2020 has been one for the history books for countless reasons, including the volatile effect the events have had on the world of oil and gas. As this unprecedented year comes to a close, it’s time to look over the past 12 months and understand trends as well as continuing challenges as we step into 2021.
What 2020 Meant for Oil & Gas
The COVID-19 pandemic has changed how work is done in every industry. And unfortunately, the effects of the pandemic (mass working from home, the decline in air travel, etc.) have taken a toll on O&G.
Deloitte Insights shares the following statistics that help illustrate the effects of the pandemic on the industry:
“The oil, gas, and chemicals industry has been one of the hardest hit by the pandemic, with energy and industrials revenues declining by 54% and 25%, respectively, primarily because of increased remote work and lower industrial demand for energy and materials… However, the pandemic has created new opportunities for the chemicals industry, increasing demand for single-use packaging as well as for materials used by the life science and electronics industries. Recovery has been uneven. Vehicle sales fell 50% in April before rebounding over the summer—they still remain 15% below 2019 levels. Additionally, after plunging close to 80%, the number of commercial flights has partially rebounded—though it’s still down 30% compared to pre–COVID-19 levels.”
The oil and gas industry is accustomed to volatile market conditions, but COVID-19 set unprecedented new challenges in front of O&G companies. Throughout it all, companies are innovating and solving pandemic-induced challenges, while trying to remain competitive and profitable, AND prepare for the challenges on the horizon.
While problem-solving for both expected and unexpected roadblocks, O&G companies have had to shift their game plans.
Shifts in 2020
Solving the Problem at Hand
In 2020, leadership at oil and gas companies could no longer only look ahead and prepare for the future, they had to solve the 'right-now' issues. The effects that COVID-19 had on the market cut margins and impacted revenue significantly, which means steps needed to be taken for the unexpected downturn. Then we started to see the beginning of a recovery, which meant another pivot.
While the O&G space is used to volatility and many companies are prepared with a downturn game plan to put in place, unexpected shifts can take your eye off the horizon. To stay competitive, increase revenue, and prepare for future shifts in the energy space, you need to be constantly innovating. With this year needing more attention than most, some companies may have fallen behind on their pursuit of innovation.
Exploring New Opportunities
The pandemic has forced most, if not all, industries to approach things differently. For the chemicals industry, 2020 meant embracing new opportunities caused by the increased demand for single-use packaging and materials used by the life science and electronics industries.
For others in O&G, the opportunity may have been getting their footing after the downturn, and taking advantage of the downtime to focus on longer-term issues, such as decarbonization.
Preparing for the Energy Shift
As many O&G companies start to prepare for a long-term shift in the energy space, this year was used to solidify or develop a strategy for a low-carbon future. A recent survey found that more than 90% of oil and gas companies have or are developing a long-term strategy for a sustainable, low-carbon future. Beyond just a strategy, 50% of respondents said their company is already investing in energy efficiency and acquiring businesses outside their core focus.
New Year, New Strategies
As we step into 2021, there are a few things that oil and gas companies can implement to stay competitive, gain revenue, and prepare for the future:
- Seek out and implement new technology. By making any part of your operations more efficient, you are setting yourself up to have better margins in a downturn and capitalize on future upturns.
- Preparing for future shifts. In a market as volatile as O&G, combined with the unknown long-term effects from COVID, it is necessary to develop and start implementing strategies to protect and prepare your company for future fluctuations.
- Looking for and capitalizing on opportunities. Opportunities may present themselves as free moments that you can explore innovation or a sudden jump in demand. Whatever the opportunity may be, it is important to be ready to quickly pivot and take advantage of anything that may put your company ahead.
- Embrace change and innovation. Being rigid in the way things are done may be the make-or-break point for your company. 2021 is the year to explore new ways of doing things to gain a competitive advantage and improve margins.
While there is no way to truly know what 2021 will bring us, you have the power to put your company on the right track for a successful new year.
So here’s to 2021! May it bring innovation, stability, and positive change.