COVID-19 Impact on Connected Oil and Gas in ICT Industry
COVID-19 which originated from China has threatened the survival of modern human beings by creating an unprecedented pandemic situation. The nano-sized virus has increased its footprint globally affecting more than 175 countries. Entire nations have gone into full lockdown as the total cases globally have crossed 50 million. Companies have been advised to shut down their offices and small businesses are facing bankruptcy. Major pharmaceutical companies are developing vaccines at a rapid pace in assistance with the government but it is still a year away from being commercially available.
The oil & gas industry was already facing a crisis before the pandemic and the advent of this pandemic has seemed to worsen its condition further. Due to these lockdowns, travel restrictions have also been put in place for which there has been a heavy reduction in fuel consumption across the entire transportation sector. Barring LPG and domestic natural gas, the demand for all the other fossil fuels is in free fall. The oil price crash which started before this pandemic has gone into overdrive mode due to this pandemic. Brent crude oil process has touched 17-year lows erasing billions of wealth from this sector. The energy demand from economies globally has also muted. However, as the economies unlock and travel bans are lifted in a phased manner, companies are introducing technologies such as machine learning, AI and digital twins among others and have also introduced connected solutions to digitalize their offerings which are pushing them towards industry 4.0. For instance,
Schlumberger has introduced its digital connected service that optimizes the operations of the website while ensuring their safety and increasing their efficiency. This service leverage cloud-based applications for building a robust data network.
AFTERMATH OF COVID-19 AND GOVERNMENT INITIATIVE TO BOOST THE MARKET
COVID-19 overall has further strained the operations of this sector which were already reeling from a crisis of its own. The prices have crashed from their all-time highs. This pandemic has also made the consumers switch to electric vehicles which are further choking the future prospects of this sector. However, as the nation’s rely on this industry for meeting their energy demands, various measures are being implemented to provide relief from the impact of this pandemic. Governments are investing significantly to increase their production and to meet the energy requirements. Implementing technology has become very essential as the integration of IoT has eased the operations. Apart from that, domestic companies are acquiring major stakes in oil plants.
For instance,
In November 2020, Perenco has initiated talks to acquire one of the four oil & gas producing blocks to become a major operator in Ivory Coast.
STRATEGIC DECISIONS FOR MANUFACTURERS AFTER COVID-19 TO GAIN COMPETITIVE MARKET SHARE
The demand for oil is increasing step by step as the economies are opening back steadily and lockdown restrictions are lifted partially. International flight restrictions have also been eased allowing limited flights to travel. To ensure their survival, they have shifted towards implementing technologies such as predictive analytics, AI as well as Industrial Internet of Things to increase their overall efficiency. This digital transformation is helping them to cut down operational expenses and execute quicker decisions increasing employee productivity.
INCREASING INVESTMENT IN OIL REFINERIES AND MINES BY GOVERNMENT AND PRIVATE COMPANIES TO CATER TO THE EXPONENTIAL DEMAND
The government is investing in large amounts so as to increase the supply of oil on a large scale to meet the energy demands. Not only are those, many private companies acquiring plants and refineries to ensure an uninterrupted supply. Major players are investing heavily in technologies to introduce connected solutions for their clients to ease the overall flow.
TO FORM PARTNERSHIP, ACQUISITION STRATEGIES TO DEVELOP THE TECHNOLOGY AND STABILIZE THE SUPPLY
Mergers and acquisitions are going on as the consolidation has become the need of the hour for this sector. Even though it is facing a lot of distress, however this is essential for the entire industry to survive after the pandemic.
For instance,
In October 2020, Mid-Con Energy Partners LP was acquired by Contango Oil & Gas in an all-stock transaction worth USD 400 million.
IMPACT ON PRICE
This pandemic has cast a negative impact as the prices have increased significantly which was already in a downward spiral due to the price war. But the advent of connected solutions may stabilize the price as the flow becomes consistent.
IMPACT ON DEMAND
The pandemic has muted the demand for oil & gas barring domestic natural gas. Even though lockdowns are lifted in a phased manner, the demand is still weak as the energy requirement is still low and people are switching to energy-efficient electric vehicles. However, the offering of connected solutions is poised to increase demand.
IMPACT ON SUPPLY CHAIN
The disruption of the global supply chain has disrupted the entire oil supply but companies are still able to provide connected solutions for oil & gas. The oil supply is rising and is abundant to cater to this demand.
CONCLUSION
COVID-19 overall had a mildly negative impact on the oil & gas industry as the demand has decreased massively. However, connected oil & gas solutions are being implemented by the vendors to maximize their potential while reducing the operating costs. Digitalization is happening at a rapid pace as the entire sector is advancing towards Industry 4.0. There has been massive government support to re-ignite the demand and private companies are also jumping the bandwagon. There is a dire need for consolidation in this industry to weather this storm and survive in the upcoming landscape where electric vehicles will take precedence. The prices have dipped sharply due to the previously ongoing price war and lockdowns imposed due to this pandemic. However, the supply is abundant and can easily address the energy requirements of an economy.
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