Australian Energy Firms to Rebalance their Portfolios: DNV GL

Maritime Activity Reports, Inc.

February 6, 2017

Elisabeth Tørstad, CEO, DNV GL – Oil & Gas and Richard Palmer, Country Manager, DNV GL – Oil & Gas Australia. Photo: DNV GL

Elisabeth Tørstad, CEO, DNV GL – Oil & Gas and Richard Palmer, Country Manager, DNV GL – Oil & Gas Australia. Photo: DNV GL

 New research by DNV GL, the technical advisor to the oil and gas industry, shows oil and gas companies in Australia are seeking to rebalance their business portfolios and reorganize for a new era. 

In a period of drawn-out recovery, 45% of senior oil and gas professionals surveyed expect their business to diversify into, or invest more in, opportunities outside of oil and gas. Still, 85% believe gas will become an increasingly important component of the global energy mix over the next 10 years.
Short-term agility, long-term resilience is DNV GL’s seventh annual benchmark study on the outlook for the oil and gas industry, providing a snapshot of industry confidence, priorities and concerns for the year ahead. It draws on a survey of 723 senior sector players 1 . 
“The number of companies we now see pursuing opportunities beyond oil and gas signals a step change in the reshaping of the sector and demonstrates the sector's ability to adapt and build a more robust, diverse and sustainable future in which gas will have a key role to play,” says Richard Palmer, Country Manager, DNV GL – Oil & Gas Australia. 
Despite the high share engaging in diversification strategies, investments across the oil and gas value chain will continue in 2017 at a similar level, with the percentage of respondents expecting to maintain or increase CAPEX levelling at 39% (same as globally), slightly up from 36% last year. More than half (55%) will favour investment in more agile projects that are adaptable in shorter time frames. 
Australians are also more confident than their global peers that the worst of the downturn is over (45% vs 27%). Confidence in the oil and gas sector has risen from 19% to 30% in the last year, but Australian respondents are less confident about the overall prospects for their own organization – with a decline from 48% to 38%.  
Cost-cutting in 2017 will be prioritized around OPEX (41%), workforce reduction (34%) and organizational restructuring (34%), with less focus on CAPEX reductions - down from 37% to 27% in the last year.  Notably and alarmingly, 30% of respondents believe that cost-cutting is negatively affecting the health and safety risk (compared to only 19% globally). 
Over half (52%) say that the cost pressures are driving more industry collaboration, a positive effect of recent market challenges. Efforts to improve standardization are also increasing as this helps remove remaining complexities.  
Sixty-one per cent of respondents say their organization will seek greater standardization of tools and processes in 2017, a 16% increase from 2016.  
Digitalization is also increasingly seen as a means to enhance operational and cost efficiencies. Thirty-three per cent of respondents believe there has been an increased focus on digitalization since the beginning of the downturn in June 2014. Almost half (45%) of respondents also said their organization will embrace digitalization to increase profitability.    
"We see a mixed picture for the oil and gas sector in Australia.  The majority believe the worst of the downturn is over, confidence in the overall outlook for the industry has improved slightly and nearly half expect oil prices to rebound in 2017. However, more than half expect further job losses this year and it is of great concern that nearly one in three believe cost-cutting is reducing HSE levels,” adds Richard Palmer. 
Richard added: “While the oil and gas industry continues to experience one of the lowest injury and fatality rates of any industry in Australia, this is clearly an area to watch. We as a sector should never compromise on safety.”  
“Last year, we saw intense and painful short-term cost-cutting measures in the industry,” comments Elisabeth Tørstad, CEO, DNV GL – Oil & Gas. "Though cost-cutting measures are still on the table this year, confidence in oil and gas sector growth has stabilized for now and opportunities are being created. An improved focus on collaboration, standardization and digitalization will enable the industry to transform to meet the demands of the new era and become profitable in volatile markets.” 
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