The increased remote work and lower industrial demand for energy and materials caused by the pandemic have put business resilience in many organizations’ focus. With energy and industrials revenues declining by 54 and 25 percent respectively, the economic panorama over the oil and gas sector is distant from stable. As the industry suffers notable disruptions, the pandemic and consequent drop in oil prices have made it more vital than ever for oil companies to create an effective business resilience strategy.
Business resilience is an organization’s ability to adapt to an unfamiliar environment after or during any significant disturbance, enabling them to survive and thrive in increasingly unfavorable conditions. Today, technology is daring the old assumption that any company could obtain resilience only at the cost of efficiency. The most progressive approaches offer innovative solutions for running scenarios, monitoring many supplier network layers, accelerating response times, and even changing production economics. Proper technology guarantees to maintain revenue streams, increasing sustainability, and leading organizations closer to their customers.
To better understand the future in oil and gas industry, we will dive into some significant shifts and opportunities. These will help industry leaders make the right decisions and build a solid foundation for business resilience.
Future and current shifts in the foreseeable future
The pandemic has delivered the most significant and extensive value chain collision recently. However, it is only the latest in a range of disturbances, which inevitably exposes the weak spots within broader value chains. Therefore, the operation of a supply chain can be a source of vulnerability or resilience. A well-thought business resilience strategy depends on its effectiveness in monitoring risk, executing mitigation strategies, and setting business continuity plans. Addressing major changes in advance can secure the future of oil and gas industry.
With our extensive experience in the industry, we have examined four oil and gas major shifts that will determine the industry’s direction and challenge traditional oil and gas production methods.
1. Shifting end markets
Many companies will face lower consumer demand during the next years, meaning that refinery utilization will decrease, and revenue will be slower. Enterprises will need to navigate the hostile market conditions that indicate changing consumer preferences, investor expectations, and tightening regulations. However, companies can position their business for new challenges to avoid such circumstances.
2. Sustainability and decarbonization
The pressure governments and consumers face on decarbonization will increase as the signs of climate change are exposed and continue to expand. Recent surveys state that 58 percent of industry leaders believe that achieving a future with clean energy relies on the oil and gas sector. The production and use of energy will become a major influence in government policies, investment strategies, and consequently, consumer’s choices.
3. International trade barriers
Obstacles such as transportation costs, thin markets, restrictive contracts, noncompetitive pricing, risk, and government trade restraints are barriers that still have a significant impact on worldwide commerce. Probabilities for growth and exportation will continue to be restrained by international trade barriers.
As technology becomes a vital asset, the need to create precise process control will force businesses to run complex analyses and collect a higher volume of data. This shift has been rapidly evolving and will continue doing so. Companies that want to stay ahead will have to adopt innovative technologies and accelerate their digital transformations. At Digital Oil & Gas Solutions, we offer diverse services, and we have partnered with many organizations to help them accelerate their digital transformation journeys. Contact us and find out how we can help secure your market share in the future of oil and gas industry.
Opportunities to secure the future of oil and gas industry
The pandemic has accelerated the transformation that might have taken years to happen in a matter of months in the oil and gas industry. Stepping into the new energy future could be challenging and may require companies to make bold decisions. The following opportunities will help companies in the industry decide what direction to take and how to build business resilience in 2021:
- Calculated strategy
Anticipating an effective strategy that includes the diversification of product offerings will significantly help. To create valuable business opportunities, adding superior materials that are recyclable and low-carbon will lower risks. For instance, consider modern technologies in the delivery industry, which is growing exponentially, think of the way your company can promote new services or products for them. By looking at innovative fuel production and distribution, sustainability will be accomplished.
- Digital acceleration
Although digitalization is not new in the sector, embracing it is no longer an option. With increase technology and software power, more companies have integrated a new approach to automate operations. Technology can deliver detailed customer data and influence market sensing, manage inventory, and predict demand. Consequently, businesses will become more proactive and better connected between operational and economic patterns. Our experience implementing automation for many oil and gas companies has proved that by accelerating digital transformation, expenses decrease while agility increments.
- Talent skills
The pressure to work from home during the pandemic highlighted the need for a more flexible and digital-ready workforce that is better connected. The demand for talent with digital and data science skills has grown due to the challenges being faced by the pandemic. Integrating training programs with digital technologies is a great opportunity to shape the skills of the workforce of the future. Simplifying processes and upskilling people will improve decision-making, health, safety, environmental risks and reduce nonproductive time.
Decisive factors for success
As the industry encounters notable changes, how can companies ensure business continuity and effective crisis management? We’ve discussed the value of implementing well-calculated strategies, technology adoption, and upskilling talent, which will be critical to building business resilience. However, as organizations detect new risks, they need to decide on how to respond. Today many rely on long processes that involve certain kind of bureaucracy to make decisions, slowing their ability to act. Resilient companies not only resist perils but also emerge more potently. Below, we will go through some actions that leaders can take to build the required abilities:
- Reset the purpose for risk management. Instead of thinking about risk as a matter of prevention and mitigation, create value around it and incorporate it to a dynamic strategic enablement.
- Apply agile risk-management processes. Quick decision-making is essential across functional teams. Encourage the workforce to be part of the process by making risk management, innovations, and business decisions.
- Control data and analytics. The dynamism of data can be used to extend the view of risk components, and by digitizing workflows, algorithms will help to detect errors better and get precise predictions.
- Increase risk talent for the future. The workforce needs to be enabled to understand the risk scenery. As they developed the required skills and expand their knowledge, they will be better prepared to respond quickly against disruptions.
- Encourage risk culture. Integrating risk into your daily business activities and outcomes will make your company familiar and unafraid of risk. Building a risk culture will enlarge the confidence and ability to face challenges.
Organizations can learn from the many risks they currently face and take advantage of disruption by changing their approach. Up to now, risk management was not usually considered a source of efficacy, strength, or advantage. But now, more than ever, effective, and dynamic risk management is critical to build business resilience and thrive in adverse times.