The beginning of the pandemic transformed habits in all people. This greatly affected the Oil&Gas sector because with measures such as quarantines and strict confinements, the mobility of people was reduced and the demand for fuel decreased. Likewise, the value of the shares of companies in the industry fell throughout much of 2020.

However, for the second half of 2021 this industry seems to enter a state of recovery. As some countries have decreased the numbers of COVID-19 infections and measures have become more flexible, demand for the Oil&Gas sector has increased. However, there are still challenges to overcome.

We tell you some trends and challenges that will be seen during the second half of 2021.

1 . Increase in demand

The pandemic decreased oil demand by about 8 million barrels per day (According to data from S&P Global Platts Analytics), however, it is estimated that at least 6 million could recover in 2021. This translates into an approximate consumption of 100 million barrels in the second half.

This increase responds to the end of border closures, which increases demand for airlines, as well as land travel. Additionally, the announced gradual openings of the USA and the EU, in the second half of 2021, will be markets that will drive demand.

This trend also implies a need to optimize the Supply Chain to meet demand, efficiently manage the relationship with suppliers, manage contracts and guarantee the distribution network.

2. Liquidity management

Liquidity optimization is key for organizations. In the Oil&Gas industry, even more so. It is important during this second semester to guarantee positive cash flow through organized, digitalized and automated processes. With relative oil price stability and cost efficiencies realized during the Pandemic , a likely scenario is that many companies in the sector will have some excess liquidity. The effective management of these resources through early payment discounts to their suppliers, in which they can obtain additional financial returns, becomes an attractive option.  

For those companies that do not yet have these excess liquidity, one of the most notable trends is for companies to collaborate with their suppliersto manage invoice payments, offering solutions such as Factoring and/or Confirming. This last modality allows creditors to have liquidity to face contingencies, suppliers to gain loyalty, the paying company to obtain more days for payment and the Supply chain not to stop.

3.Digital Transformation

Although the industry has faced great challenges, one of the priorities is investment in technology to modernize operations. This new approach includes projects for 2021, such as:

• Incorporation of AI to analyze data.
• Migration to the Cloud to guarantee collaborative and dynamic work in different areas.
• Incorporation of Supply Chain Analytics to forecast demand more accurately.
• SCADA systems to proactively detect leaks and other problems.
• Implementation of platforms that allow interaction with suppliers, logistics operators and buyers for online tracking and Expediting of the delivery of purchased equipment and materials.

Without a doubt, the second half of 2021 brings opportunities for the Oil&Gas sector to continue promoting and strengthening this industry in Latin America.

Sources: EY – Inspirage