Collaboration across the supply chain is key

Cuts, cuts and more cuts are
the prediction for the turbulent
oil and gas sector which is
riding out one of the worst
storms ever.
Given the high capital costs
of this sector and the long-term
investment cycle, oil and gas
producers have little alternative
but to relentlessly focus on
cost,” said Chris Bredenhann,
PwC Africa Oil & Gas advisory
leader. “Layoffs, reduced capital
expenditure budgets, and
aggressive discounting across
the supply chain reflect a sector
trying to adjust to a new reality.
While the much-heralded wave
of consolidation across the
sector has yet to be realised, it
is clear that more transactions
may well follow a period of
financial distress.”
Speaking at a recent
oil and gas event,
Bredenhann said
cost was not the only
issue shaping the
oil and gas sector at
present, but it was by
far the most dominant.
“Oil prices have declined
by more than 60% since
2014, with oversupply and
weakening global demand
keeping prices low,” he said.
There was little hope
of an increase, said
Bredenhann, especially in
light of global uncertainty.
“Companies will continue
to cut costs in this uncertain
environment,” he said.
What is required is an
innovative response to
disruptive change using
existing assets as well as
technology, knowledge and
capabilities, in his view.
“A readiness to form
alliances and collaborate
across the supply chain, with
a growing focus on efficiency
gains and reduced
emissions rather
than cost and risk
sharing will also
become increasingly
important,” he said.