The onset of the pandemic transformed people's habits. 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 fuels decreased. Likewise, the value of the shares of the companies in the industry fell in most of 2020.
Challenges in the oil & gas sector
However, by the second half of 2021 this industry appears to be entering a state of recovery. As some countries have decreased COVID-19 contagion numbers and measures have been relaxed, demand for the Oil&Gas sector has increased. However, challenges remain.
Here are some of the trends and challenges that will be seen during the second half of 2021.
1.Increased demand
The pandemic decreased oil demand by about 8 million barrels per day (according to S&P Global Platts Analytics data), however, it is estimated that at least 6 million barrels per day could be recovered by 2021. This translates into an approximate consumption of 100 million barrels in the second half of the year.
This increase responds to the end of border closures, which increases airline demand, as well as ground 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 for optimize the Supply Chain to meet demand, efficiently manage supplier relationships, manage contracts and secure the distribution network.
Liquidity management
Liquidity optimization is key for organizations. In the Oil&Gas industry, even more so. It is important during this second half of the year to ensure positive cash flow through organized, digitized 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. Effective management of these resources through early payment discounts to their suppliers, where they can earn additional financial returns, becomes an attractive option.
For those companies that do not yet have this surplus liquidity, one of the most marked trends is for companies to collaborate with their suppliers for invoice payment management, 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 does not come to a halt.
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 a collaborative and dynamic work in the different areas.
- Incorporation of Supply Chain Analytics for more accurate demand forecasting.
- 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.
Undoubtedly, 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
