Oil prices have always been fickle, and the industry was just beginning to see light at the end of the tunnel following the major oil crash in 2014.
The price of oil dropped hard and fast, from $115 per barrel down to $70, a fall of around 40%, between June and December of 2014. In 2019, the price of oil was still sitting at around $64 a barrel, $7 a barrel less than the previous year, but still holding steady with a positive outlook for 2020.
Then, in March, as Europe’s coronavirus death toll began to rapidly increase – with Italy’s healthcare system overwhelmed by cases – it became apparent that COVID-19 was going to have huge implications worldwide.
Now, just over one month later, the world is in lockdown and cases have passed the 3 million mark. Businesses are having to adapt and change aspects of their day-to-day running to mitigate the difficulties they face.
Ian McGowan, the managing consultant at Barrier Networks, commented on these challenges: “The Oil and Gas sector is faced with the same lockdown challenges as other businesses but in the energy sector you have the added complication of an industry that society relies on.
“The social distancing rules imposed by the government in many situations cannot be complied within the energy sector, so employees are working under conditions which are exposing them to a higher risk of infection.”
The Digital Solution
Oil and gas companies, much like across many sectors, had to quickly adapt to the changing situation after oil prices dropped by around 30% in a week, and now around 50% what they were in January.
Worldwide, organisations have been stripping back workforces to weather the storm, as well as modernising their systems to for employees to work from home.
The UK Oil and Gas Authority (OGA) set out a digital strategy covering the move to a more technology based working systems, and aimed at delivering, promoting and influencing digitisation to the industry.
The strategy, introduced in December 2019 and covering the period between 2020-2025, provides benefits such as “delivering a digitally-enabled culture and way of working that supports the OGA’s “great place to work” initiative with better data, information and automated and streamlined workflows”, and changing business models to help save costs and improve digital experiences.
This acceptance and utilisation of data are potential tools that could help the industry to weather the storm over the next few months.
Commenting on the OGA’s response to the crisis, Chief Executive Andy Samuel, said: “We’re working very closely with the Department for Business, Energy and Industrial Strategy (BEIS) and HM Treasury on financial resilience while supporting the work of industry and trade associations such as OGUK and UKOOG on operational and logistical resilience.
“We at the OGA have swiftly re-prioritised in response to this evolving situation. Areas of immediate focus include financial and operational resilience; operations and turnarounds; licence management; supply chain; and communication.
“We recognise the immediacy of the current situation and will work flexibly with all parties as appropriate.”
The advent of home working also means that companies have many staff out of the office. Many do not have systems in place for this situation.
McGowan explains how companies such as his can help businesses: “We have helped a large number of organisations to transition to secure remote working at a scale they have never had to embrace, and in a timescale that would previously have been deemed impossible.
“Those efforts are still ongoing, but we are now seeing an increase in security assurance activity to assess the cybersecurity risks that these new operating conditions introduce to home workers.”
Cyber-Threats in the Industry
The advent of COVID-19 has seen an increase in cyber-attacks of various forms using the virus as a topic increase over the last few months.
Phishing attacks involving emails purporting to contain vital information about the virus and potential cures have been catching people out all around the world.
McGowan comments: “The relevance of coronavirus to us all means that it is likely to provoke curiosity in the user environment and that is particularly concerning with email phishing attacks.
“We’ve conducted COVID-19 phishing campaigns at the request of two large organisations who felt that it was necessary to prepare their user base for this type of attack.
“In the space of three weeks, we have been able to reduce employee susceptibility to COVID-19 related phishing attacks significantly by raising awareness and providing educational content.”
Danika Blessman, Sr. threat intelligence analyst, Global Threat Intelligence Centre, at NTT, says that cyber-criminals aren’t going to stop using COVID-19 anytime soon: “COVID-19 is being used as a lure for cybercriminals – especially as around 2,000 coronavirus-themed websites are created every day – and will continue to be for the duration of the pandemic.
“COVID-19 has generated a sprawling web of cybersecurity risks. But it is not just a news story that criminals are using as fodder for phishing emails. The world is reaching into unknown territory, not knowing exactly how to react to new social and physical restrictions.”
Blessman adds: “As the number of COVID-19 cases rises, we can expect to see that both cybercriminals and possible nation-state actors increasingly exploit the global crisis.
“Businesses must continue to use common sense and implement best practices in all aspects of their network – and day-to-day – environment.”
The oil and gas industries are at particular risk as they become more digitised. A report by registrar company DVNGL found that increased use of digital technologies put the industry at more risk than others due to its size and wealth generation.
According to the report, events over the past few years have shown that that the energy and petroleum sectors are “among the most vulnerable”, and the methods used against them are becoming increasingly innovative and more sophisticated.
Pete Watson, CEO of Atlas Cloud, commented on a major issue with increase digitisation: “Like many Scottish businesses, companies in the oil and gas industry are run using a device-led IT model, where work and sensitive data is often held on devices, like laptops, tablets and smartphones themselves.
“When individual devices hold sensitive business information it is far easier for this information to be hacked or taken away from the business by an employee moving to a rival company.
“To combat both internal and external cyber-attacks, the oil and gas sector should move away from device-led IT and towards server-led IT such as virtual or hosted desktops, where information is stored on on-premises servers or in the cloud.
“Server-led IT is hugely important for ensuring business security during COVID19 because it takes the control of business information out of the hands of individual employees working on individual devices, where the information is less secure and more vulnerable and gives control back to oil and gas businesses who retain ownership of all their business information in the cloud.”
Both the UK and Scottish Government are stepping up to support businesses through the crisis.
Finance Secretary Kate Forbes announced money for one-off grants from a £1 billion support fund to prevent job losses and to prevent companies from going bust.
Through this scheme, more than 90,000 ratepayers in Scotland can benefit from the one-off grants, designed to “help protect jobs, prevent business closures and promote economic recovery.”
There are two types of grant available: £10,000 payment to ratepayers of small businesses or £25,000 to retail, hospitality, and leisure business ratepayers with a rateable value of between £18,001 and £50,999.
The grant support is in addition to separate tax relief measures and is part of a package of measures worth £2.2 billion.
The UK Government has also passed the Coronavirus Act 2020 on the 25th March, outlining the government’s response to the pandemic.
“The economic outlook for the oil and gas sector as a result of COVID-19 and historically low oil prices remains challenging,” a spokesperson from the Scottish Government commented.
“The Scottish Government is determined to use all resources and levers at our disposal to support businesses and jobs during this global public health crisis, which is why our financial support now exceeds the £2.3 billion passed on from the UK Government.
“Although oil and gas taxation and regulatory policy remain reserved to the UK Government, we continue to work closely with the UK Government and the industry to assess the gaps within the existing support packages that have been announced.
“The Energy Minister has held several strategic engagements with the sector since the onset of COVID-19, including with Oil and Gas UK, the Oil and Gas Authority and the Trade Unions.”
A meeting of the Scottish Government’s Oil and Gas Energy Transition Strategic Leadership Group was also convened in April to hear from stakeholders on the immediate and longer-term challenges affecting the oil and gas sector the sector.
The spokesperson continued: “A key theme throughout this engagement is the positive role that the oil and gas sector and its workforce can play in the energy transition”
The Industry’s Future
In response to the recent news that oil prices have dropped below $0 for the first time in history, oil companies such as Saudi Aramco have started reducing production from 12 million barrels per day (mbpd) to hit its target of 8.5 mbpd, according to an article by Bloomberg.
The drop in prices has caused a huge backup in oil supplies. There is potential that we will run out of places to store oil in as little as three months.
More than 600,000 bpd in production cuts have already been announced in the US, as well as another 300,000 bpd of shut-ins in Canada. Brazil’s state-run Petrobras has reduced output by 200,000 bpd.
The current coronavirus landscape changes daily, and it is impossible to know exactly how industry and business will be affected long-term.
If lockdowns remain in place, the oil and gas industry will continue to suffer increased disruption to demand and supply chains, with many margins and prices already collapsing.
Ian McGowan concludes: “In these circumstances, it is difficult to predict where we will be, but I expect the waves of infection will continue until at least the end of this year.
“I believe we can take comfort in the success of the radical adjustments we have made in such a short period and that we will work continue these efforts together, towards a new definition of normal.
“These are challenging times for all of us, so it is more important than ever that we work together towards a common purpose.”