Oil-gas Optimism Reigns, Study Finds

February 18, 2019

Optimism driver: Kitimat LNG (courtesy Chevron Global)
Optimism driver: Kitimat LNG (courtesy Chevron Global)

The worldwide oil and gas industry is “resilient, confident and ready to spend” but is at risk of reverting to overspending, just as an increase in large-project approvals loom.

That’s the gist of a new report from Oslo-based, all-in-one classification society, DNV GL. According to A Test of Resilience: The Outlook for the Oil and Gas Industry in 2019, 76 percent of the oil and gas industry feels “confident” in growth, or more than twice the polled number expressing that kind of confidence in 2017.

Most apparently see “increases or stable capital and operating expenditure in 2019, and more large project approvals than in 2018,” the DNV GL report says, adding that the US outlook has improved the most. The Report cites optimism about achieving “high profitability over the next decade” as having also risen by double digits in all oil regions.

The report seemed mainly to summarize 2018’s course while reiterating that oil-price “volatility” is here to stay (“volatile” words from a BP executive reported by this writer several years ago). Despite the rollercoaster state of things, DNV GL said the executives polled confirm an increasing number of large project sanctions in 2019.

“Two-thirds of respondents to our survey say that more large, capital-intensive oil and gas projects will be approved in 2019 than in 2018,” respondents said, pointing to approval in October 2108 for LNG Canada in British Columbia as an augur of good times ahead. Shell Petronas and PetroChina are among stakeholders in the oft delayed Canadian project, one of handful in the worldwide approval queue.

While both DNV GL and those it surveyed have a significant stake in gas, the Class community also pointed to Petrobras plans to sink USD 68.8 billion into E&P over five years as well as the USD 132 billion Abu Dhabi National Oil Company will spend from this year to 2023 to boost oil production.

While sources of confidence include segments like rigs and shipping (links), the report quotes analyst appraisals of industry costs-savings as cause for optimism: “The oil and gas industry actually makes bigger profits now than they did when the oil price was USD150. This is because of cost control measures implemented after the sharp fall in oil prices in 2014,” Nordea Bank energy advisor, Thina Saltvedt, was quoted as saying.

DNV GL, however, says there’s already signs the industry might be reversing the good habits carved out since the downturn of 2014. Fewer execs, for one, are saying the cost cuts they put in place since that fateful year were permanent.



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