- Author: Elinor Turander
- Keywords: Oil & Gas, Oil and gas
Low confidence in Brazil is also reflected in capital expenditure intentions, with 44% of respondents there planning to decrease CAPEX this year, compared to 11% three months ago. Nearly half (49%) expect headcount to decrease in their business, while the number expecting headcount to increase has dropped 30 percentage points in three months to 7%.
On a more positive note, Brazil is cited as the fourth most preferred investment destination by respondents globally, after the US, China and Norway.
In Brazil, more than three quarters (79%) of respondents plan to increase strictness on cost control, with 37% stating that cost management will be their top priority in 2015. A number of measures are expected to tighten finances such as making tougher decisions on CAPEX, reducing exposure to riskier/costlier projects, improving work processes, planning sustainability initiatives to deliver cost savings and increasing pressure on the supply chain to reduce costs (all 35%). Compared to respondents globally, there is less of a focus on increasing standardisation to manage costs (14% in Brazil vs 25% globally).
Alex Imperial, Regional Manager: South America for DNV GL – Oil & Gas, said: “With so much uncertainty it is natural that the high activity in Brazil and the region as a whole is slowing down. Until recently, E&P players put a premium on growth and accelerated the business. Cost control and efficiency received less attention. Now industry leaders face a difficult balancing act - pressure to find and access new hydrocarbon reserves have not gone away, despite a recent surge in supply. On the other hand, the financial risks are clearly intensifying as prices drop, given that these environments bring greater complexity and typically demand costly technologies.
It is important that the industry continues to develop skilled people and to invest in research and innovation in order to develop areas such as the pre-salt fields in Brazil. 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.”
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 the week of 19th 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 price, as well as DNV GL’s 2014 industry outlook report.
Key findings include:
Brazil has also dropped from being the second most favoured investment destination globally in 2014 to the fourth in 2015, after the US (28%), China (11%) and Norway (9%).
The biggest barriers to growth in Brazil are the low oil prices (65%), weak local economy (47%) and the weak global economy (33%). Among respondents globally, the third biggest barrier to growth is uneconomic gas prices (20%).
Since October, regional differences have flattened out with Asia Pacific, Europe and North America now expressing similar confidence levels. North America is the most confident for the year ahead at 33%.
Download a complimentary copy of A Balancing Act: The outlook for the oil and gas industry in 2015 from: www.dnvgl.com/balancingact.