As December is finally here -marking the end of 2015, the oil and gas industry continues to experience the consequences of one of the worst downturns of its history. At the beginning of 2015, many oil and gas companies were faced with a harsh reality that for them to survive the downturn, they have to slash their spending. Therefore, it was clear that doing nothing is not an option, and companies need to take fast cost-cutting measures to combat the current oil price slump if they want to survive such low-oil-price environment.
Oil companies started to aggressively reduce their workforce, scale back, sell existing assets, put strategic plans on hold, and consolidate with other companies. Such measures worked for many companies, however those who did not have the ability to become fully efficient were faced with a wave of bankruptcy. According to Wall Street Journal, around 37 oil and gas companies have filed for chapter 11 bankruptcy protection so far this year. Obviously, 2015 downturn seems to be taking a bill on the oil and gas industry, but is that what the downturn is all about?
No one can deny the fact that the current low-oil-price environment has adversely impacted the oil and gas industry, however, it is totally unrealistic to only look at the negative side of the downturn. While low-oil-price environment leads to extreme measures and cutbacks, it presents a unique window of opportunity for oil companies, exporting and importing countries and O&G professionals. What is crucial about that window is; it will eventually close, and that may happen fast even before many decide to take advantage of.
Opportunities for O&G Companies
Tough times surface the weaknesses, and so did the current downturn. Over the past five years, the oil and gas industry has seen a frenzy of activity as oil prices were high and sustained for a long time. Therefore, the main focus of many oil companies was scrambling after volume and growth. The fast growth of the industry, and the desire of companies to make higher profit made them sometimes fail to consider if they were operating efficiently and getting higher productivity for their investment. As the oil industry was hit by the downturn, companies started to realize that things are not really going well, and change is needed.
The positive side of the current downturn is that it is a wakeup call for oil companies that were driven by fast growth and short term profit. It represents a window of opportunity for oil companies to do a reality check, spot problems and fix them. Therefore, it is time for companies to get out of their comfort zone, learn how to adapt, and make money at whatever the oil prices are. And regardless of the short terms loses that oil companies are experiencing, they should be able to take advantage of the following positive aspects of the current market downturn:
Highlight ongoing inefficiencies and problems, and fix them.
Focus on increasing operation efficiency.
Focus on innovation and cooperation with other companies.
Capture market share when your competitors are pulling back.
Penetrate new markets, diversify your business.
Engage your employees, train them to be multitasked.
Launch new products that are focused on increasing efficiency.
Try out new geographic region, and buy low cost leases.
Recruit the best talents and most experienced hires at low cost,
Get more out of what already exists, and keep your staff employed.
Reprocess and reevaluate your existing data at low cost.
Opportunities for Importing & Exporting Countries
When talking about opportunities the current downturn in O&G industry offers to countries, one should divide those countries into two categories, namely, winners and losers. Winners are crude oil importing countries such as China and India. Those countries are already taking advantage of the prolonged downturn as the cost of buying oil halved, that means those countries are spending less and saving more. Countries in this category should take advantage of the downturn to cut subsidies on fossil fuel. They should also be ready with a huge stockpile capacity to buy as much cheap oil as possible, because no one knows when such window of opportunity will be closed, and it could close fast.
The second category consists of countries which are losing due to the current low-oil-price environment. Those are crude oil exporting countries such as Saudi Arabia, Russia, and Iran. Most of the oil exporting countries are heavily dependent on crude oil revenues for their budgets and this is why countries like Russia and Venezuela are having a tough time as oil prices remain low. Countries in this category should consider the current downturn as a reminder for them to reduce their budget dependency on oil revenue, and to diversify their economy. Those countries should also start to think seriously about reducing their subsidies for fossil fuel now, as eventually they will have to do it, but when it is too late.
Opportunities for Professionals
The current downturn has led to a huge number of layoffs in the oil industry, and the number still increasing. Many have lost their jobs and things are getting harder, but the downturn still holds a positive aspect for those working in the oil industry. As for professionals, those who have been laid off, or those who are still waiting for their turn, this is the best time for spotting weaknesses and making improvement. Therefore, if you still have your job, make sure to secure it by identifying your weaknesses, areas to improve and work hard on them to make sure that you can keep your job in such a very competitive market.
But even if you have been laid off, that is not the end of story. The oil industry is a boom and bust by nature and soon enough things will get better and the need for workforce will be back again. It is important to take advantage of the downturn by assessing your skills and competencies, finding your weaknesses and areas to improve. Utilize this time to improve your skills and competencies, attend training workshop and Society of Petroleum Engineers’ conferences. Make sure to take advantage of all the time and resources available to get yourself ready to win the competition.
It is now over a year since the O&G industry started to experience a low-oil-price environment, and it seems that the downturn is going nowhere for quite some time. It is important to understand that this is not the time to rely on hope nor the time to complain and put the blame on others, because hope, blaming and complaining is not a strategy to survive. The downturn offers many opportunities of change for oil and gas companies, professionals and exporting and importing g countries. Therefore, to survive, it is crucial not to panic, stay focused, act fast, fix what is not working, and before you make any decision, think about where you want to be when the market recover.