The oil and gas industry may be looking forward to closing a nail-biting chapter on a year that saw West Texas Intermediate crude fall to $26 per barrel (bbl), layoffs recur and stacked rigs proliferate amid an activity slowdown.

With commitments by OPEC members and some non-OPEC producers to cut production, optimism appears to exist, including in the U.S., as 2016 nears its end. Rig counts are steadily rising, while the natural gas sector continues fighting to avoid being crushed by lower prices as it powers the U.S.’ emergence as an LNG exporter.

Although the climate has improved in the last two years, remnants of the oversupply-driven downturn are not expected to disappear in 2017, according to analysts. But it’s not all bad. Tough times led to efficiency improvements, shifting strategies and different ways of doing business— and all have staying power.

“The impact of the extended oil price downturn, which we have experienced since June 2014, will likely have long-term effects on the industry in a number of areas, including capital allocation and people,” John England, vice chairman and U.S. energy and resources leader for Deloitte, said in his 2017 outlook on oil and gas.

Capital Allocation: The “survival mentality,” as England puts it, has resulted in a shift to shorter-cycle projects. The industry’s “appetite for long-term, complex capital projects has waned,” he said, noting the downturn led to the deferment or cancellation of an estimated $620 billion in projects through 2020. “While this trend certainly seems to lower the risk of individual companies in the industry, it may pose some broader questions regarding energy supply and security.”

The International Energy Agency (IEA) forecasts oil demand will continue growing, hitting 103 MMbbl/d by 2040. The IEA warned that there is a near-term risk if the shortfall of new projects continues.

The agency acknowledged the ability of short investment cycle projects, specifically U.S. tight oil, to quickly respond to price swings. However, it pointed out the need for conventional projects, with lead times of three to six years from investment to first oil, to help meet future oil demand.

“We estimate that if new project approvals remain low for a third year in a row in 2017, then it becomes increasingly unlikely that demand (as projected in our main scenario) and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry,” the IEA said in its World Energy Outlook.

England added that the long-term perspective typically brought by international oil companies and the short-cycle perspective brought by pure play E&Ps will both be needed.

The good news is that some stalled projects are seeing progress. Among these is the BP-operated $9 billion Mad Dog Phase 2 in the Gulf of Mexico.

People: In the year ahead, the industry is still expected to face workforce issues—both in the short term as U.S. shale activity picks up and in the long term as older workers retire.

“The downturn and resulting layoffs across the industry threaten to damage the industry’s brand as a career destination. This seems to make it more imperative than ever that oil and gas companies be innovative in their approach to talent acquisition, development and deployment,” England said. “As a large number of senior employees head toward retirement, companies should find ways to transfer this wealth of knowledge to the next generation of employees.”

People should be seen as “equally, if not more, critical to capital,” he added.

In a November 2016 job cuts report, Challenger, Gray & Christmas Inc. said “heavy job cutting in the energy sector has ebbed in recent months.” With 105,041 job cuts through November 2016, up 13% compared to January to November 2015, the industry tops job cuts in other sectors in the U.S., according to the outplacement consulting firm.

As market conditions improve, the need for workers increases. Job aggregrator Indeed recently released a report showing the amount of oil-related job postings in oil-producing states has improved, although not by “enough to designate it a rebound,” but by enough to call it “encouraging.”

Supply, Demand: Like just about everything else in life, the outlook for 2017 is shaped by supply and demand expectations. England shared his thoughts on the positives and not-so-positives.

On one side, the supply-and-demand imbalance is forecast to tighten, with most analysts believing equilibrium will be reached next year as oil demand steadily grows, both in the U.S. and globally. This is boosted by hopes that production-cut agreements by OPEC and non-OPEC members will be fulfilled.

Plus, “Oil companies have learned how to operate in a lower price environment, returning to a healthier focus on capital and operating cost discipline,” England said.

On the flip side, rising production—including in the U.S. and Iran—could work against the global supply glut. In addition, it may take longer to lower the massive buildup of crude oil and refined product inventories, he said, adding climate change concerns are among the other issues clouding the outlook.

But there was more certainty that the world still needs energy, fossil fuels will still be important to the mix and low-term investment will still be needed.

“The oil and gas industry is incredibly resilient and has some of the brightest, most innovative people I have ever met,” England said. “This is clearly what leads to my overall optimism about the industry for 2017 and beyond.”

Velda Addison can be reached at