Business Outlook 2018

In order to survive, the supply chain has had to adapt to the harsh business environment of the past three years by finding ways to work smarter, restructuring and consolidating their offerings with other businesses. It appears that those in the best position to come through the downturn are those that are: • Diversifying into tangential industries – by applying their expertise to reach new markets and sectors to unlock new revenue streams. Share Fair 2017, organised by Oil & Gas UK, for example, promoted new business and diversification opportunities in renewables and nuclear. Nevertheless, as confidence in the oil and gas sector improves, almost 50 per cent of Oil & Gas UK members expect the proportion of revenues from oil and gas activity to increase in 2018, suggesting a return to traditional core business.

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Figure 13: Snapshot of Contractor Revenue from Oil and Gas Specific Business

Revenue from Oil and Gas, 2018 versus 2017

Revenue from Oil and Gas, 2017 versus 2016

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Increased by over 20% Increased by 0 - 20%

Remained flat

Increased by over 20% Increased by 0 - 20%

Remained flat

Decreased by 0 - 20%

Decreased by over 20%

Decreased by 0 - 20%

Decreased by over 20%

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Source: Oil & Gas UK Supply Chain Survey

• Exporting into new geographical areas – although average export revenues fell by 24 per cent from £16.2 billion in 2014 to £12.3 billion in 2016, the decline was less sharp than the fall in domestic revenues. There was a slight increase in exports as a percentage of turnover in 2016, and this is expected to rise further as companies diversify into other geographical regions. Exports are expected to account for 43 per cent of supply chain revenues in 2017. The long-term vision for the UK oil and gas industry involves increasing the UK’s share of the global oilfield services and technology market. Significant value can be unlocked by the supply chain growing an export business to become a global leader in mature basin management. • Driving technological and digital innovation – if a supply chain company can provide a solution to its clients that improves efficiency and reduces costs, it has typically been able to protect or grow market share. The Oil & Gas Technology Centre was established in October 2016, with £180million of funding to support new projects that have the potential to enhance all areas of the business. In its first year, the Centre co-invested £37 million in industry-led projects that initiated 72 technology solutions. This work demonstrates the industry's desire to embrace innovation to prolong the life of the basin.

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• Merging, acquiring or setting up alliances – there has been consolidation across the supply chain, with companies seeking to buy-out competitors and/or enhance capabilities to offer a more integrated service.

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