Presentation is loading. Please wait.

Presentation is loading. Please wait.

Growing Beyond The growth gap: how high performers are accelerating ahead Findings for oil & gas 18 January 2013 This version includes input from EMEIA.

Similar presentations


Presentation on theme: "Growing Beyond The growth gap: how high performers are accelerating ahead Findings for oil & gas 18 January 2013 This version includes input from EMEIA."— Presentation transcript:

1 Growing Beyond The growth gap: how high performers are accelerating ahead Findings for oil & gas 18 January 2013 This version includes input from EMEIA Oil & Gas

2 Growing Beyond – Findings for Oil & GasPage 2 Sector insights Oil & gas ► According to the IEA World Energy Outlook 2011, global energy demand is expected to increase by 40 % between 2009 and 2035, with 90% of that growth driven by non-OECD countries; over $19 trillion investment is required in Oil & Gas supply to meet demand. ► There is a major shift in power happening from the International Oil Companies (IOCs) to the National Oil Companies (NOCs) – today the NOCs own 85% of the world’s remaining reserves and are increasingly determined to lead the exploitation themselves. Four megatrends are driving nine key issues across the entixt four slidere Oil & Gas value chain If you want more detail, see nes 114 respondents from oil & gas completed the survey. This deck compares these responses to the high performers and low performers within this sector. Macro trends Upstream – Reserves replacement: managing increasing costs and risks associated with major upstream exploration, development and production projects and the increasingly complex supply chain Downstream – Margin and volume pressure: economic downturn combined with overcapacity in certain geographies has led to a significant margin and volume decline in the OECD markets Oil Field Services – Competitive pressures and market fragmentation driving restructuring and consolidation combined with changing buyer behaviors driven by risk management Carbon management – Increasing focus on climate change and sustainability: oil companies facing increasing regulation and social pressure with regard to reducing emissions and increasing sustainability 1. Environmental standards, climate and regulation 2. Cost and operational efficiency 3. Changing fiscal terms 4. Price volatility 5. Human capital deficit 6. Supply shocks 7. Divestment 8. Operational challenges, joint venturing and access to reserves 9. Investment in infrastructure Key issues

3 Growing Beyond – Findings for Oil & GasPage 3 Sector megatrend: upstream Shaping the future of the oil and gas sector What are the overall issues and implications? ► With longer-term supply tightness and the return of volatility, competition for reserves has increased, driving consolidation within the upstream sector and increasing investment in unconventionals. ► In the aftermath of the Gulf of Mexico (GoM) spill there is an increased focus on operational risk management, partner/supplier assessment and contractual relationships, incident response and financial contingency planning. ► Cost control remains firmly on the agenda due to the pressure of higher costs of capital, a squeeze on cash and the ongoing high levels of capital expenditure. ► Regulatory changes are creating risk and uncertainty as tax, fiscal and environmental framework and rate changes are made. ► Project planning and execution is becoming more challenging due to the technical nature of the projects as well as financial implications. There are increasingly large mega-projects in new/remote locations. 1.Divestment/acquisition/JV support: valuation and business modeling, transaction preparation and sales execution, transaction carve out services, transaction tax, international tax, strategic analysis, due diligence and transaction structuring, transaction integration, Audit support for new ventures and joint ventures. 2.Cost & capital management: capital project management, working capital, TESCM, planning budgeting & forecasting, legal entity rationalization, organizational structuring, IT effectiveness and cost rationalization, Global shared services, procurement process and spend optimization. 3.Regulatory compliance: Risk framework assessment, internal audit co-sourcing/outsourcing, audit optimization, environmental/HSE assurance and advisory, trading assurance and advisory, audit and financial accounting advisory services, business/IT controls assessment and advisory, fraud investigation & dispute services. 4.Growth enablement: human capital advisory/people operating model structuring/restructuring, IT Advisory, market analysis/new country entry support. ► More consolidation and asset rationalization among IOCs, NOCs and oil field services companies. ► Increasing numbers of joint ventures to share risk and capital ► Balance of oil and gas supply and demand shifting toward gas, driven by price differentials, concern about nuclear power following Fukushima and environmental factors. ► Increasing NOC & IOC competition for reserves. ► Increased regulation around fiscal compliance, corruption, climate change and tax. ► Geopolitical risks in various countries, MENA in particular is impacting price, supply and operations. ► Increased investment in unconventional hydrocarbon sources (shale gas, tar sands, coal seam methane) and alternative fuels (biofuels). ► What is the right strategy and business mix? Upstream versus downstream, conventional versus unconventional, developed versus developing markets. ► In the aftermath of the GoM spill are the appropriate risk assessment measures, operational and financial contingency plans in place. ► How do you ensure that sustainability/environmental targets are clear, measurable and transparent? ► How do you ensure fiscal, legislative and regulatory changes are anticipated and implemented effectively? ► How can operational efficiencies and effectiveness, including cost reduction measures, be accomplished whilst improving operational integrity performance and standards? ► With an aging workforce and skills shortages how do you ensure critical staff retention and optimization of their skills. ► How do you maximize returns on past IT investments and decide what new IT investments should be made? ► What data security issues need to be addressed? Managing HSE, financial and regulatory compliance Managing brand and reputation Increased focus on new technologies, unconventionals and new geographies Carbon management and reduction Cost and capital optimization Access and reserves replacement Identifying and mitigating partner, supplier and counterparty risk What is happening in the marketplace?What are the critical issues to be addressing now? How are we helping clients?

4 Growing Beyond – Findings for Oil & GasPage 4 Sector megatrend: downstream Shaping the future of the oil and gas sector What are the overall issues and implications? ► Volume decline/stagnation in many OECD markets – caused by fuel efficiencies and the economic downturn. ► Growth coming from BRIC/non OECD markets. ► Refining overcapacity in North America and Europe resulting in low margins and refinery closures/change of use to storage terminals. ► Additional refining capacity coming on stream in developing countries is focusing the problem. ► Migration of capital from downstream to upstream. ► New market entrants and NOCS growing their downstream profiles and footprints. ► Significant investment required in European refineries to meet tightening environmental targets. ► Move away from owner operated to franchise model in retail marketing. ► Demand growth almost entirely in emerging/developing markets. Huge growth potential, particularly in Asia. Market access may be limited. Issues with subsidized fuels pricing in many markets. 1.Divestment/acquisition/JV support: valuation and business modeling, transaction preparation and sales execution, transaction carve out services, transaction tax, international tax, strategic analysis, due diligence and transaction structuring, transaction integration, Audit support for new ventures and joint ventures. 2.Cost & capital management: capital project management, working capital, TESCM, planning budgeting & forecasting, legal entity rationalization, organizational structuring, IT effectiveness and cost rationalization, Global shared services, procurement process and spend optimization. 3.Regulatory compliance: Risk framework assessment, internal audit co-sourcing/outsourcing, audit optimization, environmental/HSE assurance and advisory, trading assurance and advisory, audit and financial accounting advisory services, business/IT controls assessment and advisory, fraud investigation & dispute services. 4.Growth enablement: human capital advisory/people operating model structuring/restructuring, IT Advisory, market analysis/new country entry support. ► Many IOCs and NOCs are looking to actively cut costs through: ► Headcount reductions ► Working capital improvements ► Shared services ► Procurement efficiencies ► Operational efficiencies ► Many IOCs are actively looking to divest non-core downstream assets, markets and businesses i.e., Shell’s sale of downstream assets in Africa. ► Both Marathon and ConocoPhilips have separated their upstream and downstream businesses into separate entities ► Growing focus on carbon management and sustainability i.e., biofuels. ► Ensure there is a clear strategy and plan in place for the downstream business. ► Identify which markets/businesses are regarded as core and which non-core. ► Focus on cost leadership through cost reduction, working capital improvement, shared services, procurement optimization and other operational efficiencies and tax optimization. ► Ensure clear plans are in place for carbon reporting and reduction. What is happening in the marketplace?What are the critical issues to be addressing now? How are we helping clients? Focus on regulatory compliance and governance Portfolio review and optimization Operations optimization Carbon management and sustainability Cost optimization Strategy and vision Optimizing the business

5 Growing Beyond – Findings for Oil & GasPage 5 Sector megatrend: Oil Field Services (OFS) Shaping the future of the oil and gas sector What are the overall issues and implications? ► According to IHS Herold global upstream spending is expected to reach a record $1.3 trillion in 2012 (set to reach $1.6 trillion by 2016). ► Despite the Gulf of Mexico spill the most spectacular recovery has been in the US, where total spend should return close to peak levels by ► We are, seeing increasing activity in new geographic areas and in deepwater e.g., Brazil. ► Environmental regulation around Deepwater drilling likely to increase following the Gulf of Mexico spill. ► Growing calls for transparency and increased regulation around unconventionals e.g., shale gas. ► Investment required to modernize equipment so that it meets stricter standards demanded by customers and regulators. 1.Divestment/acquisition/JV support: valuation and business modeling, transaction preparation and sales execution, transaction carve out services, transaction tax, international tax, strategic analysis, due diligence and transaction structuring, transaction integration, Audit support for new ventures and joint ventures. 2.Cost & capital management: capital project management, working capital, TESCM, planning budgeting & forecasting, legal entity rationalization, organizational structuring, IT effectiveness and cost rationalization, Global shared services, procurement process and spend optimization. 3.Regulatory compliance: Risk framework assessment, internal audit co-sourcing/outsourcing, audit optimization, environmental/HSE assurance and advisory, trading assurance and advisory, audit and financial accounting advisory services, business/IT controls assessment and advisory, fraud investigation & dispute services. 4.Growth enablement: human capital advisory/people operating model structuring/restructuring, IT Advisory, market analysis/new country entry support. ► M&A activity is returning to the sector, lead by the $12bn Schlumberger acquisition of Smith International. This is an indication of returning confidence and of the need for further consolidation in the sector. ► Participating in joint ventures to share risk and capital – partnering with NOCs on various projects, traditionally the domain of the IOCs. ► Strong focus on cost-cutting and tax optimization. ► A focus on workforce demographics and improving workforce mobility – having the workforce where the work is. ► Increased focus on ensuring regulatory, fiscal and environmental compliance in all areas of operation. ► Review strategic alignment of the organization’s assets, people and locations versus longer-term market trends and organizational strategy. ► Ensure internal processes enable speed of response and flexibility in meeting client needs and regulatory requirements. ► Optimize working capital, costs and tax. ► Complete assessment and strategy development for new market opportunities – e.g., decommissioning, renewables and unconventionals. ► Ensure the organization can meet the upcoming challenges as customers look for greater levels of assurance in relation to HSE and regulatory changes, e.g., post Gulf of Mexico regulation and the UK Bribery Act. ► Complete assessment and strategy development of opportunities for merger/takeover to gain scale and exposure to growth markets and businesses. Aligning business capabilities with market needs Regulatory and environmental compliance Cost and working capital management Flexibility of assets and workforce New opportunity assessment Strategy and vision What is happening in the marketplace?What are the critical issues to be addressing now? How are we helping clients? Competitive pressures driving consolidation

6 Growing Beyond – Findings for Oil & GasPage 6 Sector megatrend: sustainability and carbon management Shaping the future of the oil and gas sector What are the overall issues and implications? ► Greater environmental regulation. ► More transparency required by shareholders, environmental pressure groups and regulators around environmental reporting. ► Increasing focus and investment on CO2 capture and storage ► Pressure to drive carbon reduction through carbon trading has reduced in the US since the financial crisis and fundamental concerns regarding ’gaming’ of carbon credits have been raised. ► Growth in unconventional energy (shale gas, tar sands and coal seam methane), creating new environmental concerns and issues. ► Increasing regulatory requirements driving increase in both use and R&D of biofuels. ► Increasingly complex tax incentives around renewables in different countries. ► Significant decommissioning liabilities looming. 1.Risk management: regulatory, financial and industry. 2.SEC guidance for climate change-related disclosures. 3.Financial reporting given environmental liabilities. 4.Tax implications due to climate regulations. 5.Renewables valuation, carbon footprint. 6.Global reporting initiative (GRI) and sustainability reports. 7.Developing the appropriate scorecards and KPI. ► Leading organizations supplementing traditional audit with environmental/emissions audit of their operations. ► Increasing investment in biofuels R&D. ► Joint ventures to develop and market biofuels – e.g., Shell/Cosan. ► Increasing investment in gas/LNG, which has the lowest emissions of the major hydrocarbons and is touted as “the bridge fuel” to a greener tomorrow. ► Increased debate regarding the use of gas for power generation in the aftermath of the Fukushima nuclear disaster in Japan and record low gas prices in the US. ► Develop clear renewables and carbon reduction strategy, identifying key focus areas and plans. ► Ensure board-member accountability for carbon management ► Ensure emissions and future reduction targets are reported transparently. ► Ensure sustainability reporting requirements and regulations are monitored and that the organization can react quickly to changes. ► Understand tax credits and incentives that exist in different geographies. Current regulatory compliance Managing brand reputation Preparing for increased regulation Carbon reduction projects in place Monitoring, and reporting carbon footprint Renewables strategy and vision What is happening in the marketplace?What are the critical issues to be addressing now? How are we helping clients? Sustainability

7 Growing Beyond – Findings for Oil & GasPage 7 High performers are ahead with respect to how they: High performers are … Cost competitiveness Operational agility Customer reach Stakeholder confidence Broaden product/ service offer Focus on key segments Reinforce brand Prioritize markets Accelerate speed of response Create flexible work/ delivery platforms Master innovation Improve collaboration Identify and explain risks Enhance reporting Anticipate regulatory compliance Re-engage with internal talent Inform pricing process Sustain cost reduction Pass on cost pressure Optimize capital

8 Growing Beyond – Findings for Oil & GasPage 8 Customer reach Oil & gas

9 Growing Beyond – Findings for Oil & GasPage 9 Change in the importance of business activities – Oil & gas Q: Over the next 12 months, what change do you expect in the importance that your organization attaches to the following activities? (Five-point scale). Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114). Shown in all charts: % increase High performersLow performersGap: high vs. lowAll sector

10 Growing Beyond – Findings for Oil & GasPage 10 Most critical factors for competitiveness in the next two years – Oil & gas Q: Which of the following factors does your organization/company consider most critical to your company being competitive over the next two years? (Select up to three). Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114). Stakeholder confidence Customer reach 40%50%60% Operational agility Cost competitiveness

11 Growing Beyond – Findings for Oil & GasPage 11 Operational agility Oil & gas

12 Growing Beyond – Findings for Oil & GasPage 12 Actions taken to increase flexibility Oil & gas Q: Which of the following actions has your company taken to increase its flexibility over the past two years? Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114). High performersLow performersGap: high vs. lowAll sector

13 Growing Beyond – Findings for Oil & GasPage 13 Objectives of current and future investment in use of technology – Oil & gas Q: Considering your organization’s use of technology, please prioritize your organization’s current investment today, and in three years time? (Select up to three). Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114). TodayIn 3 years

14 Growing Beyond – Findings for Oil & GasPage 14 Cost competitiveness Oil & gas

15 Growing Beyond – Findings for Oil & GasPage 15 Most significant cost pressures Oil & gas High performersLow performersGap: high vs. lowAll sector Q: Which of the following cost pressures are most significant for your company? Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114).

16 Growing Beyond – Findings for Oil & GasPage 16 Stakeholder confidence Oil & gas

17 Growing Beyond – Findings for Oil & GasPage 17 Areas with increased demand for information by stakeholders – Oil & gas Q: As a result of the recent economic and market volatility, for which of the following has demand for information from your company's stakeholders increased the most? Shown: percentage of respondents. Base: oil & gas; high performers (31), low performers (19), sector total (114). High performersLow performersGap: high vs. lowAll sector

18 Growing Beyond – Findings for Oil & GasPage 18 Contacts Oil & gas Name Job title Tel:

19 Thank you


Download ppt "Growing Beyond The growth gap: how high performers are accelerating ahead Findings for oil & gas 18 January 2013 This version includes input from EMEIA."

Similar presentations


Ads by Google