Energy Execs: “Break the Cycle of Cutbacks”

Low oil and natural gas prices are causing too many global energy companies to make shortsighted decisions around personnel, infrastructure, and research and development. Who’s saying this? More than half of oil and gas executives.

A study by Norway-based DNV GL revealed that 56 percent of 920 global energy companies disagree with their industry’s severe budget cuts. In fact, those oil and gas leaders say falling into the trap of cuts during downturns will only repeat past mistakes the industry has made during tough times.

Oil and gas executives agree that laying off workers, putting projects on hold, and slashing research and development are the wrong solutions for long-term health of the industry. Instead, many agree that more focus on efficiencies, cost-savings, and innovations will help the industry avoid the cyclical nature of energy commodities.

Elisabeth Torstad, CEO of oil and gas for DNV GL, told the Houston Chronicle’s that energy companies need to reduce complicated processes, collaborate more within the industry, and find ways to standardize delivery worldwide. “These measures will enable the industry to adjust to the new reality and put it on a sustainable growth path for the long term.”

DNV GL’s study also revealed little confidence among energy executives that 2016 oil prices will rebound or that the global economy will increase its demand for energy commodities.

“China’s economic downturn will continue. Meanwhile, Japan is restarting some nuclear-power stations, so it will be buying less gas,” Jeng Zen Fang, Chief Engineer of state-owned CPC Corp. in Taiwan said in the report. “Also, a number of big gas projects are coming online at the same time as sanctions against Iran are coming to an end. These will raise supply as demand continues to fall.”

More highlights from the study:

  • 1 in 5 global companies say they don’t have an innovation strategy in place.
  • 38 percent of U.S. respondents believe they are taking a long-term approach to innovation and research and development.
  • 45 percent say they were increasing collaboration with other industry players to deal with budget cuts.
  • 21 percent of respondents see a skill shortage coming.

As companies respond to depressed energy prices, payrolls are being slashed and investment in the future is waning, setting the energy industry up for a missed opportunity when prices rebound.

“While the industry is understandably preoccupied with generating shorter-term value, we must also keep an eye on where longer-term value and permanent efficiency gains can be achieved,” said Torstad.