Outlook for the oil and gas industry
“The number of companies we now see pursuing opportunities beyond oil and gas signals a step change in the reshaping of the sector and demonstrates its ability to adapt and build a more robust, diverse and sustainable energy future,” says Elisabeth Tørstad, CEO, DNV GL – Oil & Gas. Oil and gas professionals expect investments to continue across the value chain in 2017, though at a lower level than last year as the percentage of respondents expecting to maintain or increase CAPEX has dropped from 43% to 39%. Notably, 77% believe gas will become an increasingly important component of the global energy mix over the next 10 ten years. “Despite the drawn-out recovery, investments are still being planned across the value chain. In 2017 we will see broadening of business portfolios and consolidations for growth as a way of reorganizing for the future,” Tørstad comments. A third of respondents (33%) say their organizations will be increasing M&A activity in the next 12 months (up 10%). More than three-quarters of respondents (78%) expect increased industry consolidation in 2017. 85% have cost management as a top or high priority for 2017 and a majority (63%) see their current cost-efficiency measures as marking a permanent shift towards a leaner way of working. Organizational restructuring (37%), reducing operating expenditure (35%), and improving efficiency from existing assets (29%) are the top three priorities for cost control in 2017. Two-thirds (66%) say that the cost pressures are driving more industry collaboration, a positive effect of recent market challenges. Standardization efforts are also increasing as it helps remove remaining complexities. 66% of respondents say their organization will seek greater standardization of tools and processes in 2017, up from 59% last year. Digitalization is also increasingly seen as a means to enhance operational and cost efficiencies. 39% expect their organization’s spend in this area to increase in 2017. Half (49%) of respondents also said their organization will embrace digitalization to increase profitability. DNVGLindustryoutlookreport2017graphsandillustrations- “Last year, we saw intense and painful short-term cost-cutting measures in the industry,” Elisabeth Tørstad commented. ”Though few expect a recovery in 2017, and cost-cutting measures are still on the table this year, confidence in the oil and gas sector growth has stabilized for now and opportunities are being created. Improved focus on collaboration, standardization and digitalization will enable the industry to transform to meet the demands of the new era and become profitable in volatile markets.” Other key findings include: Confidence in oil and gas growth for the year ahead has stabilized for now (32% compared with 30% in January 2016) – in line with the price of oil. Confidence in overall prospects for individual companies is down to 44% from 50% last year, however. Respondents based in North America report significantly higher confidence in the outlook for 2017 than those in other regions.
Almost two-thirds (65%) are confident of their company’s overall prospects, compared with 45% in Asia Pacific, 49% in the Middle East and North Africa, and just 40% in both Europe and Latin America.