A Post Pandemic Oil and Gas Industry Comes Into View – Geoffrey Cann

By Geoffrey Cann

The outlines of a future oil and gas industry, shaped by the global pandemic, are starting to emerge.

Writing History

We will look back on 2020 as a pivotal time in the recent history of the planet, likely more so than 9/11, the Great Financial Crisis, and most assuredly, Brexit. We will reflect on our pre-pandemic world, how we used our time and resources during the outbreak, and how our world was transformed in recovery and beyond.

Social media is fortunately preserving much of what is happening during the pandemic in the form of photos, memes, videos, stories, and search engine results, and provides a rich source of research material for future historians.

But some of the early adaptations put in place to cope with the pandemic may become entrenched habits. Some features of life that we have been forced to discard may be jettisoned forever. Much of what we already had in place will endure.

It reminds me of a lesson that I have passed onto others many times—take a close up view of things distant, and a distant view of things up close. Very useful in uncertain times to provide a lens into our future.

The Enduring Truths

For me, the pandemic reminds me how much of our world that is durable and will remain regardless of the course of the outbreak.

After the pandemic there will still be 1.2 billion gasoline cars on the world’s roads. There will still be 300 million heavy trucks hauling goods to market. There will still be 53,000 merchant and military ships plying the world’s oceans. There will still be 30, 000 aircraft flying the unfriendly skies.

There will still be 697 refineries around the world able to process north of 100 million barrels of oil every day. Some refineries will have shut down because of a lack of demand for energy, but turning them back on will be much faster than building new ones.

Some demand will be permanently destroyed. That is to be expected.

But industry will be dependent on all of these existing instruments of progress to bring supply chains back to life, to kick-start commerce and to restore what has fallen away.

What is remarkable is the resilience (so far), of the world’s energy delivery systems which stand in sharp contrast to the fragility of the healthcare system, the collapse of the retail sector, the gutting of the tourism sector, the stalling of the services industry. Our energy systems are built to last, and frankly, during a pandemic, society is most grateful that is the case.

The Discard Pile

To put the virus back in its box, society has reluctantly embraced social distancing, which has by extension thrown a number of deeply held commercial and social orthodoxies onto the temporary discard pile. Of course, some of these orthodoxies will snap back into place, but others are looking less tenable.

First, office closures have put paid to the orthodoxy that oil and gas professionals must be physically close to get work done. Of course, physical plant workers will still need to be in proximity to the plant, and much of their work requires more than one worker for safe execution. But the office towers in many big oil towns, partially vacant because of the oil market oversupply of 2014, hammered in the market collapse of 2020, and now forced shut in the pandemic, may not recover.

Teleworking has been around for a decade or more, but has never really taken off, because it required a tipping point. In oil and gas, with its top down, command and control, siloed organization structures hard wired with budget systems, it takes but one or two powerful people in the organization to insist that teleworking is “unsuitable” and that was that. The orthodoxy has been shown incorrect. Teleworking seems to work fine when everyone does it.

A few very specific roles in oil and gas have their own dedicated office facilities. Oil traders in particular have operated out of purpose built trading floors. Not during the pandemic. And yet, oil and gas products are still being successfully traded, financed, and delivered. Coupled with the volume war between Saudi Arabia and Russia, the pandemic is forcing oil traders to confront both a supply overload and a collapsed demand at the same time, putting trading operations under extra stress. Such dedicated facilities may be endangered.

Some artefacts of the office environment, including the use of paper documents, inter office mail, and signatures with real ink, might linger on but become increasingly untenable with this newly decentralised workforce.

Another orthodoxy is the imperative of face to face collaboration sessions with key suppliers using white boards for problem solving. In-person meetings are over, but the general working problems of the industry still go on. New equipment doesn’t work properly. Business systems have to adapt to new rules. On-going compliance projects need to hit their deadlines. Problems are still being solved.

The industry relies on a steady level of international travel because of the distributed assets and their need for human care. Some, if not all, of that travel is now impossible. Imagine a critical piece of oil processing equipment imported from South Korea, installed in an US oil refinery, and in need of urgent attention from a team of senior Korean engineers. If they set foot in the US, they are subject to 14 days quarantine.

Selling to oil and gas has always involved lots of in person meetings, coffee discussions, site visits, practical demos, and collaborations. The sales model is now broken because of the ban on in-person meetings. Oil and gas buyers are quite accustomed to cutting back purchasing activity in response to cyclical changes in oil and gas, but they eventually return to the market. It’s not yet clear if sellers will replace their sales models with alternatives to the in-person experience.

The New Habits

I’m reminded of a quote from Milton Friedman.

“Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”

Friedman goes on to say that only in a crisis can the politically impossible become the politically inevitable.

Teleworking and teleconferencing on a grand scale were politically impossible in December 2019, and are now inevitable for any business that aims to keep plugging away during the pandemic.

Here are some other ideas that are lying around that could get life in the pandemic.

DIGITAL IS THE FUTURE

In 2019, digital was viewed in oil and gas as “a future”, but not “the future”. Other possible futures, notably the status quo, still held sway. Once workers and bosses get used to teleworking, both will demand deeper digitalization of the work world. Expect to see more budget being applied to strengthen, expand and evolve the digital foundations of business.

DATA QUALITY RISES

Centralised workers in an office can more readily cope with poor quality data. Go visit a colleague and talk it out. Bosses can easily delegate the problem away. But remote workers, at-home bosses, and machine-based business models incur a heavy price for poor data quality. Productivity suffers. Expect bosses to expect better quality data in their Zoom meetings, many of which will be recorded for prosperity and available to future litigators.

PORTABLE TECHNOLOGY WINS

Physical distancing and office closures that send people home require that their work tools be portable and anywhere ready. I remember during SARS how important it was to equip everyone with laptops so that they were not stranded without work tools. Work tools include data and information. Workers will be encouraged to keep their technology with them at all times.

WIFI RULES

Many home workers are discovering that their home networks cannot cope with Zoom and Netflix, kids and adults, all competing for the same limited WIFI resource. Companies have long resisted getting involved with network infrastructure outside the firewall, but now the productivity of the enterprise is dependent on how robust the home is. Expect to see telecom companies stepping up to deliver beefier networks.

MACHINE-CENTRIC BUSINESS MODELS PREVAIL

Business designs that are dependent on people working in forced close contact are in peril. Workers are going to be justifiably alarmed at the prospect of working conditions dependent on confinement, once the full impact of the pandemic is revealed. Oil and gas is stuck with lots of rigid technologies that will remain human-centric for operations and maintenance, but machines that can run those safely, reliably and impervious to viruses are the future. The rise of the machine-based business model is here. Expect to see a big jump in interest in algorithms, machine learning, artificial intelligence and autonomy that contribute to keeping equipment working longer and harder without human supervision.

Conclusions

A number of cherished oil and gas business orthodoxies have been thrown on the discard pile as we cope with this pandemic. New ones are taking their place, and those that become habits will endure beyond this current crisis.

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Check out my book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, available on Amazon and other on-line bookshops.

Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course.

Mobile: +1(587)830-6900
email: geoff@geoffreycann.com
website: geoffreycann.com
LinkedIn: www.linkedin.com/in/training-digital-oil-gas

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