The gas and oil sector is going through a massive disruption. As the world continues to be dependent on the organic sources of energy, there are micro and macro challenges that are affecting the global industry.
The gas and oil sector investment in the energy resurgence is expected to shift consistently. As a result, new technology trends are expected to flow from the upstream sector down to the midstream refinery operations, infrastructure, and petrochemical facilities.
The operators in the upstream sector in the gas and oil industry will concentrate on collecting value from recent acquisitions and discoveries. They will realize this through more effective and efficient operations. Also, they will be keen in measuring the risks that the industry is going through and the usage of new innovations and technologies.
The challenges the oil and gas industry is facing comes at an appropriate time when the industry is facing some notable opportunities.
Worsening Fiscal Terms
The instability of fiscal administration in host-nations puts significant pressure on the oil and gas organizations. This creates insecurity for the entire firm investment policy and financial strategy.
According to the industry leaders, the oil and gas sector requires predictable and secure fiscal administrations. Instability and insecurity have cost the industry $2.3 billion decrease in the expected tax revenues. Additionally, the drop has been due to dramatic falls in production and drilling exploration.
Global leaders in the industry need to put measures that will greatly stimulate an investment need. This is expected to be introduced in a matter of urgency. Brazil is among the examples that are a concern in the oil and gas sector fiscal administrations. Current tax policies are tremendously complex, impeding the growth of the sector.
The introduction of new technology in tax regimes is the other headache facing the operating organizations. For example, China recently introduced experimental resource taxes on all-natural gas and crude oil commodities with 5%-10%.
Most of these resources were not commercially feasible until recently. Due to advancements in technology, unconventional resources have become famous lately. This has partially solved the problem of high global demand.
The unconventional resources include oil sands, shale gas, and coalbed methane. While it’s a resourceful solution for energy needs, the technology involved, like hydraulic fracturing, raises concerns.
Debates have been raised among professionals and communities about the harm the technology impacts on the environment and water resources. This, in turn, may hinder its progress through unfavorable government legislations.
Rising Emerging Consumer Demand
According to statistics, about 51% of gas and oil respondents announced they had made significant investments to realize growth in the market. Emerging markets in the sector are mainly Asia economies and China.
The performance in rising markets is mostly dependent on various government pricing policies. This means that a major risk is implicated, especially for foreign direct investments. This also creates the problem with the bargaining power of the country.
China As A Significant Market Influencer
Oil and gas are needed to continue powering the global ecosystem. Multiple components of the Chinese economy in specific will have a substantial impact on the North American producers in 2020.
This entails the tariffs and trade wars, a bulging appetite for LNG, and increased legislation towards renewables and EVs. China still battles to meet its primary goal, which is to achieve GDP parity with the United States and OECD by the year 2050.
However, the good news is that paying keen attention to these factors in 2020 will see oil and gas producers thrive. Achieving deeper supply chain insights via analytics and information will hand producers the power to release trapped EBITDA in various sub-optimized business procedures. Also, it will enable growth and improve the cash position.
This problem entails relations with several stakeholder groups, health, and safety issues. Concerns of safety include employee rights, human rights, stakeholder rights, community relations, environmental protection, corruption issues, and transparency.
According to CSR, oil organizations should succeed in all the criteria to establish a reputation as a dependable potential partner for the cross-sector, private-public strategic partnerships, and government.
Substitute Fuels Which Entail Second-generation Biofuels
The market demand and environmental pressure that the oil organizations experience presently forces them to explore other sectors like renewables. According to a petroleum review, about 47% of respondents had made moves to invest in the proposed ‘cleantech.’ However, this urge entails company policies, additional resources, and revised strategies.
For example, Electric vehicles have already gained strength in China markets. This is the same market where the government has strict policies towards de-emphasis on coal, pollution reduction, and more significant sanction against polluters.
Smart Oilfield Innovation
All gas and oil operators in different locations are focused more on their efforts and budgets to improve productivity. At the same time, they are keen in monitoring their remote and local assets dynamically. This can only be realized through the utilization of smart oilfields technology. This kind of innovation will manage to provide real-time data and analytics.
One of the significant challenges facing the oil and gas sector is tied to the fact that assets and contractors relocate to different locations every week. Other additional problems are linked to environmental conditions such as frequent sandstorms and extreme temperatures.
The primary factors that will steer further adoption of smart technologies in the industry are increased demands for more intelligent devices and sensors in the field — also, the desire for company managers to stay connected with valuable contractors and assets.
Digital transformation in the gas and oil industry doesn’t require a sophisticated approach. All companies involved should view the change as an opportunity to better their functional capabilities. Innovation transformation should move organizations to a new software environment. This will significantly prolong the life of traditional legacy systems.
Without denial, digital technologies are the future of all industries. In the future, more companies are expected to better their operational efficiency. Organizations in the oil and gas sector are also partnering with peers to establish open systems that will oversee digital transformation initiatives being done at low costs and with minimal disruption.
Thanks for reading "Challenges Facing The Oil & Gas Industry & Opportunities In 2020", by the Linchpin Team in Chicago, Raleigh, and Wake Forest.