Energy sector needs to move with tech transformation: report
According to a new report from Lux Research, the oil companies of the future may more resemble the tech companies of today – and those that fail to adapt to the changing digital landscape may be left behind.
In the new report, The Digital Transformation of Oil and Gas, Lux analysts make a strong case for oil and gas companies to embrace the global economy’s shift toward a more digital-friendly way of doing business.
“No industry is immune to the rapidly shifting digital landscape, including very traditional ones such as oil and gas,” said Harshit Sharma, analyst at Lux Research and the lead author of the report. “If the world’s major oil and gas producers don’t embrace these changes and implement systems and processes that will help them scale digitally, they very much risk failing to meet the needs of their global customers, and they will likely lose market share to their counterparts that do adapt.”
The biggest growth hurdle oil companies face today is from the volatile nature of oil, writes Sharma. Five years after the 2014 oil price crash, when WTI hit $28/bbl, the industry is still trying to reposition itself.
“The oil business can no longer enhance its profitability by earning higher revenues due to strong oil prices,” states Sharma. “Instead, the industry has to grow margins at a $50/bbl to $60/bbl oil price via reducing operational and capital costs.”