New research by DNV GL shows oil and gas companies are seeking to rebalance business portfolios and reorganizing for a new era. In a period of drawn-out recovery, almost half (49 percent) of senior oil and gas professionals surveyed expect their businesses to diversify into, or invest more in, opportunities outside of oil and gas.
Still, almost eight out of ten see long term opportunities for gas.
The research report Short-term agility, long-term resilience reveals signs of deep, strategic changes for sustainable growth beyond cyclical patterns. 26 percent of industry leaders expect their business to invest or increase investments in renewable energy in 2017. As many as 59 percent see investments in renewables as a shift in long-term business strategy.
Oil and gas professionals expect investments to continue across the value chain in 2017, though at a lower level than last year as the percentage of respondents expecting to maintain or increase CAPEX has dropped from 43 to 39 percent. Notably, 77 percent believe gas will become an increasingly important component of the global energy mix over the next 10 ten years.
A third of respondents (33 percent) say their organizations will be increasing merger and acquisition activity in the next 12 months (up 10 percent). More than three-quarters of respondents (78 percent) expect increased industry consolidation in 2017.
85 percent have cost management as a top or high priority for 2017, and 63 percent see their current cost-efficiency measures as marking a permanent shift towards a leaner way of working. Organizational restructuring (37 percent), reducing operating expenditure (35 percent) and improving efficiency from existing assets (29 percent) are the top three priorities for cost control in 2017.
Two-thirds (66 percent) say that the cost pressures are driving more industry collaboration, a positive effect of recent market challenges. Standardization efforts are also increasing as it helps remove remaining complexities. 66 percent of respondents say their organization will seek greater standardization of tools and processes in 2017, up from 59 percent last year.
Digitalization is also increasingly seen as a means to enhance operational and cost efficiencies. 39 percent expect their organization’s spend in this area to increase in 2017. Half (49 percent) of respondents also said their organization will embrace digitalization to increase profitability.
Other key findings include:
• Confidence in oil and gas growth for the year ahead has stabilized for now (32 percent compared with 30 percent in January 2016) – in line with the price of oil. Confidence in overall prospects for individual companies is down to 44 percent from 50 percent last year, however.
• Respondents based in North America report significantly higher confidence in the outlook for 2017 than those in other regions. Almost two-thirds (65 percent) are confident of their company’s overall prospects, compared with 45 percent in Asia Pacific, 49 percent in the Middle East and North Africa, and just 40 percent in both Europe and Latin America.
• 76 percent believe their organization was highly or somewhat successful at meeting cost efficiency targets over the last 12 months compared with 74 percent last year
• The intensity of cost control has been reduced - the portion of respondents identifying cost efficiency as a top priority has fallen from 41 to 34 percent.
• The focus on workforce reduction as a cost cutting measure has dropped by six percentage points on last year, down from 31 to 25 percent. However, 55 percent still say that overall headcount is expected to decrease in 2017 compared to 51 percent in 2016.
• When asked to predict the price of oil at the end of 2017, respondents forecast an average of $57.8 per barrel.
• 52 percent say their organization will favor investment in more agile projects that are more adaptable within shorter timeframes
• The leading drivers for collaboration in 2017 are to make new projects financially viable (51 percent), to reduce risk/downside exposure (42 percent) and to access skills they do not have (33 percent).
• Nearly half of respondents (49 percent) agree that the industry downturn is helping to reduce the complexity of projects and operations.
The report is available here.