AOG | Oil and Gas Industry Confidence Report

Apr 30, 2018

There is a clear view that a turnaround in industry confidence is occurring, with the majority of the respondents suggesting that the local industry is in the early stages of recovery, although there was a strong perception that the real strength of the turnaround will be more noticeable in the mid-term (2 to 5 years).

Industry and business confidence

Respondents generally expressed greater confidence in the near-term success of their own businesses, as opposed to their view on the industry as a whole.

More than half of the participants registered a vote of confidence in industry growth over the next two years, while almost three quarters of respondents were confident their organisation would grow over the same period.

On a sector basis, those involved in manufacturing were the most confident in both industry and organisational growth. On the other end of the spectrum, just under half of respondents believe the “supply chain” was in the early stages of recovery.

Profit and spending growth

In a strong sign of their confidence, a large percentage of individual businesses believed their company would achieve profit targets over the next 12 months, while 66% said they were confident they would increase OPEX in that period.

Slightly less than that number of respondents also said they were confident they would increase CAPEX in that period and a similar number said they were confident they would increase employee numbers in that period.

Those who were less confident pointed to the growing use of renewable energy as major factor affecting growth potential.

Interestingly, the participants identified: demand; oil price; and innovation and technology, in that order, as the top three drivers of growth over the next 12 months for the oil and gas industry.

The future

While the majority of respondents believed that the service and supply sector was doing “ok”, less than half felt that the key future business generation areas of “field development” and “exploration” were in a similarly position.

There is also a general feeling that companies will not be increasing staff numbers significantly, but will be working hard to keep their teams in place.

Although it was noted that there are some good quality graduates coming through the education and training system and they could be hired at a cheaper rate than experienced staff.

While oil price concerns have slipped to just 11% as a barrier to overall industry growth, most respondents said high costs, particularly in Australia were a barrier.

A significant number of respondents also named ‘red tape’ as a potential barrier to further growth opportunities for the oil and gas industry in Australia.

There was also significant concern raised by specifically affected industry groups over the growing number of bans on onshore exploration and development across the country.

Respondents named increased collaboration as a top priority to increase industry growth over the short term, followed by investment in technology and innovation; investment in R&D and increasing employment.

While the Australian oil and gas market is following the global trend in registering an increasing confidence that the industry is emerging from the turmoil of the recent major downturn, the local industry has downplayed the importance of oil prices in its future growth forecasts, and focused its attention on local issues such as high local costs, red tape and the shutdown of activities in large onshore areas across the country.

In addition, while there is very strong evidence that the local industry is rebounding from the lows of the previous three and a half years, there are also indications from a majority of participants that the level of growth will be slow in the short term before beginning to accelerate in the mid-term.

For more insights see the full report here

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