The 50th edition of OTC Houston – the leading annual exhibition and conference in the world’s oil and gas calendar - has just ended with organisers reporting an attendance figure of 61,300 for the four-day event.
This figure, some 3,500 down on last year’s attendance, represents the third consecutive fall in visitor numbers and is the lowest in more than a decade. It’s also 43 percent down on the 2014 record of 108,300. Organisers had estimated attracting 70,000 people to the show this year.
There were furrowed brows when this year’s attendance figure was revealed by the organisers on Thursday afternoon, just as the show closed its doors. However, the attendance levels only tell part of the story from this year’s OTC. For while the footfall may have been down, there was no denying the feeling of growing optimism for the fortunes of the offshore industry that pervaded the show from every corner after four of its most challenging years.
Company representatives that I spoke to talked of securing an impressive number of business leads. One gathered more than 100 leads on their booth on the first day of the show, while another placed the value of the leads secured at OTC in the multimillion dollar bracket.
The phrase “quality not quantity” was repeated again and again in reference to the level of conversations that people were experiencing on their booths.
There’s no doubt that the first few hours on Day One started quietly, but it picked up from there. Personally, I regard the number of visitors on the show floor at lunchtime on the second day as a good yardstick of the success of any event – because that’s usually the busiest time on the busiest day - and it’s fair to say that OTC was extremely busy at that time.
The cyclical nature of the industry is responsible for some of us forecasting an incremental rise in visitor numbers at OTC Houston as an indication of a gradual return to optimism from the nadir of 2016/17. The fact attendance figures this year didn’t follow that narrative adds credence to the notion the industry’s response to the latest downtown will be different from those that have gone before.
The increased focus on digitalisation, collaboration, new business models and a much greater emphasis on responding to the demands of the market meant OTC Houston gave us the sense we’re entering a new era for the oil and gas industry. There was a tangible feeling the industry emerging from this latest downturn will be different, that it won’t follow the traditional route out of the doldrums, that the rule book for recovery has been ripped up. That’s both extremely exciting but also a challenge in trying to understand the direction we’re travelling in.
Shell’s announcement just prior to the show that it had made a final investment decision (FID) on the Vito development in the Gulf of Mexico, cutting original costs by 70 percent with a breakeven price of less than $35 a barrel, set the optimistic tone for OTC Houston. That was followed by BP’s revelation the $9 billion Mad Dog 2 project, which is due to start up in 2021, would be economic at $40 a barrel. The project was originally costed at in excess of $20 billion.
And while global management consulting firm McKinsey estimates on shore shale oil and OPEC’s policies will continue to dominate short-term activity sizeable offshore growth is expected to follow. Those estimates are predicated on the price of oil not fully recovering to $70 per barrel until late 2020. However, the oil price has been consistently above that level recently and, depending on President Trump’s approach to Iran and the fortunes of Venezuela, Libya and Saudi Arabia among other OPEC members, may increase this summer. In short, offshore’s renaissance may come sooner than expected.
To meet that growth, the offshore industry needs to start mobilising now, which means bringing rigs out of cold and warm stacking to make them ready for deployment.
Basing a view on OTC Houston purely on the attendance figures for the show would ignore the growing sense of optimism in the current offshore sector.