Our research shows the oil and gas industry entering 2019 feeling resilient and ready to spend. Confidence in its growth prospects has more than doubled from 32% in 2017 to 76% now.
Most senior industry professionals that we have surveyed expect increases or stable capital and operating expenditure in 2019, and more large project approvals than in 2018. The US has the most improved outlook in A test of resilience, our report on the outlook for the industry in 2019.
We explore factors driving optimism, the locations and types of company where confidence is highest and lowest, and opinion on whether the market is now in a position for the entire value chain to succeed.
Spending discipline is set to be tested in 2019, according to our outlook. The proportion of companies planning to increase strictness on cost control has dropped from a high of 72% in 2015 to 44% for 2019.
We look at the extent to which they are experiencing and expect creeping cost inflation from suppliers, and which regions and parts of the oil and gas value chain are most affected.
Skills shortages and an ageing workforce re-emerge as a top barrier to industry growth.
Our findings help to gauge whether companies will fall back into inefficient spending habits from before the market downturn, or whether they can maintain hard-won efficiency gains.
We see pressure building in the supply chain. More than a third (39%) of respondents to our survey expect to make more use of contractors in 2019, and suppliers are more likely to recruit than buyers this year. Despite these prospects, suppliers are still feeling the pinch. They are less confident than buyers about achieving their revenue and profit targets.
We assess how suppliers will respond as the market rebalances over the next few years. Two thirds of respondents predict increased supply-chain consolidation in 2019, for example. Some think suppliers will start to charge more, and three quarters believe that new business models will be required to achieve cost efficiencies.
Short-term incentives could accelerate long-term decarbonization, for which momentum is building. Half (51%) the respondents to our survey say their organization will focus on actively adapting to a less carbon-intensive energy mix in 2019, up from 44% last year. More than a third (36%) will increase investment in gas this year, and more than a quarter (28%) expect greater use of hydrogen to decarbonize the gas mix in 2019.
We also explore the dynamics of carbon capture and storage in this section. Examining how trends vary worldwide, we find, for example, that companies are now more likely to decarbonize because they are told to, rather than because they want to.
Efficiency efforts are driving sustained momentum in digitalization adoption. Our report suggests R&D spending will continue rising in 2019. Digitalization is comfortably the leading priority for R&D spending this year as the sector seeks long-term efficiencies. Twice (44%) the percentage of respondents are investing in it compared to the second-ranked priority, subsea technology (20%).
The top three priorities for digital investments this year all relate to data sharing, integration and access, according to our survey. One reason for digitalization rising this year is because some of the barriers to its adoption, such as finance, are falling.
We also assess R&D and digitalization spending intentions, priorities and barriers by region/country.
Download the report
A test of resilience: the outlook for the oil and gas industry in 2019