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Oil and gas companies most committed to radical reinvention amid Covid: Accenture report
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SME Times News Bureau | 18 May, 2021
The oil and gas companies most committed to reinventing themselves over
the next three years as a result of the Covid-19 pandemic expect to grow
their revenues and margins at twice the rate of companies least
committed to reinvention, according to a new report from Accenture that
outlines best practices companies should adopt to thrive in the energy
transition.
The report, titled "Necessity is the Mother of
(Re)invention" features results from a global survey of more than 200
oil and gas executives and introduces Accenture's "Reinvention Index,"
which analysed the companies across key factors related to reinvention.
Accenture classified the 10% of companies that scored the highest in the
Index - who are setting the pace for reinvention through bold and
decisive action - as reinvention "leaders," with those in the bottom
25% labelled "laggards."
In response to the Covid-19 pandemic,
all of the leaders plan at least some level of significant changes to
their business, with half (50%) intending radical reinvention, compared
with only 9% of the laggards. Almost seven in 10 Leaders (69%) consider
enterprise-wide transformation essential to this reinvention and 77% of
Leaders see cloud as essential to their business reinvention plans in
the next three years.
And reinvention could drive substantial
rewards. For instance, Leaders expect minimum margin growth of 7%, on
average, in the next three years, more than double that of the Laggards
(3%), and expect to grow revenues over the same period by at least 11%,
compared with just 6% for the Laggards.
"Competition from new
energy sources, environmental accountability, talent scarcity, investor
apathy and the COVID-19 pandemic have led most oil and gas companies to
realise the need to transform to ensure profitability, embrace
sustainability and maintain their relevance," said Muqsit Ashraf, a
senior managing director at Accenture who leads its Energy industry
group. "What's required isn't just piecemeal transformation but
wholesale business reinvention, which is anchored in a new approach that
we call our '5C' model."
The '5C' model for reinvention comprises: Competitiveness, Connectivity, Carbon, Customer and Culture.
The
report notes that attaining carbon neutrality, in particular, is a key
facet of the reinvention required to thrive in today's era of
accelerated energy transition. In fact, more than a third (37%) of
respondents, including all the Leaders, expect margin improvements of
20% or more from their low-carbon businesses in the next three years.
Refocusing investments, operations and products will be key, with 97% of
all respondents citing environmental performance as a priority and
one-third (33%) naming it their top priority.
Hydrogen and
renewable power were identified as the two low-carbon businesses with
the most growth potential. In fact, more than half of Leaders expect
hydrogen (cited by 62%) and renewable power (54%) to account for more
than 7% of their revenues within the decade.
"This decade will
be a make-or-break period for the oil and gas industry, which remains
rutted in a low-price environment, but the opportunities presented in
the report provide a blueprint for reinvention for continued success,"
Ashraf said. "All oil and gas companies should aim to emulate the
reinvention Leaders to maintain relevance during and after the energy
transition. Otherwise, the transition will transform from an opportunity
to build a sustainable and profitable future to an existential risk."
Hari Shankaranarayanan, a managing director and lead for Accenture's
energy practice in India said, "As oil and gas companies reinvent, they
will need to pivot from being commodity businesses to customer-centric
businesses and from businesses that meet energy demand to businesses
that solve problems. The path to a sustainable and profitable future for
the industry will depend on holistic transformation, especially
underpinned by data-driven reinvention, platform strategy, cybersecurity
capabilities and ecosystem partnerships. Oil and gas companies also
need to focus on creating a culture of innovation and collaboration."
In early 2021, Accenture conducted its Oil and Gas Reinvention Index
research to understand the actions that oil and gas companies are taking
to meet the challenges of the energy transition, their progress toward
reinvention, and the outcomes they expect to achieve. The research
included a survey of 214 C-suite executives from 179 oil and gas
companies across five continents and nine regions including India. More
than four-fifths (83%) of the companies were international or
independent oil companies, with the rest national oil companies and
oilfield and equipment services companies.
More than one-third
(36%) of the companies have revenues exceeding US$10 billion, and 48%
have annual revenues between US$1 billion and US$10 billion. Accenture
also created a Reinvention Index Score, based on selected survey
results and composed of equally weighted scores from each of the five
identified facets of reinvention (competitiveness, carbon, connectivity,
customers and culture).
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