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JAKARTA (RambuEnergy.com) – There appears to be a glimmer of hope in the oil and gas industry these days. For the first time since crude prices nosedived in 2014, a majority of oil and gas industry CEOs surveyed for PwC’s 21st CEO report say they believe that global economic growth will improve in the next 12 months.
The Pricewaterhouse Cooper’s survey shows 83% of industry CEOs report they’re very or somewhat confident in their own company’s prospects for growth in the next 12 months, and 91% say they’re very or somewhat confident of revenue growth over the next three years.
Positioned for profitability
Most companies have substantially reduced their cost bases, enabling them to increase profitability even absent rising commodity prices. And the return of growth to the largest global economies has bolstered CEOs’ confidence that demand for their energy products will remain strong for the foreseeable future.
Most CEOs believe that their companies will grow in tandem with the world’s economies, signalling an end to the industry’s long period of retrenchment and the start of a new phase in which increases in the available capital will enable companies to grow from within. A large majority of CEOs – 83% – say that organic growth will drive their companies’ growth or profitability.
Strategic Alliances
Although most CEOs say that they expect organic growth to be the main driver of their companies’ growth, they don’t dismiss the value of inorganic growth. Strategic alliances have emerged as an important lever, with 60% of CEOs saying that strategic alliances will be critical in delivering growth, compared with 39% who say M&A activities will.
Companies in every subsector of the industry have forged alliances, including tie-ups between exploration and production (E&P) companies aimed at creating value through risk- and knowledge-sharing increased investment capacity across the oil and gas value chain, and stronger corporate governance.
In other cases, oil and gas companies are teaming with technology companies to speed up the application of emerging digital technologies, such as the internet of things (IoT), to their operations.
Digital Strategy
Like their counterparts in other industries, many oil and gas CEOs are embarking on digital transformations of their companies to deliver sustainable cost reductions, enhance revenue growth, and support better decision-making.
While oil and gas companies have long since invested in technological improvements at the wellhead, digital transformation promises to reshape all elements of the operating model including the back office, supply chain, strategy, processes and culture.
But there’s more to transformation than a significant investment in digital solutions—new skills and capabilities are also critical. Digitalization changes how work is done, reshaping work practices (such as decision making on exploration) and work streams (such the delivery process that spans several departments).
For transformations to truly take hold, companies need cultures that promote cross-functional collaboration, information sharing, and speedy decision making. Many companies will need to reassess their cultures as well as hiring strategies to ensure they are well-positioned to reap the full benefit of technological advances. (*)
