Digital Technologies Can Help Oil and Gas Industry

These developments are giving negative vibes and dragging the oil and gas services market and the expansion phase further down. Consequently, oil field developers have started relooking at their strategies and Capex plans for 2020. Surplus volumes available with producing countries amid global drop in oil demand leaves the oil companies grappling for limited storage space.

Distant storage locations or paid storage currently available with end users increases cost as transportation fees, which will get factored into the selling price. Additionally, the relatively short shelf life of gasoline and jet fuel increases their worries of uncertainty prevailing around the world. Limitations of storing light crude alongside heavy crude poses further challenges for these oil producing companies.

The oil and gas industry has been struggling with multiple complex issues, due to reduced energy demand, energy transition, growing volatility in oil prices, change in government regulations to meet challenges, turbulent demand of enhanced technologies and intensified global competition, among other factors. With this, the worldwide liquefied natural gas (LNG) sector too has started reeling under tremendous pressure of falling oil prices and weak LNG demand in view of poor global economic outlook. This could lead to postponement of financial investment decisions (FIDs) and construction delays of some of the engineered projects in pipeline.

The high costs, particularly to engineering, procurement and construction projects, have become a critical issue for the world hydrocarbon industry – such as refinery, petrochemical, and power generation industries during the last few years – in light of the global down trend towards completing ongoing projects aimed at adding capacity in all sectors. It is one of the major factors behind the reconsideration of some advanced projects in some regions of the world, leading either to postponement or total shelving in some cases.

These factors increased the risk to run efficient and most sustainable companies in every sector. Without a finer picture soon, and long lasting effect of Covid-19 and the pressure on oil prices adding to the already exhaustive list of problematic factors, industry should embrace the modern digital business models and adapt it more prominently across their line of operations.

Inevitably, industry/business environment will come under considerable pressure in times ahead:

1. Oil production as during normal days earlier during previous year will see new slump in oil price and excess stock.
2. A long stretch of below US $40 price range will cause acute financial and operational stress to the companies already under pressure.

These ramifications will carry on impacting majorly the oil and gas sector, and it is highly unlikely that the current global difficulties will subside soon. The longer this situation continues, and there appears no light at the end of the tunnel, the more severe its effects will be felt. For those at the helm during this crisis, to ensure continual development, and ultimately target to achieve sustainability, should be the priority. Companies can explore adoption of new business models to bring down costs where digital is a feasible option to implement in current work environment and for future growth.