Quality of Work Life: an evolving definition
Global oil and gas demand and prices are recovering from Covid lows. Global oil supply could exceed demand in Q4 on the back of increased production. However, demand recovery remains fragile and relies on continued Covid case reduction.
Spurred on by declining Covid cases, the global economic recovery has led to a dramatic increase in oil price and demand. Brent prices have risen steadily from $ 54 / bbl in January to $ 82 / bbl in October, its highest since 2018. Despite reaching the highest rig count since 2019 (787), it remains significantly lower than 2019 pre-COVID levels.
OPEC+'s tight supply management has led to a reduction in global oil stocks, particularly those held by Western countries. OPEC + has cautiously managed its production increases amid uncertainties over oil consumption. Despite American pressure to increase the production, OPEC+ has not wavered from its incremental production increase policy (+0.4 Mb/d per month).
The expected reversal of the supply-demand balance will arrive in Q4, with an anticipated surplus in 2022.
The end of the lockdown measures triggered a rapid economic rebound and the subsequent energy consumption recovery. Against this backdrop, OPEC+ and American producers are cautiously bringing production back online, resulting in short-term shortages driving the price of oil. Previous production cuts and gradual production increases have brought inventories to low levels, intensifying competition between countries for imports of fossil fuels. Furthermore, the Northern hemisphere has entered the cold season, placing additional pressure on the supply-demand gap.
While spurred on by current market conditions, oil‘s recent highs can be attributed to structural changes.
This situation has spurred debate over the current energy infrastructure. As electricity demand growth has increased more rapidly than renewables’ electricity generation capacity, countries have called for additional investment in clean energies to avoid similar situations in the future.
With a cold winter expected in Europe, demand for natural gas will increase while supply remains stagnant. Geopolitics plays a significant role in European gas supply as well. Nord Stream 2 could ease European supply concerns, but tensions between Russia, Europe, and the U.S. remain. Once fully authorized (subject to German regulatory approval), the pipeline could double European imports (55 billion cubic meters of gas per year) from Russian oil giant Gazprom, providing natural gas supply to an additional 26 million households.
Category 4 Hurricane Ida hit the Gulf of Mexico at the end of this summer (August 26th to September 4th), causing massive damage to the U.S. Gulf’s oil and gas production. ¾ of the offshore oil and gas production in the Gulf remained offline in October, and production restarts are experiencing additional delays. Hurricane protocol imposes shutdowns on all facilities (offshore platforms, rigs, and refineries) and mandates the evacuation of all personal from offshore platforms. On October 8th, analysts estimated that 17.5 million barrels of oil production were lost. Estimated forecasts indicate that Ida could have reduced total U.S. production by as much as 30 million barrels this year. This regional impact played a significant role in global oil price increases (Brent +19.3%) and (WTI (+22.8%) / barrel compared to August prices.
The O&G industry has made tremendous progress in digitalizing its operations over the last decade. The next decade’s progress will come from advanced digitalization. New technologies such as AI, IoT, digital twins, and blockchain could revolutionize the industry.
AI and new smart capture (IoT) technology could help offshore platforms and near-coast refineries achieve quicker shutdowns and re-openings by forecasting weather changes faster and more accurately. This strategic move should help Gulf producers and refiners cut downtime caused by extreme weather events in half while increasing field personnel safety. If these tools had been equipped in the field at the time, the 17.5 million barrels lost to Hurricane Ida might have been reduced to 8.75 million barrels.
Blockchain and IoT can help track and secure oil transported by tankers and barrel movements in storage facilities. These technologies ensure the provenance of the goods and help diminish theft, dispute, and loss of product in transport or storage by giving each parcel a digital signature. Despite high implementation costs, benefits could be quickly realized by reducing disputed transactions (9% of the market) and counterfeit products (15% of the market).
Digital twins could improve refinery and offshore platform maintenance and surveillance. BP’s virtual model (APEX) helped deliver 30,000 additional barrels a day across its global portfolio, while Petrobras saved $154 million via the installation of digital twin technology in 11 of its refineries.
Robotics play a significant role in O&G’s digital revolution as well. The use of drones and robots improves operational efficiency and safety. For upstream activities, robotic shallow water pipeline inspections reduced operation time and cost while increasing while enhancing safety by reducing human diving activities. In the downstream sector, drones and wearable technologies used to inspect pipelines and machinery (digital helmets for image and video capture and glasses that load the pertinent data directly onto the lens) have reduced inspection time by 90%.