The oil and gas industry is going through a period of massive change. Many factors have transformed it in recent times and continue to transform it. These include:
a) newfound oil and gas deposits in North America;
b) greater demand for these types of resources due to them being seen as “cleaner” and more environmentally friendly;
c)the push towards “even cleaner” energy; and
d)fluctuating oil and gas prices.
The industry recently boomed but the prices of oil and gas recently have significantly dropped. This has meant the future of this industry has become uncertain. PWC recently talked to some experts and hosted a discussion about the best strategy to employ at this time to ensure your company stays afloat - 2016 Oil and Gas Trends - Challenges and Focus . Three approaches advocated in this discussion follow:
- Work out which parts of your business are the most profitable and stick with them rather than focusing on other parts which you don’t excel - e.g. decide whether you are going to focus on upstream, midstream or downstream activities;
- Don’t just cut costs for heck of it. Be strategic about which costs you cut if you choose to respond to the current uncertainty by adopting a cost cutting approach. For example, don’t lay people off if you can help it because it is uncertain what the industry is going to look like in the next ten years. The industry may very well once again enter a boom and you will need your extremely talented staff. Instead, invest where you can in the growth areas. Research, analyze and assess what those are and fund them. Renewable energy is a growth area but instead of simply going out and purchasing wind and hydraulic farms and getting rid of your current oil and gas processing infrastructure, make the products you produce and the way in which you produce them more energy efficient. If this is not possible you may want to consider diversifying your portfolio to extend to renewable energy production.
- The third piece of advice is to invest in technologies that improve efficiencies in your processes and procedures. They note that BP is already using drones to inspect pipelines in remote locations.
The current climate with respect to the oil and gas industry has meant that it is also very important to scrutinize the value of your company’s operating contracts.
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