in January 2016). Rather than remaining ‘lower for longer’, oil prices could well be “lower forever”, warns Graham Bennett, Vice President, DNV GL - Oil & Gas. “In the meantime, oil and gas companies need to start plans for developing new fields in 2018 and 2019 and beyond in order to retain shareholder value,” he adds.

Investments are still being planned across the oil and gas value chain, though at a lower level than last year. The percentage of industry leaders expecting to maintain or increase capital expenditure in the sector has dropped from 43% in 2016 to 39%. More than half (52%) say their organization will favour more agile projects that are more adaptable within shorter timeframes.

In In this climate, companies are maintaining a sharp focus on cost control, despite 76% of their leaders saying their organization was highly or somewhat successful at meeting cost-efficiency targets during intense, industry-wide, short-term cost cuts in 2016. In the research, 85% still see cost management as a top or high priority for 2017. Organizational restructuring (37%), reducing operating expenditure (35%), and improving efficiency from existing assets (29%) are the top three priorities for controlling costs.

Encouragingly though, DNV GL’s survey hints at a longer-term, strategic approach to cost- efficiency; 63% see their current measures as marking a permanent shift towards a leaner way of working.

“After this period of volatility, our management is very aware that we must always be careful to invest cautiously, optimize costs, and improve efficiency,” says Ye Hua Huang, Deputy Director-general, China National Offshore Oil Corporation (CNOOC), Bohai Oilfield Bureau in an interview for the survey. “We cannot abandon this cautious strategy when prices are high.”

Collaboration and standardization gaining popularity

Improved focus on collaboration, standardization and digitalization will play a key role in enabling the industry to transform to meet the demands of the new era and become profitable in volatile markets, says DNV GL’s Elisabeth Tørstad.

Many company leaders agree: 66% say cost pressures are driving more industry collaboration. The leading drivers in 2017 are to make new projects financially viable (51%), reduce risk/downside exposure (42%), and to access new skills (33%).

Collaboration through processes such as joint industry projects is boosting standardization efforts. “The sector is talking in an unprecedented way about working with competitors to use standardization to support joint efficiencies,” says the World Energy Council’s Christoph Frei.

For example, a cross-industry project led by DNV GL to halt the boom in unnecessary subsea documentation shows that implementing a standardized approach can significantly reduce engineering hours.

Nearly half of respondents (49%) say the downturn is helping to reduce complexity in projects and operations. Standardization efforts are increasing as it helps to remove remaining complexities: 66% say their organization will seek greater standardization of tools and processes in 2017 (59% in 2016).

Digitalization on the rise Digitalization involving technologies such as artificial intelligence, automation, predictive analytics and machine-to-machine communication is seen increasingly as another means to enhance operational and cost efficiencies in oil and gas. Among the 15 emerging technologies investigated in DNV GL’s survey, digitalization is the area in which

companies are most likely to invest in 2017 – across R&D, trials and full-scale implementations.

DNV GL estimates that the industry could become at least 20% more efficient by making full use of digitalization. It is the emerging technology area in which companies are most likely to invest in 2017, indicating that the industry recognizes it as a path to improved profitability and reduced risk. Nearly half (49%) of respondents say their organization will embrace digitalization to increase profitability.

In addition, 39% expect their organization’s spend in this area to increase in 2017. The same proportion report that lower oil and gas prices have increased their focus on digitalization, while for 45% it has remained the same. Only six per cent have decreased this focus following the downturn.

“There’s general acceptance of the idea that big data, in particular, is important to the future of oil and gas,” says Paul Doucette, global leader, public policy and external funding, GE Oil & Gas, in an interview for DNV GL’s research. “Many operators are working on how to go about harnessing it. The struggle is to make data meaningful and actionable fast enough to make a difference.”

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References 1 ‘A tricky time for oil producers’,, 26 November 2016 This article was first published in PERSPECTIVES, a digital publication from DNV GL – Oil & Gas.

Left: DNV GL’s survey hints at a longer-term, strategic approach to cost-efficiency.

Above: DNV GL’s 2017 industry outlook report outlined an improved focus on collaboration, standardization and digitalization and confidence levels.

April 2017 | | p7

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