Two-thirds (67 percent) of senior oil and gas professionals believe more large, capital-intensive oil and gas projects will be approved this year, according to "A test of resilience," DNV GL's ninth annual report on the outlook for the oil and gas industry.
Seventy percent plan to increase or maintain capital expenditure in 2019 -- nearly double that of 2017's figure of 39 percent. And the proportion of industry leaders who expect to raise or sustain operating expenditure has also grown over the two-year period, from 41 percent in 2017 to 65 percent for 2019.
Recruitment is firmly back on the agenda after four years of consistent reductions, supported by cost-efficiency measures. A third (34 percent) of the 791 senior professionals surveyed expect to grow their workforce in 2019 -- more than three times as many respondents than four years ago (10 percent). Over a third (39 percent) also expect to increase the use of contractors this year.
DNV GL's research shows signs that the old spending habits that affected the sector during the pre-2014 period of high oil prices may be returning. In 2019, fewer senior oil and gas professionals (54 percent) believe the cost efficiency measures put in place during the downturn are permanent, compared to 2018 (62 percent). The proportion of companies planning to increase strictness on cost control has also dropped from a high of 72 percent in 2015 to 44 percent for 2019.
As oil and gas companies make more investments and modestly relax their tight grip on costs, DNV GL has for the first time asked senior oil and gas professionals about the underlying danger of a gradual cost creep in the coming years. Four out of ten (41 percent) said they had experienced cost inflation from suppliers in 2018, rising beyond half in the Middle East and North Africa and in Asia Pacific. The downstream sector is most affected (60 percent), compared to just over one-third in upstream (34 percent). Forty percent expect suppliers to drive cost inflation in 2019.
Despite suggestions from some that cost inflation is re-emerging, the oil and gas supply chain says it is still feeling the pinch. Respondents who primarily identify as suppliers are much less confident in achieving revenue (66 percent) and profit targets (57 percent) in the year ahead than buyers (82 percent and 80 percent, respectively).
While more than three times as many respondents expect to grow their workforce in 2019, compared to four years ago, skills shortages and an aging workforce have resurfaced as a major concern. The issue takes joint second place as a perceived barrier to growth, alongside the oil price and the state of the global economy. Competitive pressure is viewed as the greatest challenge.
The report highlights the escalating challenge of addressing its attractiveness to young talent, who may view the sector as unstable and environmentally unsustainable after a period of prolonged stagnation during the downturn.
The oil and gas industry's efficiency efforts coincide with a third (36 percent) of senior oil and gas professionals expecting increased R&D spending this year.
Digitalization comfortably leads R&D priorities for the oil and gas industry in 2019, with 60 percent of respondents to DNV GL's research expecting their organization to increase spending in this area in 2019.
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