After experiencing over three years of an economic downturn, it appears the oil and gas industry has found reliable footing from which it can rebound. In 2017 crude oil prices increased for the second year in a row, domestic natural gas production continued to rise, our energy related export efforts intensified, cost management activities continued to improve and federal public policy became more favorable for both domestic energy production and energy exportation.

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Oil prices are expected to remain strong during 2018. Analysts point to the OPEC production cut extension to the end of 2018, the expectation that domestic oil inventory levels will continue to fall (a reflection of lower imports and strong exports), favorable domestic economic data and ongoing federal public policy as reasons for optimism concerning price. With sustained price strength, domestic E&P activities are expected to increase, providing growth opportunities throughout the industry (including midstream, downstream and supporting service companies)

The trend of natural gas as a dominant fuel source is expected to continue in 2018, and beyond. Improved extraction technologies, low natural gas prices and supportive governmental policies serve to position natural gas as “the fuel of the future”. We can expect manufacturing facilities and new electricity generation capacity to use natural gas as the primary energy source for the foreseeable future.

Exports of both oil and natural gas (LNG) are projected to increase in both the near and long term. Domestic production will remain strong, but energy efficient technology in this country will serve to lower demand, leading to more exports, which will cause the United States to become a net energy exporter in the foreseeable future.

Domestic O&G production and international demand are expected to remain strong in the near-term and increase in the long-term. A rising tide does have the tendency to “lift all boats”; however, operational efficiency is the key to sustainability. A capable workforce, good project management skills, innovation, strict cost management, collaboration, and adherence to safety protocols will better serve the O&G industry than simple reliance on higher commodity prices.

With improved market conditions, it is reasonable to expect inflationary pressure on costs to follow. During the more than three year downturn E&P companies have pressured their suppliers to reduce prices, while increasing efficiency. This pressure has been pushed downward throughout the supply chain. While any resulting efficiencies have been beneficial, and presumably sustainable, upward pressure on prices is likely to be a fact of life in 2018, potentially reducing margins for anyone not prepared to counter them.

O&G related organizations must effectively employ basic countermeasures to improve upstream, midstream, and downstream operations:

  • An effective supply chain management system provides visibility, accountability, and cash flow
  • Disciplined project management increases productivity
  • Thorough process flow evaluations and related metrics analysis uncover potential operating improvements
  • Financial analytics identify and enhance customer, project, and equipment profitability
  • Current digital technologies fully integrate all of your business operations and facilitate collaboration

Given our client engagement experience and core competencies, HSC can help you employ these types of countermeasures. Please contact us if you would like to learn more about how these solutions could apply to your specific organization or situation.


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