DNV GL anticipates seven key trends for the oil and gas industry in 2014. These trends are explained in full in their industry report Challenging Climates, and summarized in brief below:
- A confident outlook for 2014, but with signs of caution.
- Skills gaps, rising costs and tougher competition will define the industry’s barriers to growth.
- More cautious and targeted capital expenditure will be evident for the year.
- Uncertainty over oil and gas pricing will be more prevalent in 2014.
- The industry will consolidate, with larger organizations coming to the fore.
- A deeper safety culture is starting to take root.
- The US, Brazil and Australia are the top investment destinations in 2014. Malaysia ranked in fourth place, and China in fifth, having risen one spot since 2013.
Proceeding with caution
Approximately one fifth (18%) of those polled for the DNV GL survey agree that the prospects for growth in 2014 are less certain than they were last year; 38% say they are unsure. Meanwhile, 59% are of the opinion that energy prices will be weaker, or are unsure.
Despite this, the majority of executives are positive about the prospects for 2014; 88% are either somewhat or highly confident about growth in the sector as a whole, and 81% are also confident about their own business hitting revenue and profit targets.
Confidence varies significantly by region. Positive sentiment is lowest in Europe, where only 24% of those surveyed expressed strong confidence about 2014, compared with a high of 44% in North America and 38% in Asia Pacific.
All regions worry about the shortage of skilled professionals in the industry, and 47% of respondents consider this the top barrier to growth, as it was in 2013.
This issue is most pressing in North America, due to the rapid growth of shale oil and gas production in this area.
Counting the pennies
The number of companies with plans to increase investment in new projects has been in decline for the past three years, from a high of 63% in 2912 to just 45% for 2014.
Additionally, while 11% of survey respondents indicated that they planned to cut headcount last year, 16% have suggested that they plan to do so in 2014.
Although this does not suggest a major reversal in industry spending, spending will likely fall to exactly equal that of recent years, with a narrower strategic focus applied during 2014 and better returns expected on investments.
A drop in oil price (or uncertainty about the price) was cited as a key risk facing the sector. Overall 23% of respondents thought that prices would be weaker in 2014, a further 36% remain undecided, and 39% disagree.
55% of oil and gas industry professionals are in agreement that the sector will be increasingly characterized by large global organizations. Only 16% disagree with this outlook.
36% also think the industry will see greater consolidation as companies join up to better deal with the complex challenges ahead.
44% of survey respondents believe that their companies’ current approach to safety is not just defined by box ticking, but will lead to a genuinely safer operating environment. This is twice as many as those who disagree. DNV GL hold that this is likely to bolster the trend towards a steadily safer industry.
Furthermore, 60% of companies say they will push harder to develop a more widespread safety culture. DNV GL suggest that this is indicative of the fact that many companies are now trying to effect an organizational culture change as the best way to meet increased long term safety requirements. Approximately half (49%) also expect stronger engagement by senior leadership on safety, and 35% are pushing to develop more robust safety processes.
Adapted from report by Emma McAleavey
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