Confidence in global oil and gas industry growth has stalled among 66% of senior oil and gas professionals, down 10 percentage points from 2019, DNV-GL says in its just-published New Directions, Complex Choices: The Outlook for the Oil and Gas Industry in 2020 report.
The weakening confidence comes amid uncertainty about oil prices and global economic conditions—top barriers to growth. Yet, 64% of the report’s more-than-1,000 respondents predicted that their companies would hit 2020 profit targets, and 46% said their companies would still achieve acceptable profits if oil prices were to average less than $50/bbl. Additionally, 71% plan to maintain or increase investments in decarbonization—up sharply from 54% in 2019.
“While the industry is experiencing persistent uncertainty, growing complexity, and new risks, we also see it taking bold decisions, building greater efficiencies, and rising to long-term challenges as the world pivots towards a lower-carbon energy future,” said DNV-GL Oil & Gas CEO Liv A. Hovem.
The report addresses five key trends—confidence, cost discipline, decarbonization, digitalization, and the workforce. Highlights of the report include:
Optimism is weaker among respondents from upstream-focused organizations, where confidence in growth for the year ahead has fallen from 80% for 2019 to 64% for 2020.
The oil and gas industry is in the early stages of what could be a sea change for the sector, driven by digitalization and decarbonization.
Digitalization and automation could save approximately 10% of the current $1-trillion budget that upstream organizations globally have allocated to operations, wells, facilities, and subsea installations. Almost all respondents (92%) plan to either increase or maintain their level of spending on digitalization in 2020.
Just over 80% believe the industry needs to develop new operating models—including those based on outcomes, availability, or other kinds of benefits—to achieve further cost efficiencies.
Less than half of respondents expect more large, capital-intensive projects to be approved this year, down from two-thirds last year. Instead, 85% expect to maintain or increase spending on efficiency of assets and 80% plan to maintain or increase investments to extend the lifespan of existing assets. Operators can use digital tools to achieve goals of improving recovery rates and extending asset life rather than launching greenfield investments.
The trend toward increased investment in decarbonization is much stronger in Europe than elsewhere. Focus in Asia is on meeting soaring demand for energy to maintain economic growth and development. North American majors are focused on the opportunity to export to Asia and other energy-hungry markets.
Skills shortages and an aging workforce remain top-five barriers to industry growth. Investment in both digitalization and decarbonization can potentially help attract and retain young talent. Widespread digitalization is creating strong competition for specialist talent.
AI and data specialists are the second-most in-demand types of workers—and number one for North America—from a list that includes all aspects of oil and gas operations. Software developers are ranked fifth overall. Project managers, risk management professionals, and subsea engineers round out the top five skills in demand for 2020.