Senior oil and gas professionals in the Middle East and North Africa (MENA) are showing soaring levels of optimism about the sector’s growth in 2019. 83% of those surveyed in new research express such confidence, compared to 63% last year and to 76% globally now.
These findings appear in A Test of Resilience, the ninth annual benchmark study on the outlook for the oil and gas industry by DNV GL, the technical advisor to the oil and gas industry. The research is based on a global survey of nearly 800 senior and gas professionals, and in-depth interviews with industry leaders.
MENA respondents’ optimism over overall prospects for their own organisations in 2019 has also risen over the past year, from 78% to 85%, and is second only to China (92%). As confidence grows, 83% in MENA predict their companies will increase or maintain capital expenditure in 2019, the highest such level of confidence among regions in DNV GL’s analysis. Nearly two thirds (62%) in MENA believe their organizations will favour projects that are adaptable within shorter time-frames.
“This research shows the industry in the Middle East and North Africa gearing up to dominate global oil and gas production for decades to come. It aligns with DNV GL’s September 2018 Energy Transition Outlook (ETO) forecasting that more than half of conventional onshore oil production and the majority of offshore oil production will come from here. The ETO model of world energy supply and demand also sees the region becoming the largest producer of on- and offshore gas by mid-century,” said Ben Oudman, regional manager, Continental Europe, Middle East, East Africa and India, DNV GL - Oil & Gas.
DNV GL has previously suggested that greater supply of oil and gas from MENA in coming decades will be driven by large-scale, low-cost production with operators responding to growing relative abundance by asserting competitive advantage. The technical advisor argues that realizing this huge opportunity will involve companies maintaining focus on costs while making the massive investments required to meet anticipated demand.
DNV GL’s new research underlines undoubted challenges to achieving this as the upswing continues and the easiest cost efficiencies have already been made and embedded. More than half (53%) of MENA respondents saw price inflation from suppliers in 2018. Only about a sixth (15%) say their organizations were highly successful in achieving cost-efficiency targets, compared to 22% in 2017. Nearly half (47%) expect higher supply chain costs in 2019. The same proportion say their organizations’ contracts are exposed to cost inflation because of the recovery in oil prices in 2018.
While the percentage anticipating that cost control will be a top priority in the year ahead has fallen from 41% to 26% in a year in MENA, A test of resilience is encouraging on long-term prospects for achieving sustainable margins. More than half (53%) of the region’s senior oil and gas professionals now agree that companies will be able to achieve high profitability in the next decade, well up on the 39% who thought so in 2018. In addition, cost controls remain firmly in place: 89% expect them to increase or stay the same this year, compared to 82% last year.