New research has revealed low confidence among UK-based senior oil and gas professionals for hitting revenue and profit targets this year. Nearly a third (31%) of UK respondents are confident in their organisation’s prospects for 2017 - down from 43% last year.
Short-term agility, long-term resilience is DNV GL’s seventh annual benchmark study on the outlook for the oil and gas industry providing a snapshot of industry confidence, priorities and concerns for the year ahead. It draws on a global survey of 723 senior sector players1.
“The significant drop in confidence in the UK marks the sentiment of an industry that has endured two years of measures to lower costs as it adapts to a market that is unlikely to return to the way it was only a few years ago,” says Hari Vamadevan, Senior Vice President, DNV GL – Oil & Gas.
“Looking forward, however, the research shows there will be less emphasis on cost reduction compared to 2016, and more emphasis on operational efficiency and standardisation this year,” he adds.
Fewer respondents to DNV GL’s research expect an increase in measures to control spending in 2017 (59%) compared to 2016 (74%). More than two thirds (67%) of respondents expect operators to increasingly push to standardise their delivery globally this year, up from 52% the previous year.
“Despite the drawn-out recovery, our research indicates higher spending in some key areas of the UK’s oil and gas industry. Low oil prices and high decommissioning costs are driving 41% of industry professionals to expect an increase in asset life extension this year; sharply up from 22% in 2016,” Vamadevan added.
Signs of deep, strategic change are also appearing- both in the UK and globally - beyond the industry’s cyclical patterns. DNV GL’s research indicates that companies are looking to rebalance business portfolios and reorganise themselves, making strategic changes for a new era of long-term, sustainable growth.
A third of UK respondents (34%) say their organisations will be increasing merger and acquisition (M&A) activity in the next 12 months, up from 16% in 2016. Meanwhile, almost half (45%) expect their businesses to diversify into, or invest more in, opportunities outside of oil and gas.
27% of industry leaders based in the UK expect their business to invest or increase investments in renewable energy in 2017. As many as 55% see investments in renewables as a shift in long-term business strategy.
“The number of companies we now see pursuing opportunities beyond oil and gas signals a step change in the reshaping of the sector and demonstrates its ability to adapt and build a more robust, diverse and sustainable energy future,” says Elisabeth Tørstad, CEO, DNV GL - Oil & Gas.