Industry confidence globally has increased much faster than the oil price, as two-thirds of senior professionals globally plan to maintain or increase capital spending in 2018. 36% expect to increase investment in R&D and innovation - the highest level recorded in four years.
In the Middle East and North Africa (MENA), optimism has recovered to levels above global expectations. Efficiency remains a priority, however, as more than half (51%) of professionals in the region forecast increased cost control, according to DNV GL’s eighth global oil and gas industry outlook report.
After three years of stringent cost cutting, workforce redundancies and an overhaul of business models, a fresh sense of optimism has emerged across the global oil and gas industry.
In the Middle East and North Africa (MENA), renewed confidence is significantly higher than global expectations. In particular, 80% compared to 66% globally, are feeling positive about the prospects for their organisation in the year ahead, compared to last year’s figures of 49% and 43% respectively.
According to research by sector technical advisors DNV GL, business leaders expect a step change in the industry’s capex, opex, headcount and R&D spending levels. Though the report signifies pronounced positivity for 2018, tough lessons learned from the downturn are still very firmly front of mind.
The study – Confidence and Control: the outlook for the oil and gas industry in 2018 – reports a surge in respondents’ confidence about their own organisations’ prospects for reaching revenue and profit targets in the year ahead. Rising confidence is also evident regionally. 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), while the trend is less distinct in North America (up from 49% to 57%).
“The outlook for the oil and gas industry in MENA is one of confidence and control,” says Ben Oudman, DNV GL – Oil & Gas’ newly appointed regional manager for Continental Europe, Eurasia, Middle East, India and Africa.
He foresees huge potential for mid and downstream activities in the Middle East, adding: “Though the oil price is lower, it is at an acceptable level to run a profitable business, if spending is managed effectively and efficiently.”
In DNV GL’s recent Energy Transition Outlook report, the company forecast that conventional onshore oil will continue to provide the major and most stable share of oil production and will still account for more than 50% of the global figure by 2050. By this time, more than half of conventional oil production will come from the MENA region.
Oudman continues: “Our model assumes that regional supply increases are driven by large-scale, low-cost oil resources, especially in MENA, as producers respond to growing abundance by asserting competitive advantage. Our model forecasts that the region that will require the greatest capex and opex for conventional onshore production to meet predicted demand is MENA. This underlines the importance of the region in the future.”