- Author: Elinor Turander
- Keywords: Oil & Gas
Hiring intentions have also changed dramatically in Australia. Three months ago only 10% planned to decrease headcount, rising to more than half (52%) of respondents in January. The pessimistic outlook is also reflected in capital expenditure intentions, with those planning to increase CAPEX in the same three month period dropping 56 percentage points from 71% to 16%.
Expectations of spending on R&D/innovation have also been scaled back sharply in Australia in the last three months, with respondents planning to decrease spending rising from 8% to 39% in January.
Cost management will be a priority driven by pressure from low margins with 80% of respondents planning to increase strictness on cost control. As well as reducing headcount, other measures will be introduced to manage costs, with the top priorities being tougher decisions on what capital expenditure is actually approved (45%), improving workflow and processes (43%), reducing exposure to riskier/costlier projects and increasing collaboration with other firms, especially on major projects (27%).
Richard Palmer, Regional Manager: Australia for DNV GL - Oil & Gas, said: “Our research shows the extent of the drop in confidence in the last three months within the industry. The industry must take heed of the lessons learnt from the recent wave of investments in order to make future investments more sustainable.”
"It is important that the industry continues to develop skilled people in Australia and to invest in research and innovation. If we stop doing this, we are going to be worse off further down the road. We need to use this downturn to become more efficient in how we do things.”
Richard Bailey, Executive Vice President and Director: Asia Pacific and Middle East for DNV GL - Oil & Gas, said: “The dramatic drop in confidence, CAPEX and hiring intentions in just the last three months is no surprise given the oil price. At the same time, we have some of the world’s largest international mega projects for Australia, Malaysia, the Middle East and Europe still under development here, which in turn, will keep key regional suppliers busy. It is positive to note that Asia Pacific respondents put a greater emphasis on improving work processes as ways to work smarter and more cost-effectively to help ride out the storm. Whilst short-term measures such as cutting CAPEX spend to reduce costs are understandable, the industry must continue to keep a clear focus on long-term growth to remain robust in different price environments.”
DNV GL’s report, A Balancing Act: The outlook for the oil and gas industry in 2015, provides a timely assessment of industry confidence and priorities for the year ahead and is based on a global survey of more than 360 senior industry professionals and executives carried out during the week starting 19 January 2015. The report also includes 18 in-depth interviews with a range of experts, business leaders and analysts. The research has been compared with a previous survey carried out from October to November 2014 to monitor shifting sentiment during a period of falling barrel prices, as well as with DNV GL’s 2014 industry outlook report.
Key findings include:
Last year, the US, Australia and Brazil were the most favoured investment destinations among global respondents. In 2015 the US (28%), China (11%) and Norway (9%) are the preferred investment destinations.
In Australia, 14% still plan to increase spending on R&D and innovation in compared to 10% globally.
The biggest barriers to growth for respondents in Australia are the low oil prices (75%), the weak global economy (41%) and uneconomic gas prices (32%).
18% of respondents in Australia believe skills shortages or an ageing workforce to be the biggest barrier to growth compared to 11% in North America and 14% in Europe.
23% of respondents in Australia will prioritise increasing pressure on the supply chain to control costs. This compares to 38% in North America and 36% in Europe.
Download a complimentary copy of A Balancing Act: The outlook for the oil and gas industry in 2015 from: www.dnvgl.com/balancingact .