For the world oil and gas upstream oil and gas sector, there is scope for guarded optimism in 2017.
The very painful cost reductions and the rather higher oil prices could lead to increased investment and production, compared to 2016.
If investors believe prices in the $50-$60 range can be sustained, the result could be that some projects which have been put on hold will be sanctioned for execution.
But this will not happen uniformly across all oil provinces. Increased investment is much more likely in countries where the unit costs are relatively low.
This would include the Middle East, where both the absolute and unit costs are low by world standards.
It could also include countries where the absolute costs are relatively high but, because the fields have large reserves, the unit costs are moderate. This could include the Gulf of Mexico and offshore west Africa, for example.
Of particular interest is the onshore US in areas where shale oil exploitation is taking place. At prices in the $50-$60 range, investment in completion of wells which have already been drilled could well become viable.
It is quite possible there will be some resurgence of drilling for and production of shale oil. The time lag from initial investment to first oil is comparatively short in this sector, compared to offshore.
But much will depend on the behaviour of the oil price. Oil traders will be closely watching the actual implementation of the agreement made by Opec members and their co-operating non-members on November 30.
If they are satisfied that the agreed production cuts are being followed, the price could remain in the $50-$60 range and investment elsewhere would react positively. Perceived non-compliance would cause the price to fall.
As ever, there remains considerable uncertainty to the investment environment.
