- Author: Neil James Slater
- Keywords: Oil & Gas
Neil James Slater
Neil James Slater
Head of Media Relations and Events, DNV GL - Oil & GasPhone: +44 2038165702
VP Director of Communications, DNV GL - Oil & GasPhone: +47 415 60 264
After three tough years, confidence levels have increased significantly from 18% in 2017 to 61% this year, close to the overall global average of 63%. Supporting that positive change, more than two thirds (69%) of respondents say their company will maintain or increase capital spending in 2018, compared to 33% last year.
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 senior sector players surveyed, expect to increase spending on R&D and innovation in 2018: the highest level recorded in four years.
“It’s important to remember that we are a long-term industry that takes its confidence from the short-term oil price. The fact that the oil price has recovered from $30 in 2016 to $70 at the beginning of 2018 is incredibly positive,” says Hari Vamadevan, Senior Vice President, DNV GL – Oil & Gas.
“You can see already that investment is starting to flow back into the North Sea. This time last year, there were practically no projects moving forward offshore but, today, we have Premier’s Tolmount and Shell’s Penguins advancing; while Hurricane’s Lancaster and Alpha’s Cheviot are examples of two smaller companies progressing FPSO conversions.
“While confidence has returned, the DNV GL survey also shows that cost control remains one of the most prominent issues for oil and gas companies. We’ve seen the industry make a number of tough decisions by reducing staffing numbers, reducing prices and costs – we now have to find new ways of collaborating to work more efficiently.”
93% of UK respondents say they will increase (53%) or maintain (40%) cost control measures already in place, a 4% overall increase on last year and, while slightly higher than global expectations (89%), the situation is reflective of the ongoing need for the industry to better manage its expenditure.
In the UK, 28% of respondents, more than double the 12% recorded in 2017, say they expect company headcounts to increase in the year ahead. That figure is 8% greater than the global average for 2018. A further 40% expect to maintain their current staff base, up 5% on 2017; and the number of respondents expecting to see headcounts reduce has fallen to 28% (from 52% in 2017).
And there is greater optimism among UK respondents that oil and gas companies will achieve high profitability over the next 10 years, with more than half (53%) of respondents predicting success compared to 45% last year.
Other key findings from DNV GL’s research include:
- Rising confidence is evident in regions worldwide. North America is up from 49% to 57%. 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)
- More than three quarters (77%) of senior industry professionals in the UK say their organization was somewhat or highly successful in achieving cost efficiency targets in 2017, compared to the global average of 73%
- More senior industry professionals in the UK (43%) named the oil price as an expected barrier to growth for 2018, compared to the global average of 37%. One year ago, the figures were 70% and 64% respectively
- Nearly two-thirds (62%) of respondents expect their organization to maintain or increase headcount in 2018, compared to 68% in the UK. In 2017, the global figure was 43%, and the UK figure 47%
- 58% of respondents expect to maintain or increase operating expenditure in 2018, up 17% from 41% last year. In the UK, that figure is 65%, an increase of 28% compared to 2017.