EHS spending

Oil Industry’s EHS Spending on the Rise

A new report from Lux Research indicates that environmental, safety and health spending in the oil and gas industry could rise 60 percent to $56 billion by 2030.

As recent high-profile environmental disasters have prompted increased regulatory scrutiny in the oil and gas industry, environmental, health and safety spending in this industry is expected to increase from $35 billion in 2011 to $56 billion by 2030, according to a new report.

The report from Lux Research, “Using Technology to Drive Improvements in Health, Safety and Environment,” suggests that this 60 percent increase in EHS spending could lead to a reduction in the rate of incidents within the oil and gas industry.

“With producers shifting to extract resources from increasingly harsh environments, new technologies and drastic innovation are required to improve [EHS] practices and make the production and transportation of hydrocarbons safer,” said Rick Nariani, Lux Research analyst and the lead author of the report.

Lux Research analysts studied oil producers’ approach to EHS issues. Key findings include:

  • Upstream producers now bear the brunt of EHS costs, as they spend $0.70 per barrel of oil equivalent (BOE) compared to midstream operators that spend less than $0.01 per BOE. However, as midstream companies now must navigate past interest groups and journalists before every major project, they too will need to invest accordingly.
  • The United States will continue to dominate spending in EHS. Over 39 percent of all EHS expenditure is in the United States, where spilling a single barrel of oil currently costs producers $8,000 in penalties. Regulations from EPA and others will keep the United States the largest EHS market for the foreseeable future.
  • Leak containment and detection is a key market.

This report is part of the Lux Research Exploration and Production Intelligence service.

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