Oil and Gas After the Pandemic
The oil and gas industry has been facing various challenges over the past year, no thanks to the emergence of the COVID-19 threat globally. With the advent of shale and excessive supply, revenues have been extremely low, and to top it off, prices are at their lowest in the past three decades.
With this in mind, it is not unlikely for the oil and gas industry to reconfigure itself, and the COVID-19 pandemic will only speed up this transformation. Among the permanent shifts that are expected to result from the crisis include changes in upstream, downstream, midstream, petrochemicals, global gas and liquefied natural gas, and new businesses related to renewables and energy transition.
Although we cannot be sure how drastic the oil and gas industry ecosystem will change and when will the shift happen, it is certain that the pandemic will bring about a noticeable reconfiguration in the system in the following years. It is believed, though, that companies whose business models or asset bases are already distinctive will emerge as winners in the next normal. But for the majority of companies, a change in strategy, if not the business model, is a need.
As a start, companies should learn from others and seek inspiration from other industries that have experienced a sector-wide change. See how the industry leaders thrived and emerged as value creators.
Some traditional and existing business models can also be put into use. After all, basin leadership has long been a source of value creation and distinctiveness among oil and gas players. Similarly, those with low-cost commodity suppliers with first-quartile assets seemed to fare better than the rest.
Finally, players in the oil and gas industry should focus business models that create value through capability, scale, and operational efficiency in specific segments like Quantum Energy Partners in private equity and Vitol in trading.