Henry Berry, Director at the UK oil company, Tristone Holdings Ltd, notes that whilst the oil industry has seen considerable changes in 2020 already, there will undoubtedly be many more come
Every year, a myriad of prominent industry analysts make their predictions on the various directions that the oil and gas industry might take. Last year was no different, however, the crippling global pandemic, of which we’re all uncomfortably aware, did not factor into a single prediction. COVID-19 has forced the entire industry to re-evaluate and reset.
Henry Berry believes that a repeated analysis of the industry is very important, and in doing so, has identified certain areas in which more concrete trends appear to be materialising.
A crucial trait
The pandemic has brought oil companies into a new era. Agility will prove to be an essential trait in ensuring a company is able to, not only identify, but persevere through the various risks that inevitably lie ahead. Oil companies will need to consider a high level of agility within the industry as crucial, for years to come.
Agile and flexible practices
There are many oil companies that have already laid the foundations for increasingly agile practices – even before the devastation of the pandemic. BP, for example, announced last year that they had been able to cut their logistics costs by a substantial $60 million, in Azerbaijan. This was achieved by implementing the scrum technique; an agile work-system which essentially involves bringing the right people together, and allowing them to develop the ideal solution to a problem. One of the leading benefits of agility within the industry – as seen in BP’s utilisation of the scrum technique – is its inherent simplicity.
Whilst a shift towards these types of practices may have simply given companies the upper hand a year ago; they should now be considered a necessity. The last few months indicate that we will see an increasingly turbulent shift in demand and, from an operational perspective, flexibility will be key in coping with this.
A focus on sustainability
It’s widely known that virtually every industry across the globe – oil companies included – are doing what they can to assist with environmental care by cleaning up their practices. It goes without saying that in an industry revolving around a particular fossil fuel, more sustainable practices can only go so far. Regardless of this, there is still much that can be done in order to make the oil industry, in its entirety, much cleaner. From tightening up various inefficiencies and reducing methane leakages, to reducing freshwater wastage and other means of recycling, there is much the industry can do to make their processes more sustainable.
There are certainly those within the industry that are looking to diversify their portfolio with the introduction of biofuels, but the majority are trying to go greener and cleaner with their pre-existing processes. Utilising technology is a necessity in this endeavour. Many more companies, for example, are starting to use drones to efficiently detect ozone-destroying methane leakages.
Expanding into the natural gas market is strongly advisable for any oil operator that has the capability to do so. The most rapidly-growing fossil fuel, according to the 2019 Edition of BP’s Energy Outlook, is natural gas. This can be seen in its estimated annual growth of 1.7% between 2017 and 2040.
Further to the above, volumes of Liquefied Natural Gas (LNG) are also predicted to steadily increase. In the intensely volatile period we’re all currently living in, the prospect of spreading your interests safely with a more diverse asset portfolio, appears to be a particularly perspicacious move. Although natural gas – just like crude oil – has experienced a substantial hit on account of the pandemic; a return to form is likely in the coming year.
An example from tristone holdings
Whilst pursuing high-value crude oil assets in the USA was our initial goal, it’s fair to say that diversification is certainly an option. The area Tristone Holdings is focused on – Cherokee Valley – not only features existing wells, but also an incredibly well-established natural gas pipeline network too. Pursuing a prospect such as this may lead to a secured asset of high-value and exceptional versatility.
No matter how well prepared your company may be, this year has introduced the importance of being able to change tack, wherever necessary. Certain events – a global pandemic, for example – have the capability to disrupt even the most thoroughly prepared companies, making agility and flexibility an essential trait for all those looking to succeed within the industry. Further to this, it’s incredibly likely that a selection of the most well-funded companies will have developed previously non-existent contingency plans to deal with any unforeseen events such as this – but this isn’t the only way for a company to be smart in their set-up. A plan that allows for agility and diversification will place you in a substantially better position to deal with any unexpected difficulties that come your way.