GLOBAL oilfield services giant Schlumberger is the latest company to suggest that 2017 will be the year the petroleum industry begins is climb out of the recent doldrums.

Releasing their latest quarterly report, Schlumberger said that a tightening of the global oil and gas supply and demand balance in the second half of 2016 had been further strengthened by the December OPEC and non-OPEC agreements to cut production.

The company is now tipping a significant oil supply deficit in the medium term, which will see a return to oil and gas industry growth this year.

According to the company’s Chairman and CEO, Paal Kibsgaard, the oil supply deficit can only be avoided by a broad-based global increase in E&P spending, which they expect will start unfolding in the later parts of 2017 and leading into 2018.

Schlumberger believes the USA will lead the expected growth in investments, tipping that Exploration and Production (E&P) investments in 2017 will grow by 30% in North America, with the rest of the world running slightly behind that schedule.

“We expect the growth in investments to initially be led by land operators in North America, where continued negative free cash flows seem less of a constraint, as external funding is readily available and the pursuit of shorter-term equity value takes precedence over full-cycle return on investment. E&P spending surveys currently indicate that 2017 NAM E&P investments will increase by around 30%, led by the Permian basin, which should lead to both higher activity and a long overdue recovery in service industry pricing,” Mr Kibsgaard said.

“In the international markets, operators are more focused on full-cycle returns and E&P investments are generally governed by the operators’ free cash flow generation. Based on this, we expect the 2017 recovery in the international markets to start off more slowly, driven by the economic reality facing the E&P industry. This will likely lead to a third successive year of underinvestment, with a continued low rate of new project approvals and an accelerating production decline in the aging production base.

“These factors together are increasing the likelihood of a significant supply deficit in the medium term, which can only be avoided by a broad-based global increase in E&P spending, which we expect will start unfolding in the later parts of 2017 and leading into 2018,” Mr Kibsgaard said.