(MENAFN- Gulf Times) The energy industry in GCC and elsewhere must commit to innovation in order to successfully navigate a period of significant change and uncertainty in 2016, according to Booz Allen Hamilton.
Amid falling oil prices and new models of distributed power, oil producers and utilities need to adapt and react to market changes to secure the viability of their businesses as the market tightens.
The study, conducted in collaboration with IDC, also highlights the importance of cyber security to the energy industry, noting that it expects up to 75% of industry players to have a full risk-based cybersecurity strategy in place by 2019.
Booz Allen Hamilton says that organisations will need to identify and manage threats well before they have direct operational effects.
The hydrocarbon industry is a critical one in the GCC (Gulf Cooperation Council), a region that accounts for nearly 40% of the world's oil production.
According to the International Monetary Fund estimates, the market downturn will result in a $287bn loss in oil exports or around 21% of the combined GDP for GCC suppliers, in 2015.
"The global oil industry is entering a critical period as it adjusts to the reality of sustained low oil prices and no foreseeable return to a $100 dollar barrel of oil," said Dr Walid Fayad, executive vice president, Booz Allen Hamilton MENA. "As a region dependent on revenues from oil, this new reality demands a response from GCC producers and exporters to create more resilient businesses able to withstand the market volatility and continue to deliver on major domestic social and infrastructure projects."
Beyond driving down the net cost of oil production, the adoption and integration of technology can also disrupt energy across the value chain, positively impacting utilities and power generators in the region.
"Electricity demand growth of more than 8% a year presents the GCC with an energy security challenge that threatens the continued economic development of the region," said Dr Adham Sleiman, vice-president, Booz Allen Hamilton MENA. "Technology will be critical to installing and connecting the grid capacity the region requires whilst making the electricity system smarter, more efficient and more secure."
The report highlights five key trends for 2016. They are listed below.
Cybersecurity spending is set to rise, as threats will need to be identified and managed well before they have a direct operational effect, replacing the traditional compliance-oriented approach to cybersecurity.
There will be a spike in energy demand and associated infrastructure, mainly driven by emerging economies. Innovation will rise correspondingly to meet the unique needs of these markets. The International Energy Agency reports that emerging economies will account for more than 90% of net energy demand growth by 2035.
Customer demand for information, service and control will drive digital transformation to touch every aspect of the industry (e.g. information sharing, outage notification, bill payment, sale of energy products and services, in connected-homes).
IDC Energy Insights reports that by 2018, 70% of utilities will have launched major digital transformation initiatives.
Advanced analytics will be deployed to drive down overhead costs. The increasing use of Big Data will create an industry where leadership decisions are more and more data-driven. In 2016, a majority of CIOs will push innovation funding to minimise operational costs.
Companies will automate more and more manual processes to reduce effort, streamline functions, and improve results. The demand for next generation IT skills is rising faster than the talent pool in most companies, meaning that the industry will see more training and recruiting over the year.
In 2016, 70% of utilities companies will look externally to source talent for advanced analytics, cognitive systems, cloud and cybersecurity.
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