Preparing for a new oil world
It’s clear COVID-19 is having a profound impact on the cornerstone industries of our economy.
Regardless of the industry they operate in, all firms will need to plan to anticipate the shape of recovery and prepare for the next normal. This is particularly complex for the energy industry. With global lockdowns cutting demand and social distancing measures set to impact ways of working for the foreseeable future, how should oil companies adapt their operations to protect and create jobs for the future?
For several years, it’s been widely accepted that technology is the way forward for oil and gas. Due to the pandemic, it is likely social distancing will become standard practice for years, meaning firms should invest in automation technologies now, to allow for improved remote working in the future.
Advanced technological solutions can be applied across all oil operations. Cloud-based AI platforms can analyse subsurface geophysical data, providing quicker and more accurate modelling of recently discovered and established oil deposits. These systems can also make oil and gas platforms safer, by monitoring topside and subsea installations and enabling firms to identify potential problems before they occur.
Another priority is to connect the supply chain digitally. Linking the entire network from raw material supplier to customer can increase efficiencies, reduce inventory and give customers a more transparent service. AI can improve inventory management by creating a fully integrated network of warehouses and enable real-time data analytics through barcode tracking and radio-frequency identification tagging.
Investing in these applications will help firms to modernise their processes and improve cost and operational efficiencies, whilst creating new and desirable jobs.
Throughout the pandemic, it has been widely reported that renewable energies might emerge as the winners in the post-COVID-19 world. Demand for renewables is set to grow this year, according to a report by the International Energy Agency. This is not only down to the pandemic’s role in reducing oil demand, but also increasing awareness of climate change. This transition was reflected by BP’s move to slash value from its oil and gas assets, as it expects the crisis to accelerate the transition towards cleaner energies.
Investing in oil is becoming less acceptable and all firms are looking at ways to embrace the energy transition. Among the majors, this transition is beginning to influence corporate behaviour, with Royal Dutch Shell vowing to become the world’s largest electricity company by the 2030s, whilst Denmark’s Orsted, previously Dong Energy and now an offshore wind farm specialist, has shown that successful transitions are possible.
All oil companies have workforces with strong and transferable skills, which with the right training, could be put to good use for the green transition. Firms should consider using this time to readdress their renewables strategies, be smart about which business areas to invest in and focus on optimising their workforce for the new energy world.
COVID-19 has wreaked havoc on global oil markets for the best part of 2020. Despite this and under most scenarios, oil and gas will likely remain a multi-trillion-dollar market, given its role in supplying affordable energy. The industry is too important to fail. However, as companies seek solutions to improve their performance in the short term, they will have to redefine their value, increase their competitive edge and distinguish themselves to have a truly sustainable future.
This article was contributed by Boris Ivanov, Founder, GPB Global Resources
