Monday, 27 July 2015

DELOITTE SAYS DROP IN OIL PRICE WILL ENGENDER GREATER INNOVATION


Deloitte Touche Tohmatsu Limited’s Oil and Gas Reality Check 2015 report has revealed that the drop in the prices of crude oil in the international market will engender new ideas in the oil and gas industry.

According to Deloitte, the instability of the oil and gas industry will not impact the long-term trajectory of the sector, but that the current rise and fall might accelerate some of the trends that were already opening up in the industry. The report highlighted major issues currently impacting the oil and gas industry and the upstream market in particular, such as:
·         An anticipated shift in supply-demand fundamentals
·         The emergence of new trading patterns
·         Consideration of the role of the Organisation of Petroleum Exporting Countries (OPEC) in the market
·         Falling LNG prices
·         The long-term costs of complex projects and evolving dynamics between integrated oil companies and national oil companies

Anton Botes, the Global Oil and Gas Leader in Deloitte Touche Tohmatsu Limited, said: “The oil and gas industry has been built on long-term investments and has successfully emerged from cyclical downturns in the past. As these trends play out, companies across the board need to adapt and remain agile to emerge a leaner, fitter business. At the same time, it’s worth remembering that weaker price signals spur innovation. With that in mind, it’s not unreasonable to expect that lagging oil prices will spur greater innovation.”

According to the report, capital spending is likely to fall off in the near term; however, megaprojects will still be required to meet long-term global energy demand, adding that to avoid the cost and time overruns that had typically characterised these projects, companies would likely want to explore a range of strategies, including pre-project planning, integrated project delivery, lean project management, modularisation and talent management.