How Will the Future of Oil and Gas Industry Look Like After COVID-19 Pandemic?
The dramatic fall in crude prices and the reduced demand from end-users during the COVID-19 pandemic has severely thumped the oil and gas industry. Thus, the recovery scenarios in the oil and gas industry are predicted to be sluggish rather than following a quick V-shaped path. The divergence in supply chains will be key in the post-COVID-19 landscape across the globe.
The massive and dramatic fall in crude prices along with reduced demand from end-user markets during the COVID-19 pandemic has severely knocked the oil and gas industry. Subdued and excess demand resulted in a significant imbalance where particularly, the demand for oil dropped as a result of stoppages in road and air travel. The oil-price war and the impact of the pandemic led to a two-pronged crisis for oil, chemical and gas companies, imposing them to defer investments and stop their existing projects until the situation improved.
Though the evolving long-term outlook for the oil and gas industry presents a critical challenge, a number of energy companies are preparing for the opportunities and threats of the new world that lies ahead once the pandemic ends.
The Slow Recovery Track
The recovery scenarios in the oil and gas industry are predicted to be sluggish rather than following a quick V-shaped graph. Recovery trajectories are predicted to exhibit significant variance across parts of the world, with some regions striving to speed-up energy transition while others focusing more on supporting existing energy-producers and strengthening their domestic manufacturing industries. Since the oil demand was already restrained pre-COVID-19 chaos, the pandemic has further provoked the oil crisis.
Thus, the oil and gas industry is anticipated to witness slower growth and weaker oil demand in the post-pandemic era. A considerable amount of time will be required for the industry to recover the subdued oil prices. Furthermore, the demand for refined and chemical products will progressively recover, once the world will gradually return to the new normal.
Petrochemicals May Exhibit Fastest Recovery Rate
The COVID-19 outbreak around the world has rigorously damaged the whole oil and gas value chain, evident in large capital expenditure cuts, recent production declines, reduced refinery capacity consumption, and deferrals of final investment decision among other measures. On the other hand, the petrochemicals segment is predicted to bounce back faster than all other oil and gas sectors, such as midstream and upstream, after the pandemic. The petrochemical sub-sector’s expected buoyant growth can be predominantly attributed to its wide-ranging application-spectrum which comprises packaging, fertilizers, automotive, electronics, and medical equipment industries among others.
The petrochemicals industry can possibly continue to be a bright spot in the group of leading energy companies. The industry is assisted by investment in advantaged assets, such as petrochemical installations, or integrated refining that feature distinctive technologies which can enable value creation for investors. Hence, it is projected that the petrochemical industry will grow more strong, followed by other segments after the COVID-19 pandemic.
What to Expect in the Post COVID-19 World?
The divergence in supply chains will be key in the post-COVID-19 landscape across the globe. The impact of the unprecedented crisis has been increasingly pushing companies to reform their supply-production strategies to survive the new normal. Most companies however, will have to make and implement changes in their strategies to survive in the post-pandemic world.
In the near future, a majority of companies operating in the oil and gas industry are projected to pursue supply chain adjustments, coupled with leveraging remote-working wherever possible, while also progressively resuming field work. However, energy firms are predicted to gradually adapt to the emerging new normal in the medium to long run, to safeguard their financial sustainability. The companies are likely to influence a more digitally connected enterprise, across both corporate functions as well as their plants through the incorporation of essential supply chain adjustments. Furthermore, nations across the globe will prioritize self-sufficiency while avoiding excessive dependency on any one source or commodity in the post-COVID-19 world.
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