DNV GL report finds cost control, collaboration top industry priorities

Offshore staff

HØVIK, Norway – A report by DNV GL suggests the industry is repeating the mistakes of previous downturns.

“A New Reality: the outlook for the oil and gas industry in 2016” surveyed 921 senior sector players globally. Cost management emerged as the top priority for 41% of respondents, while the main three measures prioritized to impose stricter cost controls were:

  • Tougher decisions on capex
  • Headcount reductions increasing
  • Increasing pressure on the supply chain.

Elisabeth Tørstad, CEO of DNV GL – Oil & Gas, said: “With the low oil price, the industry has taken painful short-term cost-cutting measures by reducing the capex and headcount and squeezing the supply chain.

“Although 74% say they achieved their cost-efficiency targets last year and 65% believe the industry will be successful in cutting costs in 2016, not all parts of the sector have been able to achieve lasting lower cost levels during downturns.

“To prevent repeating past mistakes, real change is needed now - cutting complexity, increasing collaboration, and driving standardization. These measures will enable the industry to adjust to the new reality and put it on a sustainable growth path for the long term.”

She added that the survey found some hopeful signs that the industry is adopting longer-term thinking on cost management, with 61% of respondents agreeing that operators will increasingly push to standardize their delivery globally (up from 55% in the 2015 survey). 

Despite the current price environment, 49% said their company was retaining a long-term approach to innovation and R&D. Respondents cited the most common strategy for maintaining innovation with lower budgets as increased collaboration with other industry players (45%), while nearly one in three (30%) anticipated greater involvement in joint industry projects this year.

“Innovation and collaboration are even more important in this current price environment. It isn’t just about finding the breakthrough technologies – although that’s important too – it’s also about making things simpler and more efficient and ultimately helping the industry to safely cut costs,” Tørstad claimed.


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