“The 2020 COVID-19 pandemic has affected almost every aspect of the global economy, as workers and consumers stay home and countries shut down non-essential businesses and services to limit the virus’ contagion rate. The oil industry has been particularly hard hit as prices for crude oil dropped to historic lows and consumers stayed off the roads and the airports,” said Boris Ivanov, founder of GPB Global Resources, an industry-leading oil exploration company, in a recent publication.
This comes when the way consumers use energy and how companies produce it are both evolving rapidly. The International Renewable Agency (IRENA) anticipates that by 2050, almost 70% of energy production globally will come from renewable sources. New technologies are making all of this possible – redefining the energy landscape in exploration and production, but in storage and transportation, turning solutions that once had little market viability into contenders in energy, as Boris Ivanov points out. As seismic shifts in industries have done in the past, this pandemic can become a catalyst for even greater change and investment in technology. Established energy companies must prioritize digital transformation or risk obsoletism as perceptions, ideals, and technology change.
The challenges facing oil and gas
As recently as April oil prices dropped below $20 a barrel and storage reached its limits as the novel coronavirus officially became a pandemic. China, a country that now accounts for 80% of oil demand, saw the greatest reduction, but world travel and even consumer travel fell dramatically worldwide. According to Boris Ivanov, it was exacerbated when OPEC and ten oil-producing companies could not agree on stable oil production, given the demand freefall. All factors sparked a historic price drop and a selloff in crude oil.
However, in just the past two months, China’s oil consumption rebounded to 90% of pre-pandemic usage; this only demonstrates the market’s volatility. Dealing with the ups and downs in the market has always been a part of the game, but every industry has its breaking point. Not unlike how evolutionary catalysts might speed up change in a species, this event will further push those late adopters of digital technologies to adapt.
Ivanov has also noted that African countries like Angola, Libya, Algeria, and Egypt, whose economies depend so strongly on oil, see financial ripple effects throughout their nations that couldn’t come at a worse time they’re trying to manage the pandemic.
The future of the industry, according to Boris Ivanov
COVID-19 has laid bare vulnerabilities in the industry, demonstrating for those still on the fence why so many have already begun to invest in digital transformation. While there is a definite shift toward renewables, there is still a massive global demand for oil and gas. To compete going forward, oil and gas companies need to get creative about attracting investment to further their ability to navigate new technologies.
Companies must focus on generating efficiency and cutting waste, which is good for business and better for the environment. Ivanov believes that oil and gas will be an essential part of continued economic growth globally. It will be some time before alternative technologies can generate enough energy and get it where it’s needed practically and cost-effectively. However, to continue to receive the support of private equity and government partners, oil and gas companies will need to demonstrate fiscal responsibility and the willingness to embrace new technologies. The oil and gas industry is no stranger to technological investments. It is what has made the industry what it is today. Now, investment in a new generation of digital technology will continue to shape the industry for the better.
Digital technologies having the biggest impact across the industry
Boris Ivanov shares four specific areas where digital transformation is changing how energy is utilized business.
Artificial intelligence (AI)
Market research firm MarketsandMarkets™ published the finding of their research that showed that AI investment in the oil and gas sector rose $1.5B in 2017. This trend continues, as an Accenture Survey found that 51% of oil and gas companies were investing in AI in 2019. Cloud-based AI solutions are helping companies analyze subsurface data to make more data-driven decisions. This cuts waste reduces risk and increases profitability.
Internet of Things (IoT) and Big Data
AI, combined with IoT, turns everyday equipment into data-gathering and process-managing tools. Boris Ivanov put it this way, “the oil and gas sector can play a crucial role in optimizing costs while improving safety, by enabling predictive maintenance, performance forecasting, and real-time risk management. As the IoT develops and more data is collated, it will become a crucial tool for energy companies to gain a competitive market advantage. “
Blockchain received notoriety with its use in Bitcoin transactions. Still, in its most basic form, it’s a public transaction ledger that enhances transparency across the industry and allows a company to optimize every step of their process, cutting out the go-betweens and extra steps that drive costs up.
Reskilling the workforce for more technology-literate roles
As Boris Ivanov has also pointed out, a digital transformation isn’t just about technology; it’s about people. Companies are creating a technology culture and investing in training and recruiting digital technology-minded people.