Given the span of the COVID-19 crisis, it is safe to assume the usual way of life and conducting business will witness a dramatic change going forward. The anxiety, both human and economic, that has ensued has also meant the traditional business models are not prepared to swiftly switch gears. While the Novel Coronavirus has caused turmoil for businesses in general, the oil and gas industry was already facing some serious troubles even prior to the crisis, with the supply and demand imbalance already in effect.
As the crisis and the responses continue to evolve, there are immediate actions and medium-term considerations to view that will help restructure the business models as we get on the road to a longer-than-expected recovery. The oil and gas industry has already initiated corrective actions like reducing headcount, writing down assets, closing non-performing businesses, closing and merging field offices, and reducing/eliminating dividends to preserve cash. Here are some key points that will be critical to the transformation process:
Automation
Accelerating initiatives to automate work processes wherever possible will help reduce the dependence on people. Some examples include the ongoing effort to create automatic seismic interpretation, and the automation of drilling rigs to reduce HSE risks. We believe that new and emerging technology in AI, VR, and robotics will speed up this process.
Oilfield services
OFS companies that provide staffing services at client premises will have to think about ways in which they can offer remote services to minimize both travel and close staff interaction. This can be ensured by investing in automation.
Personal interaction
It is likely that the way we interact and collaborate professionally will change going forward. Several businesses have found that they can continue to work without having staff in the office and by using tools like Microsoft Teams and Zoom. The lessons learned in these past few months will help better organize the work and the workforce. Will we even need to go to the office when we already have the information and tools available at home? It is an open question. There are also other unanswered questions about the work and workplaces going forward. Given that the pandemic continues to evolve, it is worth pondering what future changes we can expect to the way we work.
Certification
There is a strong likelihood that some kind of proof of non-infection, past infection or eventual vaccination will be required in many places. On the external side, we may see countries requiring certification before allowing entry or visa approval. On the professional side, we may look for certification to work at the well site or offshore. Internally, companies may require employees to provide certification as a condition of employment. If this does become reality, we may need to think of ways to comply with the privacy laws that exist in various countries.
Office design
Given that social distancing is set to be the new norm, it is likely that our office landscapes will also have to be reshaped. Sharing an office may not be permitted or advised under the new norm, and we may also see the implementation of the distancing rules in the workplace. We have already moved to collaborating through online tools, and this may become the standard way operating going forward. It may be that offices will become virtual spaces, and that physical meetings will take place only on rare occasions.
Supply chain
The current crisis has exposed us to some crucial supply chain disruptions. If the situation persists, it is likely that operators and service companies will need to restructure their supply chains. We will likely see shortening of the supply chains as the suppliers are brought closer to the home base or the base of operations. To do that, however, the industry needs to evaluate the risk of disruptions like COVID-19 to critical supplies in various stages of the value chain and then determine the most efficient way of mitigating risk. Integrating operational data with the supply chain and using analytical tools will not only help find the bottlenecks, but also determine the best ways of making the supply chain more efficient.
Course correction
We believe that the course correction to restore the supply/demand balance will last longer than initially expected and will happen well after the COVID-19 crisis has been addressed. While there are expectations that the supply/demand imbalance may likely be resolved by early 2021, we believe that a combination of the upcoming additional supply and the slower-than-expected return of demand will make it difficult for such a scenario to flourish. The oversupply situation is also unlikely to be overcome quickly by any reductions in production, as we have seen from the Russia/OPEC producer group. We may not see substantial improvement in intentional oil markets for some time to come.
Lessons learned
However, there are a number of lessons to be learned from the events of this year. These lessons will change the way that the industry operates. We believe that the industry will emerge out of the crisis in a better shape than before. Those who have learned the lessons of 2020 will have streamlined their operations through integration of the front and back office; adaptation of advanced analytics; and by using data to become more efficient. Hydrocarbons will still be essential to the world in the years to come, both as an energy source and as a technology driver. After all, we live in the age of hydrocarbons, and much of our hopes for the future are built on the hydrocarbon molecule.
