The sector’s outlook appears more promising for 2021, already fuelled by higher oil prices (Brent at US$68/bbl at the time of writing), the COVID-19 vaccine rollout, and consequent growth in global oil demand. But the industry is still in crisis. With too many companies and assets competing in a shrinking market, businesses carrying too much debt on their balance sheets, and fewer interested capital providers, this crisis is unlikely to pass for some time.
What might the sector’s future hold to transition from this crisis?
Diversification is inevitable for upstream operators and contractors. Together with decarbonisation, diversification presents a great opportunity for OFS companies to:
- Expand their addressable markets
- Gain exposure to end markets — anticipated to experience structural growth
- Redefine investor perceptions.
The industry must address ESG aspects head-on. That means investing in, developing, and using, all available technologies to meet these responsibilities and address investor and customer concerns. It’s technology that will continue to unlock the industry. This digital journey is unfolding across the industry at different speeds. For many, digitalisation delivered a meaningful bottom-line impact to their 2020 financial results — by leveraging it to lower internal cost structures and improve efficiencies. Others are embracing it as a key differentiator, offering another revenue stream. Whether secured through partnerships, joint ventures or alliances, what’s certain is that digitalisation is a growth opportunity for the sector and a solution to many of its challenges. Alongside diversification and decarbonisation, digital will play a key role in bolstering industry morale following these challenging times, and in attracting much needed new talent.
The full breadth of OFS has so much to offer. As companies reinvent themselves, it is time they also rearticulate their purpose — reminding people how they benefit all their stakeholders and society. While great challenges remain, those that embrace these challenges and seek to build long-term value, will help deliver sustainable returns, attract new capital, and build a brighter and more prosperous future for the industry and the world.