GPB Global Resources is one of several innovative oil exploration companies that provide cutting-edge technology to areas that do not have the resources to bring new oil industry resources online. Founder Boris Ivanov built his career as a diplomat and an international financier, following a successful stint at the Russian oil and gas champion, Gazprom. He describes GPB Global Resources’ ethos in two phrases: ‘We dare, where others do not’ and focus on the “can do” mentality.
As several countries are starting to gradually lift stay-at-home orders and allow people to go back to work, it remains to be seen what a new “normal” will look like. The oil industry has undeniably taken a huge hit during the COVID-19 pandemic and how it rebounds depends largely on factors out of companies’ control. However, embracing new technologies and pivoting towards renewable fuels will undoubtedly help mitigate the damage and help set companies up to thrive in the decades ahead.
The 2020 COVID-19 pandemic has affected almost every aspect of the global economy, as workers and consumers stay home and countries shut down non-essential businesses and services in an attempt to limit the virus’ contagion rate. The oil industry has been particularly hard hit as prices for crude oil dropped to historic lows and consumers stayed off of the roads and away from the airports.
The price of crude oil has always been volatile, but the COVID-19 pandemic has created a perfect storm, combining plummeting demand with erratic financial markets and the need to keep oil workers protected from contracting the virus. To make matters even more challenging, Saudi oil producers launched a price war in late April, driving the price of a barrel of crude oil down even further. As I write this, the price of US crude oil has dipped below zero, an unprecedented situation. For oil industry workers, this volatility has meant layoffs and unemployment and more are likely to follow. Recently, Rystad Energy suggested that up to twenty percent of the offshore workforce could lose their jobs before the pandemic has abated, and that these staffing cuts could remain in place until mid-2021. Oil producers are facing bankruptcy, stockpiles of unsellable oil and turning off the valves on offshore rigs.
Recovery Plan for the Off-Shore Oil Industry
According to Boris Ivanov, Founder of GPB Global Resources, before the pandemic shutdown, nearly 96 million barrels of crude oil were consumed each day, more than 60 percent of which were used for transportation. Before the pandemic, this rate of usage was predicted to last for at least five more years. However, the shutdown may likely quicken worldwide adoption of electric cars and fuel-efficient motors. This is already happening in some countries.
In Norway, 42 percent of all automobiles sold in 2019 were electric cars. That number goes to 56 percent if one counts in plug-in’s. It’s difficult to envision what the world marketplace will look like post-COVID-19. However, Mr Ivanov has shared his view on initiatives that the industry can do to ready itself for the recovery period:
1. Further embrace technology. Previous price cuts have prompted oil companies to put in place more technology in their offshore operations. To rebound successfully, these companies will need to replace some of their human workforce with AI and other management technology.
2. Pivot to other energy sources. The period after the pandemic shutdown may also be a good time for companies in the oil industry to diversify and invest in renewable energy sources. Many have already begun. According to Forbes magazine, “Enerco and Shell are jointly investing in offshore wind, combining offshore expertise with cash. BP has said it plans to achieve net zero emissions by 2050, while Repsol and Equinor continue to buy their way into solar and wind energy. “
3. Work in collaboration with governments. Many governments, including several EU countries and the United States are proposing some type of economic bailout plan to help hard-hit industries, including the oil industry, recover after the pandemic shutdown has ended.
Several industry analysts have stated they expect demand for crude oil to surge as consumers travel even more than they did before the emergence of the pandemic. However, a willingness to adapt to the new normal and to “dare, where others do not” is likely to be critical for oil companies seeking to thrive in the post covid-19 world.