The Middle East and sector diversification are the industry’s answer to weathering the oil price storm, according to new research.
More than 500 people took part in Energy Voice’s research campaign, dubbed Sub $50 Oil: New Perspective and Hidden Opportunities.
The results, which were analysed by Douglas Westwood, revealed internationalisation and sector diversification would take centre stage as the sector battles its latest downturn.
A total of 75% of respondents said an increased resource or effort will be placed on seeking international opportunities this year.
Notably, 88% of chief executive and director-level respondents– those most likely to be involved in such strategic decision making – responded a resounding “yes” to whether their firm was targeting internationalisation.
The Middle East came out as the top prospect with 49% of respondents ranking it the best return on investment, followed closely by Africa with 42% of the vote. Europe was rated the least favorable prospect, garnering only 11% of the vote.
The research said: “It is clear that there are certain regions where investment opportunities are more attractive. This is stimulating increased attention and capital inflows to these regions as North Sea businesses look to de-risk their existing operations. This is a popular strategy at the moment for those operating primarily in the UKCS but who can access other more favourable markets such as the Middle East, where activity levels are comparably high.
“The Middle East has two characteristics, which currently attract higher levels of interest to this region: the region has relative stability with regards to activity levels, as many national oil companies in the region look to maintain production levels and proceed with planned developments, furthermore the arrival of Iran back to the market as a major producer holds large potential for companies to gain additional work. Shallow gas developments in Asia and deepwater projects in Africa are also drawing interest as these projects create relative hotspots of activity in the current environment.”
The interest in the Middle East is well-guided, according to Douglas Westwood as it’s the only region where OFS expenditure will by higher in 2020 than it was in 2014, according to its research.
A total of 56% of respondents said their company was targeting sector diversification.
However, this figure rose to 65% for service firm respondents.
The majority of respondents said renewables should be the upstream industry’s next port of call, followed closely by downstream. Respondents also pinpointed construction and civil engineering as possible crossovers.
“The large interest in the renewables sector highlights an ongoing trend for oil and gas firms operating in the UKCS to move into offshore wind,” according to the report.
But diversification isn’t without its challenges.
The report read: “Challenges related to diversification are very dependent on each company and their current role in the supply chain. For many companies in the sector currently, they are tied by assets, whether it be factories, platforms, vessels, to the oil and gas sector, and particularly the North Sea.
“The maturity of the region also means that many firms have been long-placed within this industry and have specialised within it – this will make it difficult to diversify away because there has been a longer term focus on one local sector.”
An expert panel will debate the research findings at this year’s Offshore Technology Conference.
To read where respondents think the North Sea’s operating costs must be to survive and see more from the report click here.
The research campaign is sponsored by the Regional Economic Development Initiative (REDI) in Texas and Burness Paull, a leading Scottish law firm.
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