CONFIDENCE in the outlook for Asia Pacific’s oil and gas industry has more than doubled in the past two years, according to new research published by DNV GL.

The study found that 76% of senior oil and gas professionals in Asia Pacific are optimistic about the industry’s growth in 2019, compared with 58% in 2018 and 30% in 2017. The proportion of industry leaders who are confident in their own organizations’ prospects has also risen from 59% last year to 74% in 2019.

These rises in confidence come alongside intentions to spend more in the year ahead. A third (34%) of industry leaders in the region expect to increase capital expenditure in 2019, up from just 20% in 2018. More than a quarter (28%) anticipate their companies increasing operational expenditure, compared with 20% last year.

These findings come as DNV GL publishes A test of resilience, the company’s ninth annual report on the outlook for the oil and gas industry. The research provides a snapshot of sector confidence, priorities and concerns for the year ahead. It is based on a global survey of nearly 800 senior oil and gas professionals and in-depth interviews with sector leaders.

Recruitment in Asia Pacific’s oil and gas industry is also expected to rise in 2019, as more than two thirds of respondents to DNV GL’s research agree that more, large, capital intensive projects will be approved compared to last year. 29% of senior oil and gas professionals in the region say they will increase headcount in their organizations this year, up from 19% in 2018 and 10% in 2017. More than half (51%) expect greater use of contractors this year, compared with 39% globally.

“Increasing expectations for capital spending and recruitment in Asia Pacific are welcome news for the oil and gas supply chain. It has had to adapt after new developments were put on ice within the region and across the world during the market downturn, reducing demand for services, assets and equipment from Asia Pacific’s manufacturers and service providers. Despite fluctuations in the oil price at the end of 2018, the industry is entering 2019 with a greater sense of resilience to volatile market conditions,” said Brice Le Gallo, Regional manager, South East Asia & Australia, DNV GL – Oil & Gas.

DNV said that after a challenging few years, Asia Pacific’s oil and gas industry appears to be closing the chapter on a string of challenging years. Final investment decisions are now appearing, or are soon expected to appear, for several major projects around the region. These include Chevron’s approval of a multi-billion dollar second phase of the Gorgon LNG project in Australia in April 2018, and Sinopec’s plan to build new infrastructure to double its LNG receiving capacity in China over the next six years.

Growth in Chinese demand for LNG in line with its coal-to-gas switching policy coincides with rising demand for LNG in Asia Pacific, and both are positive market trends for Asia Pacific gas producers and the supply chain. Sapura Energy Berhad and its partners Petronas Carigali and Sarawak Shell Berhad are to develop the Bakong, Goek and Larak gas fields offshore Malaysia with production destined for Petronas’s MLNG complex. ExxonMobil plans to make an FID this year on a multi-billion dollar expansion at its Singapore refinery and petrochemical complex.

As prospects improve, more than half (56%) of senior oil and gas professionals in Asia Pacific now believe that oil and gas companies will achieve high profitability in the next decade. Cost control will remain a key feature for the industry in the region this year, though. Sector leaders are working to ensure that unmanageable inflation, which was a key trend in the pre-downturn era, does not return to a sector starting to turn on the investment tap.

DNV GL’s research indicates that companies are modestly relaxing their tight grip on costs. 80% of senior professionals in the region say their organizations will place top or high priority on cost efficiency in 2019, compared to 86% in 2017. Only 15% said they were highly successful in achieving cost-efficiency targets in 2018, down from 21% in 2017. More than half (54%) experienced price inflation from suppliers last year.

As Asia Pacific’s oil and gas leaders continue to pursue cost discipline, and leaner projects and operations, the sector will increasingly look to digital technologies to drive efficiencies in 2019.  82% of respondents in the region now believe that their companies need to embrace digitalization to increase profitability, up from 70% in 2018 and 51% two years ago. Half (49%) of respondents from Asia Pacific see digitalization as the top priority for their R&D and technology investments in 2019. The Internet of Things (42%) is cited as the highest priority investment in this area.