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Oil and gas companies are unlikely to loosen their exploration and development purse strings anytime soon as the future remains uncertain. It’s predicted that they will instead focus on production and operations optimization while investing heavily in energy transition strategies.

As we emerge from Covid-19 the demand for oil has rebounded – crude oil prices have more than doubled in the second quarter of 2021 from a year earlier. Market analysts predict that prices will reach $78 a barrel, their highest in almost three years and may even reach $100/bbl by next year, a trend fuelled by a predicted surge in travel once pandemic restrictions are lifted. However, despite this positive outlook, oil and gas operators are acutely aware that this boom could also mark the final surge in oil prices.

Due to the recent market volatility coupled with the overall market downward trend over the past decade, oil and gas companies are less inclined to splash billions on new projects that could take upwards of ten years to deliver a return on investment. Although the demand for oil is unlikely to abate in the near future, there is also considerable pressure on companies to speed up their journey to Net-Zero and to ease off developing new greenfield projects.

Generating high returns is a top priority

A demand for better cost efficiencies, increased production and cleaner energy is making optimization a more attractive investment than exploration. Similarly, the pull towards lower-carbon fuel provides companies an additional incentive to explore options to modify existing assets for green energy production.

“Higher oil prices allow us to extract more value from our existing businesses, which in turn will generate more resources for our spending on transformation in line with our energy transition roadmap,” Repsol Chief Executive Josu Jon Imaz told Reuters in a statement.

Supermajors, such as Shell and BP, have made big promises to anxious investors about high returns from the sector, which has been performing poorly over the past decade, and are therefore unlikely to throw the spending discipline they’ve practiced during the pandemic to the wind any time soon. Research by McKinsey & Company predicts that discipline in finance, capital allocation, risk management and governance will be critical to the future success of the oil and gas industry.

Drive value through the adoption of digital solutions

It’s estimated that throughput from existing assets could be improved significantly – in upstream, average performers have more than 20% opportunity, and even top-quartile performers could improve production by 3% to 5%. These figures suggest leading companies are likely to prioritize scaling up investments in technology, digital tools and data-driven solutions.

Oil and gas technologies are evolving so rapidly that they now offer the industry a myriad of digital solutions to help them achieve their performance goals. Advanced technologies, such as digital twins, IoT sensors, AI powered analytics, and 3D modelling will transform how companies operate for the better. 

The Covid-19 crisis, in which demand for oil almost stalled completely, has also prompted many company leaders to reconsider how their teams collaborate, deliver projects and the management processes needed to run a more efficient oil and gas project. Greater connectivity through cloud-based platforms and the digitalization of data and processes enables teams to work more effectively no matter their location and in real-time.

Optimize your digital tool box

Digitalizing the toolbox needed to deliver an oil and gas project on budget and ahead of schedule is an investment companies should be giving serious consideration, given the current situation. With the future uncertain and the possibility of a re-emergence of Covid-19 or a more virile variant, business leaders should not discard the lessons learned during the crisis – adaptability and resilience is paramount.

Even before the pandemic, the energy industry was in a period of transformation, but now the industry fundamentals have changed and things are likely to get tougher. To be able to compete in this new business landscape companies will need to embrace a new way of thinking, champion innovation and adopt superior operating models.

With its powerful 3D visualization tools and central data hub, FutureOn’s FieldTwin and FieldTwin Design makes optimization, planning, and decision making easier and faster. FutureOn’s cloud-based tools enable projects to continue despite social distancing and help minimize the need for crew to be offshore. Taking this approach addresses many of the issues the industry has faced since the first lockdown in early 2020 and will continue to face until we reach mass Covid-19 vaccination, which could potentially take until 2024.

To find out more about how FutureOn’s cloud-based digital twin solutions can support your company in achieving its performance and production goals or for enquiries about partnership opportunities please contact us or book a demo.