- 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, overall confidence levels have nearly doubled from 34% in 2017 to 64% for the year ahead and are now in line with the global figure of 63%. Plans to maintain or increase capital spending in 2018 is significantly higher in MENA, 80% versus 66%, and is a two-fold increase on last year’s intentions (40%).
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 and six percentage points higher in MENA (42%).
“The outlook for the oil and gas industry in MENA is one of confidence and control. Though the the oil price is lower, it is at an acceptable level to run a profitable business, if spending is managed effectively and efficiently. In the Middle East, we are now seeing a much longed for focus on investment and plans to bring in new technology and extra skills which suffered severe cuts during the downturn,” said Ben Oudman, regional manager, Middle East and North Africa, DNV GL – Oil & Gas.
“Industry leaders and technical experts questioned in our survey cite R&D as the main area for increased spending. This is an area which has suffered the most in the past three years, so it is very encouraging to see a positive turnaround to allow those companies to realize improved profits and performance.”
Barriers to growth related to increased operating costs and a weak global economy are all expected to subside in the coming year, while geographical instability in key markets, lack of investment in innovation, and a shortage of skills are growing. The greatest challenge cited by MENA respondents is uneconomic oil price, though notably, this has fallen significantly as a key concern from 66% in 2017 to 42%.
Concerns regarding low oil price may explain a greater focus on cost efficiency among MENA respondents compared to their global counterparts. More than two-fifths (42%) believe efforts to manage spending will be a top priority in the next twelve months, a figure that has relatively unchanged from 2017 (43%), but is 11 percentage points higher than global opinion.
Other key findings from DNV GL’s research include:
- Rising confidence is also evident in other regions outwith the US. 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)
- Nearly three quarters (73%) of senior industry professionals globally say their organization was somewhat or highly successful in achieving cost efficiency targets in 2017, matching opinion in MENA
- Nearly two-thirds (62%) of respondents globally expect their organization to maintain or increase headcount in 2018, compared to 66% in MENA. This compares to 43% globally in 2017 and 43% in MENA
- 58% of respondents globally expect to maintain or increase operating expenditure in 2018, up 17 percentage points from 41% last year, compared to 65% in MENA, up 22 percentage points from 43% in 2017.