Major PwC report spells out how oil and gas industry will look post-crisis

Oil and gas firms must adopt more resilient business models to get back on their feet once the coronavirus emergency has eased, including “doubling down” on digital technologies and greater collaboration.

The findings are contained in a major report which is due to be published by professional services giant PwC in the next few days examining the response of the oil and gas industry to the current pandemic.

Industry experts also believe that the consequences of Covid-19 will be to provide a fillip to the energy sector’s transition to a low or zero carbon future.

The findings are contained in a major report which is due to be published by professional services giant PwC in the next few days examining the oil and gas industry’s response to the current pandemic.

As well as the direct effects of the virus, firms have had to contend with an oil price war that has seen a barrel of crude sink towards $20, although there have been signs of stability in recent days following an Opec-led agreement to trim production levels.

In its Resilience in Adversity report, PwC observes: “The coronavirus crisis will re-shape the oil and gas landscape (and many other sectors for that matter) to the point where it is entirely conceivable that we may begin to refer to “Before Covid-19” and “Post-Covid-19” as a key event in the global industry’s timeline.

“All market participants across the energy value chain are being impacted. As companies mobilise their efforts, the focus is on weathering the turmoil, retaining critical operations and protecting cash flow.

“More than many sectors, the industry is used to challenges and crises. There was the global financial crisis in 2008/09 and then oil and gas companies successfully emerged, albeit somewhat bruised, from the brutal downturn which began in 2014. And in 2019 and 2020 it has been increasingly buffeted by the winds of the energy transition.”

Looking at the lessons that the industry can take forward from the crisis, the study notes that “cash is king for survival”, though there may be trade offs.

“For some players headcount reduction is a necessity but there are shades of reduction, such as options to furlough staff on reduced pay,” PwC said. “Letting go of essential staff in a downturn may mean companies are ill-prepared to navigate the current downturn and benefit from the upturn when it comes.”

The research argues that planning for the expected upturn in activity is just as important as short-term liquidity.

Meanwhile, experts from the firm say that “innovation is king for longevity”, providing an opportunity to “double down” on digital technologies and new ways of working. Digital “solutions” from artificial intelligence (AI) to drones will need to be deployed more extensively.

PwC also predicts that the energy transition will “return to the front pages in the near term”, noting: “There is a real chance that one of the consequences will be to provide a fillip to the energy transition’s momentum in so many ways.”

Neptune Energy

Meanwhile, a new study indicates that Neptune Energy provided a £350 million boost to the UK economy last year and supported some 2,800 jobs,.

Research by Oxford Economics quantified the direct impact that the firm has through its gas-weighted operations and the indirect impact generated through its supply chain, as well as the additional result of spending by Neptune staff and suppliers’ staff within their local economies.

For every Neptune employee in the UK, some 16 jobs were supported elsewhere in the domestic economy, primarily due to the company’s spend on capital goods and services in relation to its operated gas production platform, Cygnus, which supplies about 6 per cent of UK gas demand.

Alexandra Thomas, UK managing director of Neptune Energy, said: “This study demonstrates the important economic contribution the oil and gas sector makes in the UK that goes far beyond its core function of producing and supplying energy.”

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