The results of the Energy Voice sector survey #Oil17: New World Order unveiled in Houston yesterday highlighted that there is no room for complacency in the industry is it recovers from the downturn.
Sean Shafer, project manager at energy sector advisory firm Calash, said that while people in the industry are “generally positive, they are not very confident of that positivity”.
Areas of confidence highlighted in the research were around new technology and diversification – although Mr Shafer said this was more “confidence in the potentials of those new technologies and not people actually deploying those technologies.
He said the industry could face criticism for reacting too slowly to the downturn.
“We have essentially been through the longest sustained cost cutting periods since the 1980s in the industry,” said Mr Shafer.
“Even though about 88% of companies said they were still cutting costs this year, one third said costs cuts had not gone far enough.
“My question is: how did the industry get to a point where three-plus years of cost cuts were not enough?”
Perhaps one of the challenges that faced the industry was over-confidence, according to the survey.
He said: “What people are failing to understand, oil prices are not coming back as fast as people predicted.
“The costs cuts we have seen over the last few tears are not necessarily sticky.
“We see a lot of talk about long term structural costs reductions. It is easy to say that when oil is $50. But if you look at the history of the industry don’t be surprised if costs go up so we are just basically breaking even in 2020.
“It is something people need to be prepared for. Long term, people in the industry have been overly optimistic about the future. It is fully understandable why people do that psychologically. But that is not a way to plan for your business going forward.”
This overconfidence extends to predictions on cost, particularly for offshore oil and gas producers who are competing with less expensive shale producers.
“The big question for offshore oil and gas is can it compete with US shale,” he said.
“What we have seen as prices come down is offshore operators sanction projects that are comparable to shale.
“It is easy to claim your project is $45-50 a barrel when you sanction it. It is an entirely different thing to have a $45 barrel project when you actually go into production. The real question is: can offshore actually deliver on the claimed costs savings or are these costs saving going to be lost?”