With BP cutting 10,000 jobs and further gloomy job losses across the energy, manufacturing and travel industries including Centrica, Liberty Steel, Heathrow Airport and carriers like British Airways, it’s clear COVID-19 is having a profound impact on the cornerstone industries of our economy.
For all businesses, there are several strategic implications, but they vary by company and sector. Regardless of the industry they operate in, all firms will need to plan to anticipate the shape of the recovery and prepare for the next normal.
This is particularly complex for the energy industry. With global lockdowns continuing to radically cut demand and social distancing measures set to impact ways of working for the foreseeable future, how should oil companies adapt their operations to protect and create jobs for the future?
Invest in automation and technology
For several years, it’s been widely accepted that investment in technology is the way forward for oil and gas. Due to the pandemic, it is likely social distancing measures will become standard practice for many months, even years. This means oil companies will do well to invest in automation technologies now, to allow for improved remote working in the future. Companies must equip essential employees with sustainable remote working tools and consider such things as coordinating across time zones and working hours, providing the equipment and tools to create a virtual work environment and enable reliable, secure and ubiquitous remote network connectivity.
Technological solutions can be applied across all operations. Cloud-based AI platforms can analyse subsurface geophysical data, providing quicker and more accurate modelling of oil deposits. These systems can also improve safety in oil and gas platforms, by monitoring topside and subsea installations for offshore sites and enabling firms to identify potential problems before they occur.
Another priority is to connect the supply chain digitally. Linking the entire network end-to-end, from raw material supplier to customer, can increase efficiencies, reduce inventory, inform product development, and give customers better service with more transparency. AI can improve inventory management from creating a fully integrated network of warehouses to allowing seamless workflow and real-time data analytics with material tracking, using track and trace through barcodes and radio-frequency identification tagging.
Investing in smart HSSE (Health, Safety, Security and Environment) and fire services will also help firms to streamline for the future, with solutions ranging from connected emergency response systems to rolling out e-permits and digitising incident and occupational health reporting. More advanced options include 3D digital asset data capture through drones, and virtual reality or augmented reality technologies for real-life training and walk-throughs.
COVID-19 has certainly accelerated a reset in terms of how we work, so the industry will have to adapt and adopt a culture for the changing work environment to enhance business continuity plans. Investing in these applications will help firms to modernise their processes and improve cost and operational efficiencies, whilst creating new and desirable jobs.
Adopting renewables
It has been widely reported that renewable energies might emerge as the winners in the post-covid world. Demand for renewables is set to grow this year, according to a report by the International Energy Agency.[i] This is not only down to the pandemic’s role in reducing oil demand, but also increasing awareness of climate change. This transition was reflected by BP’s move to slash value from its oil and gas assets, as it expects the crisis to accelerate the transition towards cleaner energies.
Investing in oil is becoming less acceptable and all firms are starting to look at ways to embrace the energy transition. Among the majors, this transition is beginning to influence corporate behaviour with Royal Dutch Shell vowing to become the world’s largest electricity company by the 2030s, whilst Denmark’s Orsted, previously Dong Energy and now an offshore wind farm specialist, has shown that successful transitions are possible.
All companies throughout the oil distribution chain, have workforces with strong and transferable skills which, with the right training, could be put to good use for the green transition. Firms should consider using this time to readdress their renewables strategies, be smart about which business areas to invest in and focus on optimising their workforce for the new energy world.
COVID-19 has wreaked havoc on global oil markets for the best part of 2020. Companies should use this time to bring together the myriad learnings from the pandemic, identify the challenges and energy needs of the world as it comes out of the crisis and recalibrate their strategies accordingly. Investing in technology, renewable energy sources and equipping their workforces for these important transitions are a good place to start.
Despite this and under most scenarios, oil and gas will likely remain a multi-trillion-dollar market for decades, given its role in supplying affordable energy. The industry is too important to fail. However, as companies seek solutions to improve their performance in the short term, they will have to redefine their value, increase their competitive edge and distinguish themselves to have a long and sustainable future.
The July issue of Fuel Oil News magazine looks at how one distributor has benefitted from embracing automation at their retail fuel sites.. Subscribe here to receive your copy.
[i]https://www.iea.org/reports/renewable-energy-market-update#key-findings