Continental Europe puts long-term focus on R&D and innovation.
Although the majority of senior oil and gas professionals in Europe (68%) are preparing for a sustained period of low oil prices, there are reasons for optimism according to a new report published today by DNV GL, the leading technical advisor to the oil and gas industry. Despite ongoing concerns over job losses, a new more meaningful stage of cost management is expected, prioritizing efficiency, cutting complexity and driving innovation.
According to A New Reality: the outlook for the oil and gas industry in 2016, a DNV GL report based on a global survey of 921 senior professionals in the sector1, cost management is the top priority for 41% of Continental European respondents in 2016. The highest-prioritized measure to impose stricter cost controls is to optimize the efficiency of production from existing assets (31% in C. Europe, compared to 25% of respondents globally). Reducing exposure to riskier/costlier projects is favoured by 29% in C. Europe (compared to 25% globally) and 27% will initiate simpler processes and designs (versus 20% globally).
Continental Europe has less of a focus on reducing headcount to manage costs in 2016 compared to the global average (22% vs 31% globally) and pressure on the supply chain is also easing, down from 31% in 2015 to 27%.
Liv Hovem, regional manager, Continental Europe, North and East Africa for DNV GL – Oil & Gas, says: “While the oil and gas sector in Europe still needs to be prepared for more short-term cost-cutting measures and job losses, there is cause for optimism. Companies are driving initiatives to reengineer projects to create more efficiency and generate longer-term value.
"The industry needs to accelerate these more meaningful cost-management measures that will enable it to adjust to the new reality and put it on a sustainable growth path for the long term. That means cutting complexity, increasing collaboration and driving standardization.”
There are positive signs that the industry is adopting longer-term thinking on cost management: six in ten respondents say that their organization will seek to achieve greater standardization of tools and processes during 2016. Standardization measures in Continental Europe will have a high focus on processes, process design and operational procedures in 2016.
Further, more than half of respondents (55%) say their organization is taking a long-term approach to innovation and R&D, compared to a global average of 49%. The R&D focus will be on LNG/gas production for 43% of respondents (compared to 17% globally) and subsea/deepwater operations (18%, compared to 20% globally).
The most common strategy for maintaining innovation with shrinking budgets is to increase collaboration with other industry players (47%). Nearly one in three (28%) plans greater involvement in joint industry projects in the year ahead.
Elisabeth Tørstad, CEO of DNV GL – Oil & Gas, adds: “Innovation isn’t just about finding the breakthrough technologies – although that’s important too - it’s also about making things simpler and more efficient and ultimately helping the industry to safely cut costs. At DNV GL, we are continuing to invest 5% of our revenue in R&D as we see this as a key enabler for sustainable long-term competitiveness.”
Other key findings include:
- Respondents in Continental Europe expect subsea technologies (32%), enhanced oil recovery and floating liquefied natural gas (FLNG) – both 29% - to be the most important technologies in 2016, in line with global respondents.
- 62% of respondents in Continental Europe believe there will be increased consolidation within the oil and gas sector in 2016, compared to 72% globally.