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Exploring oil and gas trends, the impact of COVID-19 and the 2021 outlook.

Posted by: Sharon Dunleavy
04/02/21

The oil and gas industry is used to the highs and lows of economic cycles. The downturn caused by COVID-19, however, is like no other. But what’s in store for 2021?

The global economy and capital markets have rebounded faster than expected in the third quarter of 2020. The pace of recovery in 2021 remains to be seen and there are a number of factors to consider. Global oil demand fell by 25% in April 2020 but rebounded sharply. It’s expected to recover strongly in 2021, but more lockdowns and restrictions could have a major impact. With the survival of many companies at risk and the longer-term decline in petroleum demand, the next decade could look very different for the entire O&G value chain. 2021 will either be a leapfrog year or a test of endurance for many.

With the cleanest fossil fuel available at the lowest price, the projected share of gas in the future energy mix should increase over time. Some believe that gas will have an essential role in building a clean energy future, while others expect a reduced and varied role due to the emergence of alternative cleaner energy.

Considering all the challenges the COVID-19 pandemic threw at the sector in 2020, it was perceived that low oil prices would slow the energy transition and the industry’s low digital maturity, which translates into the need for the technicians and engineers to be on-field, could limit its ability to run its remote operations. However, the industry accelerated its energy transition, with many O&G companies announcing their net-zero goals at the peak of the pandemic. Their success will depend on support from firmer climate energy policy worldwide and technology advancements. Digitalization is expected to play a key role in enabling an effective energy transition strategy in 2021. Not only will it assist to drive human-machine collaboration, it will also provide improved reporting, enhanced employee engagement tools and better knowledge transfer. Energy transition and digitalization should be the strategic priorities for the organization of the future, as together they will create new and differentiated value for a company and its stakeholders.

Assuming cash flow will remain under pressure amid accelerating energy transition, companies may need to look at their assets or capital and channel them into:

  • Exploring renewable natural gas (RNG) production and delivery opportunities
  • Preparing for next-generation technologies including CCUS and hydrogen
  • Achieving operational agility by optimizing the crude-to-customer value chain
  • Integrating renewables (solar) into existing energy delivery infrastructure
  • Diversifying businesses to build optionality across hydrocarbon and clean products
  • Converting underperforming assets into storage facilities or renewable plants

The following signposts could help O&G companies in deciding their strategy and direction in 2021:

  • The stance and commitment of governments on clean energy.
  • Changes in end-use demand patterns and supply composition.
  • The rise of environmental, socially responsible, and impact-focused investing.
  • An adoption of new talent strategies to succeed in the future of work.
  • Consolidation in a low-priced environment.

The choices O&G companies make in the coming months, and the trends they prioritize, will decide the path forward and reverberate through their decision-making in the coming decade.

Read the full report at 2021 Oil and Gas Industry Outlook | Deloitte US

Already in 2021, we are seeing some of the major O&G companies changing their strategies to move to supply cleaner energy and reduce carbon footprints locally, nationally and globally. Examples are popping up in news articles all over the world, confirming that the O&G sector is embracing the changes required to succeed in a greener climate. Examples such as this:

Oxy Delivers First Carbon Neutral Oil Shipment by Andreas Exarheas, Rigzone Staff

Oxy Low Carbon Ventures (OLCV) has announced that it has delivered the world’s first shipment of carbon neutral oil. The delivery, which was arranged in conjunction with Macquarie Group’s Commodities and Global Markets group, saw two million barrels of oil produced in the U.S. Permian basin by Occidental (NYSE: OXY) go to Reliance Industries in India. The transaction was described by OLCV as a first step in the creation of a new market for climate-differentiated crude oil.

“We are taking important initial steps to work with our customers in hard to decarbonize industries to offer carbon neutral and other low carbon products that will leverage our expertise in carbon management to lower their total carbon impact and address Scope 3 emissions,” Richard Jackson, the president of Oxy Low Carbon Ventures, said in a company statement.

In other news US Senators are calling for meetings with President Biden to discuss the climate policies put in place since his inauguration. Oil companies are arguing the restrictions do not help the country to reduce its carbon footprint as described in the following report.

Oil companies push 'clean shale' amid Biden's moves on fossil fuels by Kevin Crowley, Rachel Adams-Heard and Alix Steel, Bloomberg

American oil executives began a pushback against some of President Joe Biden’s climate policies by making the case that fossil fuels from U.S. shale have a lower carbon footprint than imports. “We don’t think it’s good policy to be overly restrictive on federal land,” Chevron’s Chief Financial Officer Pierre Breber said in an interview with Bloomberg TV on Friday. “That will just move energy production to other countries. We know that we can develop energy in this country responsibly.”

In summary, it’s unclear how the O&G industry will evolve over the coming years, but it’s safe to say, with companies already making the move to innovate and diversify, the sector is here to stay for the foreseeable future. Here at WRS we are assisting our clients to find the best talent to enable the company’s transition. Whether that be technologically skilled candidates to move their digitalisation forward or in-the-field technicians to reskill their workforce by sharing their knowledge, we can find the perfect partners.

Reach out to us via our website: www.worldwide-rs.com

ABOUT WRS

WRS can save you time and money by supporting internal resources, providing you with the best pre-qualified candidates when you need them. We are a workforce solutions company with offices in Europe, the Middle East, APAC and the Americas, supporting the needs of businesses around the world. We employ specialist sector consultants, who can help you to identify the expatriate and local personnel you need to keep your business moving forward.

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