Let’s go on a journey.
Realism and optimism blend at OTC 2017
The emerging resurgence in United States oil and gas, led by the onshore shale sector, had encouraged some commentators to anticipate that this year’s Offshore Technology Conference (OTC), which has just been held in Houston, would represent a show of strength and unbridled optimism for increased activity both at home in the US and globally.
However, the pervading mood at OTC 2017 was one of an industry confident about the future but not excessively bullish. Cautious optimism is an overused phrase but there is no other that more accurately reflects where the offshore sector believes it is right now.
The recent fifth annual Energy Symposium, hosted by the Price College of Business Energy Institute at the University of Oklahoma in the Devon Energy Center, Oklahoma City, had sent a clear message to the rest of the world that after three years of prolonged low oil prices, the US industry’s revival was in motion. Shale has taken centre stage in this resurgence, but optimism was high that the offshore sector would follow on either later this year or next.
With OTC’s focus obviously on the offshore sector, it is no surprise that the self-belief of the shale industry did not translate fully into the many conversations that were had both in the conference and on the exhibition floor.
But, despite the fact that this year’s attendance was down to more than 64,700, even less than last year’s 68,000, there is an absolute belief that, thanks to cost efficiencies undertaken over the past three years, offshore’s return is just around the corner and the sector is now in good shape to take full advantage of an upturn.
BP set the tone for the show on day one of OTC by suggesting that deep water could compete with tight onshore oil ‘any day’. Richard Morrison, BP’s regional president for the Gulf of Mexico, was reported as stating that the supermajor’s cash margins in the Gulf were better now than they were when oil was priced at $80. This was due to factors including risk sharing through operated and non-operated stakes, and improvements in overheads and lifting costs.
Aligned with this sense of optimism were announcements suggesting growing confidence in regions and countries such as offshore Brazil and Mexico, where the recent excitement over the country’s first deepwater licensing round extended into the show.
That same quiet confidence was also felt at the Scottish pavilion at OTC and expressed elsewhere in conversations with many of those who made the trip over the Atlantic. No one from Aberdeen is getting carried away right now, but the North Sea industry has had to make many difficult decisions over the past three years and there are a growing number of companies who are now seeing an upturn in business as a result.
The presence of Oil & Gas UK chief executive Deirdre Michie at OTC this year further enhanced the feeling that the North Sea is once again returning to match fitness and is ready not only to compete for, but to win, market share. Those who attended Energy Voice’s New World Order event at OTC saw Balmoral Group chairman and managing director Jim Milne typify the spirit and enthusiasm necessary for the North Sea to succeed in future - comments which he also shared with Fifth Ring’s Editor’s Eye series.
The oil and gas industry is generally an optimistic place to be – it encourages entrepreneurs who can see an opportunity and have the conviction and drive to go for it – but misplaced over-optimism can sometimes be detrimental. Despite the muted number of attendees this year’s OTC in Houston had the right blend of optimism that activity is returning, and realism in the widespread acknowledgement that we still have a long way to go to full recovery.
The next major milestone in the oil and gas calendar is Aberdeen’s Offshore Europe conference and exhibition in September. It is hoped that the intervening months will see greater justified confidence returning to an industry which, though bloodied and bruised after the last three years, is getting back on its feet and preparing to enjoy a new lease of life.