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The oil and gas industry has always been a turbulent industry, with many factors easily affecting the demand and supply for oil and thus, shaking up the oil prices. Since the oil shock in late 2014 which had led to a 30% decrease in oil prices due to oversupply of oil but sudden reductions in global demand, many companies aim to avoid undergoing the same crisis again. Yet, it is hard for oil and gas companies to venture far from its niche and diversify its business portfolio to soften the impact of any sudden crises.
With the developments in technology and innovation in the the oil and gas plays, if there’s one thing that can be constant, it is the uncertainty of the industry. Rather than hoping that your company can come out unscathed from any sudden changes in the industry, it is important for your company to acquire the necessary skills to adapt accordingly.
There are many options for a company can make in times of volatile oil prices:
- Transformational M&A
- Bolt-on acquisitions/ asset plays
- Portfolio rationalisation
However, it is hard to determine which is the most appropriate option for a company. As the saying goes, ‘one size does not fit all’. What works for one company may not work for another company. Hence, it is integral for companies themselves to be equipped with the ability to understand and approximate future energy demand or consumption. These approximations can then be utilised to forecast the impacts on their own businesses and pave the way for the relevant actions to be undertaken.
One way to keep up to date with the ever-changing oil and gas landscape will be to adapt to the latest oil and gas trends. Trends are what shapes the industry and by understanding and adapting to the trends, companies are able to build a business model that generates value in the new oil and gas operating environments.
Top emerging oil and gas trends:
- Shift towards cleaner energy
While global oil and gas demand is expected to increase, there is a clear trend towards renewables, with its demand predicted to increase from 15% in 2016 to 22% in 2030. Even China, which has been deemed as the world’s biggest carbon emitter, has been utilising solar and wind energy to generate electricity rather than solely depending on coal power generation. This shift towards renewables implies an increased focus on natural gas and reflects the potential in diversifying the business portfolio to include investments in renewable technologies.
- Rise of electric vehicles and the consequent impact on oil demand
It has been estimated that the unit sales for global electric vehicle will increase 15 times, from 1.26 million units in 2016 to over 26 million units in 2030. With around 6% of oil demand affected negatively from this trend, increase in oil demand in other sectors and countries such as India is predicted to offset the above-mentioned drop in oil demand. Hence, the factor that will affect oil prices in the near future will be oil supply. Oil supply is largely dependent on geopolitics such as the recent additional tariffs imposed on Chinese imports.
With the ongoing trade war, geopolitical factors as well as technological advancements, there are many things that can change in the blink of an eye. Hence, what’s vital for survival in this industry or as a competitive response, is to thoroughly understand the oil and gas industry – inclusive of the oil markets, in order to derive strategies that best place the company at a competitive edge.
As a general guidance for trends in the oil and gas industry, PWC has published this report to assist interested parties in gaining a deeper understanding of the volatile industry. Comprising of input from 1,378 CEOs globally, this report provides information on how to build growth strategies based on current trends. It provides information on the following areas: world’s energy demand, strategic decisions companies can embark on, priorities in the volatile industry and business portfolio management.
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“Oil and Gas Trends 2019”