Canadian oil and gas insights from the 22nd CEO Survey
The Canadian oil and gas industry stands at a significant crossroads. Despite optimism among global oil and gas CEOs with respect to their prospects for revenue growth over the next three years, the realities of operating in a jurisdiction with reduced market access is likely wearing thin on Canadian CEOs.
While oil prices have rebounded from the crash in late 2018, the longstanding challenges related to market access and global pricing has most Canadian oil and gas CEOs working to drive growth while standing on shifting sands. Global oil and gas CEOs listed overregulation and commodity price volatility as their top concerns—and these challenges are more pronounced in Canada as infrastructure projects are delayed or cancelled and Canadian crude is forced to sell at a steep discount.
Globally, oil and gas CEOs consider operational efficiencies and organic growth to be their best bet in driving revenue growth over the next 12 months. This is in line with Canadian CEOs across all industries.
Looking ahead, Canadians should focus on the following three priorities as a part of their efforts to stabilize and grow:
Most Canadian oil and gas companies don’t have the scale or capitalization needed to make massive investments in diversification, alternative energy sources or renewables.
Given challenges with market access and competitive global pricing, and the threat of overregulation, Canadian oil and gas CEOs need to focus on their core strengths to remain sustainable in the near to medium term. Emphasis should be placed on cost discipline so Canadian oil and gas businesses can, over time, free up the cash they need to move forward with diversification activities.
As Canadian oil and gas companies look to drive greater efficiencies and improve their cost structures, they’re continuing to embrace the need for and value of digital innovation. Those that get a head start on their competition with digital innovation will have a distinct advantage. Globally, 80% of oil and gas executives say they agree or strongly agree that artificial intelligence (AI) will significantly change the way their companies do business in the next five years.
In Canada, oil and gas companies are showing interest in technologies like AI, automation and advanced data analytics—seeing them as a way to make processes more streamlined, cost effective, reliable and environmentally responsible. Applications across the hydrocarbon value chain are being implemented, from downstream to upstream operations. Globally, 65% of oil and gas executives plan to implement or have already implemented some aspects of AI in their operations—but this falls behind all Canadians across industries at a whopping 83%.
While many recognize the need to embrace innovation, few have concrete plans on how to implement it holistically or as a cornerstone to strategy. Supporting this, our CEO Survey revealed that data about how the latest technology trends benefit or disrupt the industry is considered the number one area of data discrepancy among global oil and gas CEOs.
82% of global oil and gas CEOs think that data about how the latest technology trends benefit or disrupt the industry is important or critical to long term success. But only 15% have comprehensive data in this area.
Although the oil and gas sector has been traditionally slower to adopt new technologies, Canadian companies recognize the urgency to do so, as the lower for longer price environment has increased pressures for making a return on investment.
To move forward more quickly and with a more encompassing digital strategy, Canadian oil and gas companies should look to leaders in other industries for inspiration—identifying potential opportunities and best practices. By learning from the experiences of others, they can better position themselves to avoid known pitfalls and better set themselves up for digital success.
As companies develop innovation strategies, they need to consider how to find the talent they need to be successful. The availability of key talent—particularly talent like data scientists and software engineers who often make digital innovation successful—is a major challenge for this sector. In fact, the lack of availability of key skills is one of the top business threats for global oil and gas CEOs. Within Canada, it’s the number one concern of CEOs across all industries, with 88% of Canadian CEOs concerned about it.
Although Canadian oil and gas CEOs are likely focused on addressing critical market challenges and improving their operations, as companies put more resources behind digital innovation, having the right talent and skills will become increasingly important. Half of global oil and gas CEOs (49%) say the lack of analytical talent is a key reason that the data they receive is not adequate for their purposes.
Many oil and gas companies in Canada are already charting strong paths forward by concentrating on their strengths and becoming more efficient. They’re also beginning to invest in new and transformative technologies that will help them become more competitive. As they do so, companies shouldn’t underestimate the importance of their people strategy. Successful innovation is not only about technology but about transforming the way businesses work and how people use technology.
PwC Canada’s 10th annual Energy Visions report, Crisis to catalyze change or history repeating, will further explore issues impacting the Canadian energy sector and shaping the industry of tomorrow. To be released May 22, 2019.