A positive, longer-term mindset despite the low oil price, says DNV GL.
Seventy per cent of senior oil and gas professionals in China believe their organization has been successful in achieving cost-efficiency targets over the past year, according to a new research report published today by DNV GL, the leading technical advisor to the oil and gas industry.
According to A New Reality: the outlook for the oil and gas industry in 2016, a DNV GL report based on a survey of 921 senior professionals in the sector1, respondents in China believe their organizations are is taking a more long-term approach to the downturn compared to global respondents in relation to the overall cost base, skills/careers development and, most notably, headcount (32% in China compared to 51% globally).
Chinese sector professionals have a greater appetite for embarking on projects in challenging environments than their global counterparts. More than twice as many respondents in China (43%) expect their organization to expand its exploration and production activities into new frontiers or challenging environments in 2016, compared to just 16% of those surveyed globally.
Chinese respondents have a higher focus on standardization than their global counterparts. More than eight in ten (82%) of respondents say that operators will push standardization globally, compared to 61% globally, while 75% expect their organization to achieve greater standardization of tools and processes compared to 59% of global respondents.
Yi Wolfgang Wu, general manager of Business Development, DNV GL Oil & Gas Region Greater China, Korea & Japan, says: “Despite the worldwide drop in oil prices, the sector in China is bucking the global trend due to increasing energy demand and new projects coming on stream.
"Although more than three-quarters (77%) of respondents in China are preparing their company for a sustained period of low oil prices, organizations are showing longer-term thinking about how to manage the downturn, with a high focus on standardization and collaboration to drive innovation.”
Chinese respondents are ahead of their global counterparts in the drive for collaboration, with 52% prioritizing increased collaboration with other industry players to maintain innovation in China, compared to 45% globally. Increased partnering with academic institutions is the preferred strategy for 36% of Chinese respondents, compared to 16% globally.
Chinese respondents also have a greater focus on R&D investment, with nearly a third (32%) planning to ring-fence in-house R&D budgets from cuts as a measure to maintain innovation. LNG/CNG/gas production is the top priority area for innovation (42%), followed by subsea deepwater (16%).
Elisabeth Tørstad, CEO of DNV GL - Oil & Gas, says: "Innovation isn't just about finding the breakthrough technologies - although that's important too - it's also about making things simpler and more efficient. 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:
- Chinese companies are less concerned about the low oil price as a barrier to growth in 2016 (25% compared to 63% globally). A weak global economy (39%) is considered the biggest barrier, followed by a weak local economy (32%).
- Half of the Chinese respondents will increasingly focus on onshore operations in 2016, compared to 23% globally.
- More than three-quarters (77%) of Chinese respondents believe there will be increased consolidation in 2016.
1. A New Reality. the outlook for the oil and gas industry in 2016 is an industry benchmark study from DNV GL, the leading technical advisor to the industry. Now in its sixth year, the programme builds on the findings of five prior annual outlook reports, first launched in early 2011. During October and November 2015, we surveyed 921 senior professionals and executives across the global oil and gas industry. More than a third (35%) of respondents work for oil and gas operators, while 60% are employed by suppliers and service companies across the industry. The remaining respondents come from regulators and trade associations. The companies surveyed vary in size: 40% had annual revenue of USD 500m or less, while 14% had annual revenue in excess of USD 10bn. Respondents were drawn from publicly-listed companies and privately-held firms. They also represent a range of functions within the industry, from board-level executives to senior engineers.