Across the world governments are responding to the outbreak of the Coronavirus pandemic by racing to implement digital solutions to help citizens transform their day-to-day activity and levels of person-to-person contact. However, this will not be easy, because the infrastructure is simply not there yet in certain locations.
Due to the virus outbreak, routine activities like shopping, business communication, production, consumer behaviour and other will radically be transformed. The result of the change so far: both public and private spaces have closed in a bid to curb the number of new cases. During quarantine, only essential services that can be used without leaving our homes are the ones that will continue to grow, in an exponential way, every day.
Data Consumption & IT Technologies
In terms of data usage, the use of fixed internet lines has increased globally due to the implementation of some new regulations such as temporary lockdowns which has pushed people to stay at home. According to statistics, in large cities and industrial centers under lockdown a lot of people that used to work in the center (or business districts) have moved to residential areas or to houses outside of the cities – 10% or more of the population in some of them. It means that working centers changed and became sparser. Leading telecom providers stated that in general they experienced decrease of total number of subscribers but surge in amount of traffic per subscriber which means higher intensity of internet connection. In more distant locations, infrastructure was not always ready for the pressure – this situation shows the ability of suppliers to mobilize resources in order to sustain the number of clients and their satisfaction with the quality.
In Turkey for instance, there has been an increase of about 50% in the volume of the data usage, “The fact that individuals are forced to stay at home reveals that the increase in internet traffic has turned into a situation that extends to the afternoon from the rush hours in the evening,” he continued “In the period from the first case in our country until Monday, March 16, when we compared the data usage volume with the normal days last week, there is an increase of about 50%” said Assistant General Manager of Türk Telekom Technology Yusuf Kıraç.
While hospitality sector is struggling and offering hotel rooms for self-isolation or to host medical workers free of charge, entertainment sector went online – all the major global museums, theatres are doing live streaming of excursions or plays in an empty halls, musicians keep in touch with audience with ‘home’ concerts. Cinema and streaming services offer discounts or free temporary access to their archives. The issue that was there before but was not a bit as topical as today – overconsumption of information. The amount of available sources and the news is overwhelming and psychologists think that it seriously affects personal well-being. Every day we get 5-6 times more information now than 30 years before, according to South California University research. This means that every one of us is flooded with non-stopping flow of irrelevant statements, suggestions, etc. As scientists say, it leads to fragmented way of thinking, ‘clip’ mindset and weaker memory patterns.
In this case this is vitally important to follow so-called digital hygiene (especially now, when we are tempted to substitute lack of face-to-face communication with virtual one), including essential detox from social media. It is also recommended to take a step back once in a while to reflect on gained knowledge to formulate a person’s own opinion on the subject, and not to forget to keep focus on areas that are of importance to each individual in particular.
Many people recently expressed desire to try ‘slow life’ in different social polls, so this might be a good chance to do so – with sensible limitations, of course.
This mindset drove significant changes in advertising principles lately – now marketing agencies have the chance to test native and contextual advertising on an unprecedented number of users online to get statistics and improve algorithms. Other technologies that are being launched on a state level – face recognition and connection tracking – after the pandemic is over, they will be used still to monitor security in cities, airports and other places of strategic importance, which might help solve a number of issues on a higher level.
Supply Chain and Operation
In February 2020, the Purchasing Manager Index (PMI) was 35.7% down in China, compared to its value in the previous month. On the other hand, the Production index was down by 23.5% from the previous month. This shows the level by which manufacturing production has dropped. COVID-19 may have a far-reaching impact on the supply chain network of numerous enterprises, the multinational ones in particular, they will have to urgently think on ways to improve their disaster emergency mechanisms and supply chain management.
Nowadays, with the all the technology growth, key information about materials, logistics, production, and capital in the supply chain can easily be grasped, analysed and shared to improve overall supply chain management. With that being said, establishment of information chains might relatively benefit during this outbreak, as they're the ones that can further enhance the resilience of supply networks.
Market demand can be tracked and predicted more accurately; production rhythms can be adapted accordingly. The manufacturing industry is the only industry that can give digitalisation a wider push in order to deal with the next possible crisis.
One of the many areas where internet has made a significant difference is the 3D printing. It has solved numerous issues. From the bricklaying robots that are changing the rules of construction to the golden age of 3D printing that we have seen recently, we might be on the verge of human-free production and construction era. Some countries’ authorities, Spain for instance, are even working with their tech sector and are now making use of the so called “drones” with speakers that order people outdoors to stay at home, and in some other countries, like China, they are being used to disinfect public places. According to the World Economic Forum data, a drone spray can be 50% more effective than a person’s spray – this instrument is being used in Dubai, for example, for street disinfection at nights.
Attention has also turned to the e-commerce and distribution sectors, where robots and drones are filling in the gaps left by human workers and forcing many in the sector to speculate about the future of jobs for a large portion of the population. For people who don't have the possibility of working from home on a laptop, like builders, drivers, and other in-person labourers, days in quarantine mean days without work and, consequently, lost wages so governments need to take action.
The areas where business sees future development during and after the crisis:
- Flexible and tailored services (i.e. mobile apps for gasoline stations)
- Delivery (speed, better client support, order processing, non-contact delivery)
- Unmanned transportation (we wrote about the development of these for O&G facilities in an industry review)
Digitalisation of O&G Industry
Almost all manufacturers and service sectors have started establishing some measures against possible crisis scenarios, and this includes medium to large-sized companies, holdings, universities, banks, government meetings...etc. Conferencing systems that might still not be widespread will eventually be at some point, many governments are already using this system to move forward with their decisions.
Digitalising everything is crucial now, more than ever before, we may not be able to stay close to each other physically, but we still need to communicate with each other, socially as well as professionally.
This pandemic has resulted in a fast-digital response from companies, whether big or small, even the “digitally lazy” will now have to take some initiatives and step up their digital game: Video conferencing, document sharing, cloud solutions, information security and many more areas to look at. Companies, from all industries, are left with little choice, whether they like the idea of digitalisation or not, they are faced with using digital technologies to keep their operations running. Today, it is near impossible to visualise your company’s growth without considering digitalisation. It is where growth will reside in the next decades, and the current crisis may give it a massive boost. Business owners and leaders may also soon realise that some of their workers are more productive working from home, which will eventually have a positive impact on the company.
In the Oil and Gas industry there have been a number of changes due to the crisis (or so-called ‘perfect storm with black swans’): we have seen significant increased cost of freight, companies experienced lack of product storage capacities, almost all major companies have had to reevaluate investment plans and put some projects on hold - notably capital-intensive ones like new construction, Artic or shale exploration, etc.
Regretfully, certain companies were forced to transfer some of workforce to 4-day regime or even undergo employee reduction. Globally refiners have had to limit their production (or rebalance) – i.e. US refineries are shifting focus from gasoline to diesel as it turned out to be more stress-resilient to oil price. Transportation intensity nosedived leaving motor, bunker and aviation fuels producers with a close to no profit scenario for the upcoming months.
Uncertainty remains, with regards to oil price, to important industry decisions (OPEC) and the duration of the quarantine period – all this leads to companies having to implement different scenarios to their strategy.
One positive development has been the higher demand for petrochemicals due to use of polymers during this period and lower naphtha prices, as well as margin increase for fertilizers producers. Some experts predict that the situation will encourage interest in clean energy as we clearly have seen positive environmental impact of slowdown in chemical operations – this topic will be covered in detail in one of our future articles.
Our industry has not been at rest and has contributed greatly to the efforts in helping the society fight the COVID-19 virus - by producing protection facemasks, essential components for sanitizers, chemical protection suits, pharmacy components, etc.
Speaking of digital solutions, most of leading companies in the sector like ABB, AVEVA/SE, HONEYWELL, etc. have informed their customers that they have the required tools to offer better automation of certain processes and will continue to provide client support and ensure effective cooperation in given circumstances.
Many vertically integrated O&G companies stated that even though the situation definitely caught them by surprise and caused certain difficulties, they are not, only now, implementing digitalisation – for them digitalisation is a transformation path, opted for a long time ago and carefully pursued in the meantime.
We would like to share experience of two of our clients – leading Russian oil companies – in adjusting their digital strategies to increased needs:
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As a result of ongoing work in this direction, managers oversee the following growth areas for their companies and industry players in general:
- Re-prioritizing of projects: priority given to projects in advanced stage of progress with highest economic effect, then long-term strategic ones that influence sustainable development of the company
- New ways of motivation, information exchange, work organisation / workday structuring, feeling of involvement and connection – role of leaders and their responsibility increases
- New practices that can be adopted from consulting companies’ routine work – managers reflecting on the size of the team and productivity, quality of communication, monitoring and distributing workload between team members
- Easier change of supporting activities (general management, back-office, services, sales, etc.)
- Increasing efficiency and safety of process assets is more complicated without actual presence of certain staff at a supply chain unit
- Companies will get more data analytics about how people actually feel about their safety (before was only statistics on process safety of facilities)
- The approach to peak load will change
- Companies plan to use videoconferences even for routine office work after lifting restrictions to get more involvement of specialists on sites
- Part of management activities will be done from HQ and not on sites
This outbreak has forced manufacturers to commit to automation and digitalisation for long-term operations.
Uncertainty about the global economic outlook will continue to grow as long as the number of virus infected people increases. With the structures in place it is unlikely that the COVID-19 situation will have huge & long-lasting impact – it is likely that we will be faced with a period of recession but can be confident that this should be relatively short term – Economies will bounce back when the epidemic ends. In the meantime the focus needs to be ending the spread of the virus and to do so we must follow the guidelines given by the different authorities.
For nations worldwide, the course of action to fight the spread and effects of Coronavirus has been to implement quarantines; restricting the movement of the general population while isolating people infected by the disease.
Training & Education
The COVID-19 has also left its stamp on the academic sphere, obliging schools and universities to move classes online. Educational establishments have shut their doors to students and most governments have implemented a temporary distance education system, which has also contributed to the change in data usage habits leaving students as well as teachers reflect on the pros and cons of virtual and in-person lessons and at the same time relating it to the price it will cost governments while doing so.
We discussed this topic with a number of tutors and also university IT-service providers and the feedback on long-term impact was the following:
- There was a quite quick transition to digital platforms even at institutions that have not had that before – thanks to availability of different options and services
- Methodology transition was not done, though – it takes more time and stronger effort to change the ways lecturers and students work collectively
- It will help push forward e-document flow within the systems (this is also true within many corporate companies)
- People will have a chance to try a variety of digital instruments – specialists predict, that some of them will stay after the pandemic to be used in some training formats
- Training can become more tailored, interactive and thus more engaging
- Students in different locations will get an opportunity to benefit from high-quality courses and communication with best tutors when doing some courses online – the availability and quality of education is one of the vital issues in current circumstances
- There will become more specialised training centers and corporate universities to capture knowledge from fellow coworkers and industry leaders
- New trend – coaching – will be more in demand than ever, many sessions have now moved to Skype or Zoom, and the efficiency is close to real meeting, but saves more time
- The role of physical presence and personalised communication will not be impacted – no distant lecture compares to teamwork and student-tutor relationship
With this in mind, we at Euro Petroleum Consultants, have also decided to address the current market challenge and integrate the feedback received from our long-term partners, by introducing our renowned industry training courses in interactive online format to support professional development of specialists and leaders and share valuable expertise of our consultants.
Summary
The current epidemic has exposed problems and risks that already existed within certain manufacturing companies – these companies are now undertaking the needed transformations with regards to automation, digitalisation and logistics processes and systems. Companies that are the most impacted are the small and medium-sized companies, as well as those with cash flow.
In the long run, the downtime caused by the COVID-19 can be used by industries to make much-needed operational improvements.
Trends to be followed:
- Digital and physical world are not transitioning one into another – they are merging into a new reality
- Global economic landscape will change – the clients and the core business will inevitably transform
- New competences will come into the foreground: advanced human resource management, pure digital competences, transformation management, working and leading distributed teams
- In this global ‘experiment’ of digital transformation passivity of thinking will change, leaving people more open to innovations and less hesitant to introducing latest developments into their life
- Communication between industries will be a key topic
- People will value the time and personal communication more
Euro Petroleum Consultants is a technical oil and gas consultancy with offices in Dubai, London, Moscow, Sofia and Kuala Lumpur. Euro Petroleum Consultants also organises leading conferences worldwide.