A new decade is here. This position provides an excellent opportunity for pipeline operators, midstream companies, and energy producers to review major trends of the last decade in light of the current oil and gas uncertainty of 2020. This period also represents an opportunity to ensure that your measurement team is adequately trained on measurement standards to protect the integrity of your operation.
How We Arrived at Economic Uncertainty
Over the past ten years, we have seen periods of seemingly boundless industry investment, such as the $100 per barrel years of 2011 to mid-2014. We have also seen the downward trends of price crashes and continued industry downturns from mid-2014 to 2017.
Neither of these waves appear to be poised for an imminent return, as the industry has learned from both episodes. Yet, uncertainties are still a challenge to investments and performance.
As we look ahead to 2020 and beyond, it’s important to be aware of the current trends and understand how sound measurement practice can help operators and companies better position themselves to withstand uncertainty.
What Are the Trends That Indicate Economic Uncertainty?
Deloitte, one of the “big four” accounting firms and largest professional service networks in the world, recently released a 2020 Oil and Gas Industry Outlook perspective. The following factors are trends to consider.
1. Increasing Security Concerns and Decreasing Global Demand
The current state of the worldwide oil supply is robust overall. This was recently demonstrated in September 2019 when an attack on critical facilities in Saudi Arabia resulted in the largest single supply disruption since the Gulf War of 1991. Even with the abrupt disruption, the distribution of products to endline customers was largely undisturbed. Prices resumed their normal ranges within days.
Additionally, the global market has seen the slow-moving decline of supply from two other major producers: Iran and Venezuela. Yet, worldwide prices have remained stable because of healthy commercial crude oil inventories, standing at 2.9 billion barrels at the end of the decade.
The conclusion: there is a sufficient supply to offset a lengthy disruption.
2. Overall Weakening Economic Growth in the U.S., China & Europe
Consider the United States, for example. Forecasts show that the gross domestic product (GDP) of the U.S. will slow in 2020. Statistically, there is a 25 percent chance of a recession versus a 10 percent chance of growth that would keep pace with recent years.
These predictions reflect an overall forecast of economic slowdown throughout the world. There are a number of countries facing economic headwinds, as there are high debts and weak currencies in several countries.
The conclusion: cycles of inflation and even recessions are possible over the next few years. The effects will be far-reaching, especially in the oil and gas sectors.
3. Ongoing and Strengthening Trade Tensions
Rising trade tensions can limit growth and alter long-established supply chains. Since the 2014 price crash, global fuel consumption has grown at a rapid pace. However, trade disputes could weigh on 2020 foundations of the oil market.
The conclusion: As nations exert sanctions throughout the world, there will be a cumulative effect on the gas and oil market.
4. Various Political Challenges in the U.S., Europe, and Middle East
There are various political risks that could affect the global economy. These include the 2020 United States election cycle, the effects of the Brexit process in Europe, and continued political and economic tensions in the Middle East.
Any number of smoldering fires throughout the world can spark and alter the course of economic health and flow. The outcome of any of these developments are vital, yet at this point are unpredictable.
The conclusion: Caution and careful observance are necessary.
How Measurement Factors Into The Equation
At some point in 2020, your operation will likely face the challenge of domestic or global economic uncertainty. This points to the need for discipline in the face of poor market indicators.
A critical area of discipline in the oil and gas industry is the foundational element of accurate and reliable measurements performed on a consistent basis.
Measurement is the “frontline” of production and control. You must be able to provide an accurate and reliable measurement of product to ensure cost-efficiency, prevent legal entanglements, and uphold your company’s contracts with third parties, all while watching the bottom line. To accomplish this, measurement professionals need to be able to perform critical tasks with confidence to support the objectives of the entire company as a whole.
Partner with Gas Certification Institute (GCI) for Measurement Training
We recommend that your measurement team receives training on the fundamentals of measurement through GCI. We will ensure complete and thorough understanding of measurement principles that your measurement professionals can readily apply in the field.
GCI provides fundamental measurement training classes on crude, gas, and liquids that follow the industry standards and are taught by oil and gas professionals that helped write the standards.
Through this training, we can help better position your company to withstand uncertain financial climates by increasing the stewardship of resources that are in your control.
Contact us today to inquire about providing classroom training to your measurement team during one of our certification or training classes in Houston, Texas. We can also bring our training directly to your location through our on-site training option.
Our desire is that your measurement professionals perform their tasks with confidence in 2020 to support the operational integrity of your company. Position yourself for a decade of success, even in the face of oil and gas uncertainty and challenging economic conditions.
