Oil & gas sector volatility continues

New challenges force oil & gas executives to develop new strategies for growth

Although the oil & gas industry has always been volatile, there used to be a comfortable predictability to the boom & bust pendulum. These days appear at an end for now. This is one of the findings from the 'Oil and Gas trends 2019', published by PwC as part of the 22th global CEO Survey.

A combination of erratic and inscrutable commodity price fluctuations, ambiguity on the future of fossil fuels and contentious global trade negotiations are upending traditional supply & demand fundamentals. This is generating a host of new challenges with no clear answers, leaving oil & and gas execs to set a growth course for their companies based on constantly shifting sands. “Oil and gas companies, both large and small, seem to have arrived at a turning point where also a decision has to be made about the desired role and intended identity in a changed energy landscape”, says Chris Winkelman of PwC. “This requires the right strategic decisions, in which the choices for the path to be followed seem to be clearly different for large and smaller players.”

Ondanks zijn immer volatiele karakter kende de olie- en gassector altijd een goed voorspelbare conjunctuurbeweging. Van dat laatste lijkt, in ieder geval op dit moment, geen sprake meer, zo blijkt uit de ‘Oil and gas trends 2019’ die PwC publiceert als vervolg op de 22e global CEO Survey.

"Oil & gas companies are facing a turning point, one which requires strong decisions about their strategies for surviving and thriving in uncertain times."

Chris Winkelman,PwC

Three choices for oil and gas companies

Oil & gas companies must make strategic decisions about their role and identity within this evolving energy landscape, with three choices as to which pathway to take:

Push full-speed ahead on fossil fuels
Diversify the portfolio
Go all-in on renewables

Firms are not on an equal footing when it comes to this choice. Large, cash-rich companies have a distinct advantage as they can pivot quickly as industry conditions morph. Smaller, independent oil & gas concerns have less room for error, however, so can best focus on traditional strengths while prudently managing the cost curve.

Download Oil and gas trends 2019

Building growth strategies on shifting sands

What should your priorities be?

Whichever path you choose, regardless of the size of your company, your role as an oil & gas executive during this period of transformation means paying close attention to four key strategic and tactical facets.

Create a strategic identity based on inherent capabilities and a vision on how these can best be employed in the energy sector over the coming decades
An obvious step to take but by no means simple. Many executives find it easier to relive the past than imagine their company’s future. One way of creating a blueprint for what’s to come is to see your legacy as a disposable asset: save the useful pieces of your company’s traditional business lines, divest the rest and use the income to fund the future.
Realign portfolios to focus on strengths and new growth areas
There are several broad approaches to consider. Most companies land somewhere between new asset plays and portfolio rationalisation
Invest in agility through digital innovation
Oil & gas companies with a head start on digital innovation have a distinct advantage. Examples include the use of drones, robotics, artificial intelligence (AI) and virtual reality to make drilling and exploration projects more efficient, speed up resource recovery and lower labour costs
Cultivate and hire the right talent
Implement a distinctive talent recruitment & development approach:
- Offer a more engaging people experience
- Provide a flexible workplace that encourages creativity and innovation
- Use workforce analytics and talent management systems to provide a compensation structure that rewards inventiveness and places a monetary premium on gains from digital advances.

About the survey

Launched at the World Economic Forum in Davos, PwC’s 22nd Global CEO Survey includes CEO expectations for economic growth in 2019. Some 1,378 CEOs from 35 industries in more than 90 territories contributed to the report. The insights from these CEO interviews are combined with expert analysis from the oil & gas sector to explore crucial trends and strategic options.