A MAJOR survey of oil and gas industry executives has found positive sentiment that the fortunes of the sector may be about to turn around.

Global consultancy Deloitte’s “2016 Oil and Gas Industry Survey” found that optimism is returning after a long downturn.

The survey of oil and gas professionals has suggested that they believe that the recovery has al-ready begun or will begin in 2017.

The annual Deloitte survey shows more than half (59 %) of oil and gas professionals believe the recovery already has begun or will begin in 2017. While the current state of the market still leaves cost-containment initiatives a priority for oil and gas companies, executives nonetheless showed re-newed confidence in an industry recovery.

In the Deloitte survey E\executives pointed to expectations of rising prices, a return to increasing capital expenditures and headcount as drivers of their optimistic outlook.

“This recovery in many ways mimics the pattern of the recovery from the Great Recession,” said John England, vice chairman, Deloitte LLP and U.S. and Americas oil and gas leader.

“If last year was the year of hard decisions, 2017 will be the slow road back. Companies are general-ly optimistic that prices will rise to a more sustainable level next year; however, they understand that even if we see an uptick in price, the industry likely won’t fully recover until 2018 or beyond.”

Deloitte’s survey reveals that from upstream to downstream, most respondents expect to see an in-crease in capital expenditures next year. In fact, the upstream sector, which took the hardest hit in this downturn, is the most optimistic about a recovery, followed by the midstream sector. The study also reveals a number of trends in opinion that offer insight into the direction the industry may be headed:

  • Most executives believe that $60 per barrel is an important threshold for a revival in U.S. oil and gas exploration and production activity.
  • Natural gas price outlook is table to mild optimism for 2017-2020 For 2017-2020, 70 percent of the respondents expect prices to range between $2.50-3.50 per million British thermal units (MMBtu), with a third anticipating this price band in 2017.
  • X Factors could dampen optimism for recovery

When asked which policy or geopolitical issue would most affect their company, survey respondents cited OPEC production decision as having the most impact on the upstream sector, but U.S. tax and policy decisions are next, outranking several prominent international issues.

Upstream priorities: Responding to the challenges, shifting to a recovery mindset

The findings showed a shift in expectation about the impact of short- and long-term cost containment initiatives from 2016-2017.

In 2017, 50 percent of respondents see better operating efficiencies and enhanced well productivity as the biggest opportunity for cost reductions. This is a shift away from head count, portfolio changes and activity reductions.

  • Upstream priorities: Responding to the challenges, shifting to a recovery mindset

The findings showed a shift in expectation about the impact of short- and long-term cost containment initiatives from 2016-2017.

In 2017, 50 percent of respondents see better operating efficiencies and enhanced well productivity as the biggest opportunity for cost reductions. This is a shift away from head count, portfolio changes and activity reductions.

Although more than half of the respondents believe 40 percent or more of cost reductions are short-term, an overwhelming 64 percent see operating efficiency gains as the best path to sustainable cost reductions, followed by contract renegotiations.

The downturn moves to the midstream sector

“Contraction in the upstream sector has begun to wear on the midstream sector, once thought to be some-what immune from commodity price volatility,” said Andrew Slaughter, managing director of the Deloitte Center for Energy Solutions, Deloitte Services LP. “However, the sector’s fee-based contracts are at risk of be-ing renegotiated or challenged in bankruptcy court, given the financial stress of upstream producers. We al-ready are seeing movement toward consolidation, and more could be on the way. Professionals also see infra-structure building both in the U.S. and in Mexico as the biggest area of midstream opportunity.”

Midstream finds its own set of challenges and its own opportunities. The midstream sector has many opportunities for profitable growth in the burgeoning U.S. LNG export industry, and the U.S. Gulf Coast region is seen as the area that will present the most opportunity, according to 63 percent of respondents.