Last week Rigzone presented key oil and gas industry trends for 2020 as articulated by five informed market-watchers. Now, check out what they predict will likely be the biggest oil and gas industry developments in 2021.
David Sweeney, Houston-based partner with global law firm Akin Gump Strauss Hauer & Feld LLP: Though I hope that 2021 doesn’t bring the wild swings in prices that we had in 2020, I expect 2021 to be a continuation of these trends (increased restructuring/liability management and mergers and acquisitions). I think that, as a result, we are likely to see what capital is available to the industry focus on less expensive assets that are less likely to be impacted by regulation – some of which were really out of favor not that long ago. Bottom line, the industry will still be here and it will, as it always has, reward those who are resilient, patient and fundamentally sound.
Michael Krause, data scientist with artificial intelligence (AI) firm Beyond Limits: Legacy oil and gas companies will change how they recruit and hire based on the implementation of digital transformation projects. This is validated by the recent uptick in new job titles posted by legacy oil and gas corporations – many of which now include the word(s) “digital” or “innovation.” So far, AI has had the biggest impact on the industry through data cleanup and analysis – the critical next step will be using advanced AI to figure out what all that data means and the reasoning around the meaning of the results, and oil and gas companies will increasingly try to recruit to meet those needs accordingly. This will help domain experts like geoscientists free up their time from tedious analysis work too better leverage their expertise to understand the reasoning behind the results and interpret that to solve larger, more complex industry challenges.
Vicki Knott, CEO of automated control room specialist Crux OCM: I assume the current, very serious push to continue automating human process and increase efficiency will continue. Oil and gas operating companies can no longer rely on consistent yet sub-par efficient operations. For example, 85 percent utilization of an asset (pipeline, plant, etc.) is no longer good enough. The current price climate pushes hard towards the energy transition, and decreasing access to capital for oil and gas asset expansion means oil and gas operating companies will have no choice but to target as close to 99.9 percent utilization and efficiency as possible. Digital and automation solution with low to no hardware will be the fastest and cheapest way to get there.
Bob Benstead, Vice President, Strategic Planning with business cloud software firm Infor: I believe the biggest development that the oil and gas industry will see in 2021 will be the dramatic ramp-up of digital initiatives. This will truly push the industry toward new thinking, especially around how to maximize AI and machine learning, aligned to sensors and other Internet of Things devices, to drive down costs and optimize the workforce. Additionally, the increased trend toward cloud computing will help to significantly lower the total cost of service (TCS) to build, run and maintain efficient ERP (enterprise resource planning) and EAM (enterprise asset management) systems that oil and gas companies rely on.
Rob Albergotti, Managing Director with management consulting firm AlixPartners: If asked this question at the end of 2019, no one would have been anywhere close to anticipating the developments that we saw unfold in 2020. So gazing into a crystal ball to see what will happen in 2021 is also extremely difficult. There are so many unanswerable questions. Does the global pandemic still weigh on economic activity, effectively putting a ceiling on commodity prices? What will travel demand look like as the COVID-19 vaccines become more widespread? How does the landscape in Washington, D.C., impact access to capital for energy companies? And what geopolitical issues pop up, creating supply concerns?
Given the backdrop of continued uncertainty in the macro-environment, I think 2021 will likely be a year of continued capital discipline across the industry. Capital markets will continue to look at the industry with the skepticism we saw creep into the markets during 2019, requiring the continued focus on cash flow generation. This will likely lead to continued consolidation among E&P providers which will likely bleed into the services and midstream sectors. Scale and efficiency will be key in attracting capital in 2021 and beyond.
To contact the author, email mveazey@rigzone.com.