So ‘Brexit’ happened. The UK has spoken and voted to leave the EU. With 17.4m votes, 51.9% were in favour of leaving compared to 48.1% who wanted to remain.
Regardless of how you voted (or not), it’s a huge decision and one that is dominating the news, social feeds and conversation on the street. Once passed the shock or jubilation, the question on everyone’s lips is “what now?”.
There is much to consider, and many, many grey areas. The only thing that is certain is uncertainty.
After two difficult years for the oil and gas industry, and just as we seemed to be entering a slow recovery, what will be the impact of ‘Brexit’?
According to Reuters, oil prices have already dropped by more than 6 percent, raising concerns that the demand for oil could slump even further. Brent crude LCOc1 was down $1.91 at $49 a barrel at 0849 GMT. U.S. crude CLc1 was down $1.87 at $48.25 a barrel. Sterling GBP sank 10 percent in value to its weakest since the mid-1980s. The FTSE 100 fell more than 8 percent at the open, with banks among the hardest hit.
It was inevitable there would be some fluctuation in the markets if ‘Brexit’ did come to pass, particularly as prices reflected an assumption that the result would be remain. What is unclear is just how long these fluctuations will last and how the weakened oil industry will cope? As a BP spokesperson said in the same Reuters article, “It is far too early to understand the detailed implications of this decision and uncertainty is never helpful for a business such as ours.”
Change has always been a factor in the oil and gas industry, and companies that produce at the lowest cost have always come out on top. Technologies that generate operational efficiencies should not be overlooked as part of that equation.
As Dr Peter Black, managing director of EnergySys, says in his recent Cut the Cost of Hydrocarbon Accounting paper “It’s not just the oil and gas industry that is guilty of overlooking opportunities for operational efficiency when the tide is high and margins are large, but it is one industry that should be on the cutting edge in its application of technology”
In this time of further uncertainty, the oil and gas industry needs to look for technologies that could transform the economics of their business, like cloud computing. By taking advantage of the flexibility and low up-front cost of cloud software, they can add value to the business quickly and relatively easily. They can maximise opportunities, and deliver results faster.
‘Brexit’ was only one of the potential political shocks this year. What will the fallout of the US election? Oil and gas companies need to ensure that they are as efficient as possible in order to have the capacity to overcome any headwinds.