Oil & Gas industry insights Oil & Gas industry insights Oil & Gas industry insights

2020 has been a tumultuous year for the oil and gas industry with (17 percent) in ‘hard reset’ mode – double that of the overall average (8 percent). Commodity prices, already significantly depressed, were exacerbated by disagreements between Saudi Arabia and Russia over production levels. And then COVID-19 struck. The pandemic dramatically reduced demand as commercial and consumer transport modes effectively went into hibernation and manufacturing output dropped. The effects were so drastic that on April 20, 2020, crude oil contracts went negative for the first time in history. Since then, OPEC+ compliance and the slow reopening of many countries around the world have propped up Brent crude prices, with prices recovering to pre-COVID levels late in the year.  But in light of the volatility, the drastic downturn caused many oil and gas companies to reduce development programs, scale back production or shut down wells in order to reduce both capex and opex. Oil and gas executives have focused on cash preservation, concentrating on core operations. It's likely that we'll continue to see a number of impairments, bankruptcies and restructurings in the sector, and a longer-lasting impact beyond the immediate COVID-19 hits to cash and liquidity - effects that may permanently change the sector as we know it.

Alongside this, the industry is already grappling with growing pressure from climate change and ever louder demands from governments, stakeholders, NGOs and consumers for cleaner forms of energy. Investment into clean energy sources and infrastructure has become both a strategic imperative and an opportunity for financial revitalization.

Despite all this, for the foreseeable future the world will go on significantly relying on fossil fuels in the new reality. As supply chains start to revive, and travel and quarantine restrictions are lifted, demand will begin to rise again and buoy oil and gas prices. The super-majors and majors have sufficiently large balance sheets to withstand the short term pressures – although some smaller competitors and oilfield service providers will struggle to weather the storm.

From a technology perspective, everything must be geared around enabling efficiency and cost gains. Systems and data must be integrated across front, middle and back offices to deliver more precise forecasting, enable shorter decision cycles that drive profitability and reduce waste. Enterprise SaaS, advanced analytics, and automation must be fully utilized across both production systems and corporate platforms to modernize largely disparate and aging tech stacks. Insights across the enterprise will be needed to better collaborate with the business and supply chain partners as well as to identify strategic investments.

Whilst amongst the leaders in the application of advanced technology to operations, in the IT function the oil and gas industry traditionally moves relatively slowly, so there is a critical need for companies in the sector to double down on innovation and speed. The traditional supply/demand model is now at a tipping point, helping unite the business and IT to push for greater value, efficiency and effectiveness - making it no surprise that Boards are chiefly looking to IT to address improving operational efficiency to minimize downtime and poor utilization of assets and gaining actionable

insights from data. Infrastructure/cloud is the number one IT investment priority for Boards – indicating their appreciation of the key importance of digital infrastructure, cloud-based collaboration platforms, IIOT and intelligent operations in the sector.

While KPMG firms are some of the largest providers of services to oil and gas organizations globally, we take a boutique approach to client issues with a focus on flexibility, adaptability, and innovation. KPMG firms recognize that there are many on-ramps to supporting IT transformation and we’ve tailored our services accordingly:

• Strategy and operating model
• Organizational design
• Enterprise architecture
• Portfolio planning
• Merger and acquisition
• Integration and separation

• Scaling agile
• Product management
• DevOps tooling
• IT financial management
• IT service management
• IT asset management

• Cloud strategy
• Data center strategy
• Continuity and resiliency
• Workplace transformation
• Network modernization
• Cyber, risk, and compliance