Senior oil and gas professionals in MENA expect a positive step change in the industry’s capex, opex, headcount and R&D spending levels in 2018, according to a new DNV GL research report.
Senior oil and gas professionals in MENA expect a positive step change in the industry’s capex, opex, headcount and R&D spending levels in 2018, according to a new DNV GL research report.
Confidence and Control: The outlook for the oil and gas industry in 2018 is DNV GL’s eighth annual report providing a snapshot of industry confidence, priorities and concerns for the year ahead. It reveals an imminent turnaround in spending on R&D and innovation after three years of cuts and freezes. More than a third (36 per cent) of 813 senior sector players surveyed, expect to increase spending on R&D and innovation in 2018: the highest level recorded in four years and six percentage points higher in MENA (42 per cent), the report said.
After three tough years, overall confidence levels have nearly doubled from 34 per cent in 2017 to 64 per cent for the year ahead and are now in line with the global figure of 63 per cent, DNV GL said.
Plans to maintain or increase capital spending in 2018 is significantly higher in MENA, 80 per cent versus 66 per cent, and is a two-fold increase on last year’s intentions (40 per cent), the research added.
MENA confidence around hitting revenue targets is also higher than global counterparts (73 per cent versus 61 per cent), it said.
“The outlook for the oil and gas industry in MENA is one of confidence and control,” Ben Oudman, regional manager, Middle East and North Africa, DNV GL – Oil & Gas.
“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 the Middle East, we are now seeing a much longed for focus on investment and plans to bring in new technology and extra skills which suffered severe cuts during the downturn,” he said.
Industry leaders and technical experts questioned in the survey cite R&D as the main area for increased spending. “This is an area which has suffered the most in the past three years, so it is very encouraging to see a positive turnaround to allow those companies to realize improved profits and performance,” Oudman added.
Barriers to growth related to increase in operating costs and a weak global economy are all expected to subside in the coming year, while geographical instability in key markets, lack of investment in innovation, and a shortage of skills are growing. The greatest challenge cited by MENA respondents is uneconomic oil price, though notably, this has fallen significantly as a key concern from 66 per cent in 2017 to 42 per cent.
Concerns regarding low oil price may explain a greater focus on cost efficiency among MENA respondents compared to their global counterparts. More than two-fifths (42 per cent) believe efforts to manage spending will be a top priority in the next twelve months, a figure that has relatively unchanged from 2017 (43 per cent), but is 11 percentage points higher than global opinion.
Meanwhile, the DNV GL research stated that rising confidence is also evident in other regions - the US. North America is up from 49 per cent to 57 per cent.
Europe has the most improved outlook for the oil and gas sector (up from 25 per cent last year to 64 per cent), with Latin America at 77 per cent (46 per cent in 2017) and Asia Pacific at 57 per cent (30 per cent in 2017).
It also said that nearly two-thirds (62 per cent) of respondents globally expect their organisation to maintain or increase headcount in 2018, compared to 66 per cent in MENA. This compares to 43 per cent globally in 2017 and 43 per cent in MENA.
Source: Pipeline ME
