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Trends and challenges for the oil and gas industry in 2022

business-articlesTrends and challenges for the oil and gas industry in 2022

The last few years have been unpredictable for the oil and gas industry.

The coronavirus pandemic saw oil demand suddenly slump before rebounding at a break-neck pace as economies reopened. Meanwhile, the business environment became increasingly hostile for fossil fuel companies amid activist investors and legal challenges, and with tighter regulations on the horizon.

So what does 2022 hold for the oil and gas industry? What are the challenges and opportunities?

Higher prices

One key challenge will be staying competitive if prices continue to soar. Brent crude has risen by around 60% over the last year, while natural gas has climbed by nearly 70%.

Companies which are able produce at a lower cost will have a greater competitive advantage, not only against other fossil-fuel producers but also against ever-cheaper renewables. Therefore, optimising efficiency is likely to be a big trend this year.

High prices could also lead to faster decarbonisation. Conventional wisdom says that higher fossil fuel prices would mean more investment in fossil fuels, as companies seek to profit off of an increasingly valuable commodity. However, many are arguing that the rising cost of oil and gas will help drive the energy transition.

According to 76% of oil and gas executives surveyed by Deloitte, oil prices above $60 a barrel will boost their transition to cleaner energy. Emerging technologies can be risky investments, but the windfall from rising fossil fuel prices puts companies in a strong position to explore these options. In addition, if fossil fuels are more expensive than renewable sources of power, then consumers will be more likely to opt for the latter.

Energy transition

Speaking of the energy transition, it could become a bigger focus for many fossil fuel companies this year. The climate crisis is an increasingly pressing issue, and businesses face growing pressure from governments and consumers to take significant steps in reducing their carbon footprint.

As a result, both a trend and a challenge of 2022 will be how oil and gas companies go about accelerating the energy transition. This could stretch across the whole value chain. Producers may seek to invest more in renewables, while oilfield service companies will have to diversify their offering to cater to the shifting landscape.

Workforce retention

Labour markets are tight right now, and oil and gas is no exception.

The fossil fuel industry faces some sector-specific challenges, too. Many of the industry’s existing workforce are nearing retirement, while the talent pool seems to be shrinking: university graduates from courses such as geology and petroleum engineering have fallen in recent years.

In addition, the energy transition calls for a new set of skills. Renewable energy networks require a greater level of digitisation, putting energy companies in competition with tech companies when it comes to recruitment.

Many workers with these increasingly important skills are younger than the existing workforce. And as younger people tend to be more concerned about environmental issues, they may be resistant to working in the oil and gas industry.

So the industry may find it harder to recruit and retain the talent they need in 2022. Agile work structures (including remote or hybrid working) and greener credentials could be key propositions to attract prospective employees.

Coronavirus

More than a year after the first known outbreak of COVID-19 and countries are still tackling the pandemic. Even in developed countries with high vaccination rates cases and hospitalisations are high, while many developing nations have fared much worse.

Omicron caught us off guard, and most virologists expect more Covid variants to emerge in the future. Many believe that the virus will adapt to become less severe, but there is always the chance new strains could continue to cause disruption. And even if they don’t, the impact of the pandemic will continue to ripple out into the future.

In short, there is still significant uncertainty, both with the current virus and with whatever unseen risks might be lurking up ahead. The oil and gas industry will need to navigate this uncertainty while ensuring they are resilient enough to weather future storms.

Currencies Direct

Currencies Direct

Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.

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