Outlook for the oil and gas industry 2020
2: Industry remains optimistic; Cost discipline is key
Capital and operational expenditure levels in the oil and gas industry are a world away from those of five years ago, when deep cost-cutting initiatives were kicking off in all segments, as the industry fell into a major downturn.
Cost efficiency is not just about short-term belt-tightening, however; it must be a long-term priority if efficiency targets are to be met. Many expect lower-for-longer oil and gas prices to prevail, while the cost of renewable energy is expected to continue to fall over the next 30 years, making those sources increasingly competitive with oil and gas. Indeed, two-thirds (66%) of respondents to our survey say that most of their cost-efficiency initiatives since 2014 have become permanent changes.
The industry is now building new efficiencies on top of those hard-won gains, not just to survive, but to thrive. As a result, parts of the industry have become impressively lean. In our survey, some 46% say that, if the oil price were to average less than USD 50 per barrel in 2020 (Brent-WTI average), their organizations would still achieve acceptable profits. This is a large proportion, given that only one of the past 15 years (2016) saw annual average prices under USD 50 a barrel.