Looking back at the past few days, it is hard to recall a more significant big picture week for the O&G industry. This week is all about talk from O&G decision makers in positions of power. Talk of structural shifts, talk of ambitious goals, and policy talk that will influence oil prices.
As OPEC leaders gather in Vienna to talk quotas, 150 world leaders are assembled in Paris to strike a climate deal that will involve the O&G industry. Meanwhile, Saudi Aramco’s CEO talked of a long-term localization policy that could redefine the Kingdom’s oil service market. And the president of Schlumberger said the bellwether’s staff is still too large even after 20,000 layoffs to date – signaling another wave of industry downsizing into 1Q16.
This week, the groundwork is being laid for significant structural shifts in the oil and gas business. The most immediate change will be continued reductions in operational scale across the industry. Companies are being forced to resize for the new normal revenue reality and dimming 2016 outlook.
The most impactful big idea may be Saudi’s new local content program. It sets a course to cut the Kingdom’s ~$20bn p.a. market for Western sourced products and services in half over the next 5 years. The least impactful may be the talk at the OPEC meeting tomorrow, where the group is expected to stay the course on market share protection over price. Guggenheim introduced the most encouraging big idea this week, when the firm’s lead oil service analyst went all in on a sooner than expected oil price recovery.
The most ambiguous big idea might be the implications of COP21, where 10 IOC executives are participating in climate deliberations. These 10 execs have issued a proclamation that the O&G industry must be proactive in addressing climate change. What “proactive” means exactly is still unclear. ExxonMobil, notably absent from COP21, struck a balanced tone in a blog post Wednesday supporting conference efforts but stating that climate change risk mitigation must consider humanitarian necessities and differing national priorities.
Some of the big ideas talked about this week will be easier to implement than others. Whatever the final outcomes may be, the intentions of key industry influencers are coming into focus this week. Now it’s time to execute, and the implementation of this week’s talk will impact many Oilpros in one way or another.
This editorial is part of this week’s Oilpro Weekly Review, which also recaps the best discussions on Oilpro. The Oilpro Weekly Review is delivered to Oilpro inboxes each Thursday morning. To receive these comments by email each week, sign up for Oilpro, or if you are already a member, click here to adjust your email settings.