All sectors of the oil and gas industry have been challenged by the COVID-19 crisis, some of which are already at risk of bankruptcy and others unlikely to survive with the current depressed levels of oil prices and margins.
Similarly, companies led by frail management teams, dominated by high-cost assets, and carrying high-debt burdens will experience worst challenges, with most of them disappearing or getting acquired.
While the majority of oil companies have already lowered their planned short-term capital spend, they still need to consider a strategic portfolio rebalancing to provide them with the best possible chance of enduring the COVID-19 crisis and emerging more secure in the long term.
To do this, companies should curtail high-risk exploration, concentrate on low-cost assets, and strip off their high-cost upstream developments, including tar sands and shale.
They should also carefully review, if not entirely cancel, new construction of plant upgrades or refining projects.
Companies need to rebalance their business via stronger positions in the petrochemicals and natural-gas value chain, all while providing stronger emissions-efficiency initiatives.
To become more sustainable and commercially attractive, all oil and gas companies should look into development expansion in the field of energy transition, electricity, and renewables, investing more in renewables and decarbonization.
These shifts apply to both international and regional oil companies, along with American drillers.
However, global oilfield service companies should be the first to take the most urgent and thoughtful actions in response to the COVID-19 storm.
Since they are the most challenged by the reduced activity in the oil sector globally, they must quickly lean towards the renewables support.
To acquire new levels of efficiency in operation, all oil and gas players will also need to speed up their initiatives in automation and digitalization.
These transformations are the only ways to ensure a company’s viability in the petroleum sector for the long term.
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