&G. In your opinion, what are the main investment challenges in the energy sector? How are you tackling these challenges at Kenda Capital?
EV. At a macro level, price volatility is a huge challenge to the industry, coupled with a lack of experienced staff, ageing infrastructure, increasing complexity in field developments, and fewer new discoveries. The market requires investors to make long term investments in oil and gas field developments to assure long-term supply, but such dramatic volatility and uncertainty makes it difficult to justify such investments. Investments in technology are less volatile as new solutions and expertise is required to increase efficiency of supply irrespective of the industry cycle. Kenda focuses on making sure the right technologies are in place when the industry requires them, and hopefully helps alleviate some of the industry volatility as a result.

O&G. How do you see the investment sector in the oil and gas industry changing over the next six to 12 months?
EV. Many investment programs will remain on hold until the cost of materials and services have adjusted to current market conditions, and projects are shown to be robust at lower prices. Once global demand begins to recover, we would expect to see a rapid increase in investment in the upstream sector as there remains significant under investment in many parts of the supply chain. Kenda has already observed operators using the pause in industry operations to reconsider how to develop their assets more efficiently. More operators are now planning technology trials so that they are ready to implement new solutions more aggressively as the industry cycle accelerates.