- Author: Neil James Slater
- Keywords: Oil & Gas
Two thirds (67%) of respondents expect their company will maintain or increase capital spending in 2018, a two-fold increase on last year (29%)and equal to opinion globally. At the same time, just over half (53%) expect efforts to control costs in the Chinese sector to be stepped up – a rise from 23% in 2017.
Confidence and Control: the outlook for the oil and gas industry in 2018 is DNV GL’s eighth annual report providing a snapshot of industry confidence, priorities and concerns for the year ahead. It reveals an imminent turnaround in spending on R&D and innovation after three years of cuts and freezes. More than a third (36%) of 813 global senior sector players surveyed - 50% in China - expect to increase spending on R&D and innovation in 2018: more than double last year’s figure (China 23%, globally 14%).
“Research and development is going to be a key factor for Chinese companies aiming to become more competitive on quality. Its positive that Chinese respondents recognize the need for investment in technology and improved solutions for the industry,” said Wolfgang Yi Wu, regional business development manager, DNV GL – Oil & Gas.
The intention to spend more on technology development in China reflects a third of participants’ (33% versus 19% globally) escalating concern that a lack of investment in innovation is a barrier to growth. This challenge to potential prosperity for the Chinese oil and gas industry has risen from seventh to second place in the rankings, behind uneconomic oil prices, which fell from 68% last year to 47%.
Unlike their global counterparts, only 10% of Chinese questioned consider cost efficiency as a top priority in 2018, a fall from 42% last year and in contrast to 31% globally. This may be largely due to Chinese respondents taking a longer-term view of the industry with a greater percentage than globally believing they have been successful at achieving cost efficiency targets (80% versus 73%).
“Each year our survey measures the temperature of the sentiment in the global oil and gas industry and for the first time, we have seen a significant increase. For China, respondents are showing a greater turnaround in optimism for the future of their oil and gas businesses, compared to other regions. Over the past three years China, like other regions, has seen investment radically cut or frozen. While the upturn in confidence is showing more positive plans to increase investment to secure supply, improve emissions and accelerate R&D, cost control remains a top priority,” said Arthur Stoddart, regional manager, China, Korea and Japan.
Other key findings from DNV GL’s research include:
- Rising confidence is also evident regionally. Europe has the most improved outlook for the oil and gas sector (up from 25% last year to 64%), with Latin America at 77% (46% in 2017) and Asia Pacific at 57% (30% in 2017), while the trend is less distinct in North America (up from 49% to 57%)
- Nearly two-thirds (62%) of respondents globally expect their organization to maintain or increase headcount in 2018, compared to 57% in China. In last year’s survey, this was 43% globally and 36% in China
- 58% of respondents globally expect to maintain or increase operating expenditure in 2018, up 17 percentage points from 41% last year, compared to 50% in China, up from 19% in 2017
- Investment in digitalization is expected to rise in China by 60%, more than globally (54%), and up from 47% in 2017.