By Andrew Hobbs, Group Editor

CONVENTIONAL wisdom has it that the Chinese word for “crisis” is a combination of the words for “danger” and “opportunity”. Unfortunately, this is incorrect.

While the “danger” component of the term “weiji” is accurately translated – the latter “ji” sound is more commonly taken to refer to a critical point in time – rather than an option for advancement.

But as oil prices remain at levels of roughly US$50 per barrel and the industry struggles to adapt, it could well be said that both meanings carry some weight for people and companies involved in the oil and gas industry.

There is little question that, globally, the industry is at a critical point – not least following the death of Saudi Arabia’s King Abdullah bin Abdulaziz al Saud in late January.

While analysts do not believe the nation is likely to reduce oil production in order to drive up the oil price, with oil minister Ali al Naimi remaining in the role, it does set the scene for potential shifts in the future.

As Ross Verne reports from page 16 of this edition, oil projects will bear the brunt of these changes, while the fall in LNG may be less than some may expect, due to the complex linking of the prices of the two commodities.

Australian domestic gas projects, he reports, will continue to be pursued – with a fall in operating costs through cheaper labour and steel prices likely to make these projects more attractive.

Nonetheless, Australian developers are right to be cautious – with work in the more established Cooper basin likely to proceed, while the less developed Canning basin was more challenging.

Development of Australian shale projects was also slowing, despite its being flagged as a future growth area, due to uncertainty in geology as well as future prices.

For the Australian shale developers who looked to North American projects with plans to strike it rich, the situation has been more dire, Ross Verne reports.

Share prices are falling, licenses are being sold and drilling activity slashed amid groups in the sector as US gas prices plunged.

It was likely, some analysts said, that some wells would be shut-in as companies waited for prices to improve.

This fall in the oil price has hit Australian explorers and services companies hard, with project operators experiencing delays and revising their project expenditure.

As Sarah Byrne reports, a number of companies are moving towards optimising their existing operations rather than seeking out new projects – with the result being that brownfield site services groups are broadly doing better than greenfield project specialists.

There is no hiding that the pickings will be slim for service companies in the coming year – and there will be some that struggle as work in their specialist area dries up.

Now, more than ever, is a chance for groups to find new methods of cost reduction, as well as to diversify their product offerings – to innovate where possible, despite this often being one of the most expensive investments around.

The time is right, the opportunity is there – and the danger is in doing nothing at all.