A survey shows oil and gas executives' confidence in the market recovery has shifted from optimistic back to cautious, creating a need to find new cost-cutting efficiency gains in business operations by way of a new wave of digital technology adoption.
Deloitte's "2017 Oil and Gas Industry Executive" survey finds that many oil and gas executives believe the road back to recovery has become longer. Most respondents of the survey expect WTI crude to remain between $40-$50 a barrel in 2017, not hitting $70 a barrel until 2020.
With a more cautious outlook on the market, many respondents of the survey said their strategic focus for upstream companies in 2017-2018 will be to maintain or increase production levels while simultaneously reducing general and administrative expenses.
More than half of midstream executives expect a decrease in capital expenditures in 2018 versus 2016. These executives say pipelines are the best opportunity for growth in 2018 but could be stunted by environmental issues, controlling costs, and regulations.
Downstream executives are slightly less likely to expect reductions in capital expenditures, according to they survey. Downstream opportunities include increased exports and low prices stimulating the economy.
More than half of upstream executives see improving operational efficiencies as the best path forward in this new market reality, although the industry is still "immature on the adoption curve" compared to other industries.
Investing in advanced digital analytics could potentially deliver annualized savings for upstream of about $30 billion and create multi-billion dollar revenue streams for oil field service players.
"The bottom line is that companies should focus on cost discipline and operational efficiency. Digitization is likely the next frontier in this new normal, offering a lifeline for new efficiencies, cost reductions, and productivity," said Andrew Slaughter, executive director at Deloitte Center for Energy Solutions.