Greater investment renews optimism in oil and gas industry – DNV GL

There is a renewed global optimism in the growth prospects of oil and gas, with many organisations expecting to hit revenue and profit targets in 2019, according to DNV GL in their report A test of resilience: the outlook for the oil and gas industry in 2019.

The report, which surveyed 791 senior industry professionals and executives, revealed that more capital-intensive oil and gas projects will be approved in 2019 than in 2018. Rising oil prices is the main factor driving profit confidence in 2019, with the average price of oil in 2018 rising to US$70 per barrel from an average of US$50 per barrel in previous years.

This optimistic outlook comes despite expectations that global oil prices will be significantly more sensitive to geopolitical risks this year. With political tensions rising on both sides of the Atlantic, a weaker global economy is predicted to be the top barrier to growth in 2019. This is according to respondents from Asia Pacific, who ranked it ahead of oil prices and competitive pressure. Nonetheless, after the oil and gas industry put cost-efficiency measures in place during the downturn, the survey shows that 76 per cent now expect it to be able to weather future price volatility.

Some other notable findings include:

• Further consolidation is expected in the oil and gas supply chain. This is because some service suppliers will find it difficult to meet revenue targets in 2019, having lowered their rates to an unsustainable level during the downturn. Almost three out of four respondents in Asia Pacific predict a rise in mergers in the supply chain, more so than any other region.
• 60 per cent of oil and gas companies in Asia Pacific are adapting to a less carbon-intensive energy mix. However, much of the energy transition activity is still driven by regulations and social and political pressure. The report encourages more short-term incentives to accelerate long-term decarbonisation, as rising oil prices could delay the transition.
• Long-term confidence in the oil and gas industry is rising dramatically in Asia Pacific. About 44 per cent of respondents from the region expect research and development spending to increase in 2019. Greater investment will focus on increasing efficiency of new projects and existing operations, as well as adopting digitalisation. The priority of digital technology is to give the oil and gas industry the ability to share, integrate and access data, which will help to reduce drilling, repair and maintenance costs.

For more insight into the oil and gas industry in 2019, please download the A test of resilience: the outlook for the oil and gas industry in 2019.