THE end of the oil and gas industry as we know it has been predicted for many years as the planet turns towards renewables. What is little known, however, is that green energy’s appeal isn’t just environmental: it’s also economic. A recent aggregation of industry research based on data from the UN Environment agency indicates that by 2020, renewables will be cheaper than fossil fuels in many G20 countries.
What does this mean for Singapore – one of the world’s leading oil trading and refining hubs and a global leader in offshore and marine engineering, which relies on the oil and gas sector for around 5 per cent of its gross domestic product?
After several rough years, the temptation might be to enjoy the recent burgeoning oil prices and rising demand. But these mask serious challenges for the global energy industry.
While oil demand is growing for now, new development and production is seriously slowing. Worse still, the low prices of recent years forced companies to heavily reduce spending on technological development and exploration. They now have a reduced capacity to improve production – and the several years it takes to set up a new project means we will be feeling this slump for some time.
If oil and gas companies want to survive as a crucial component of the future global energy supply, they must face some inconvenient truths and radically change their approach, both to business structure and to technology. It’s a time that demands leadership and innovation – but that can mean opportunity for companies and countries that rise to the challenge. Finding large deposits is becoming an increasing challenge requiring complex and costly technology. Those technologies and agile structures are already being developed, but need to be more aggressively adopted by international oil companies.
Fundamental investments must include making exploration and refining more efficient and cost-effective. For instance, according to a Bain report, one company was recently able to reduce its unit costs by 10 per cent just by digitising a remote offshore operations centre.
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