Prediction 1: In 2020, renewable/sustainable energy will attract 85 percent of all new investment but demand for oil and gas remains high.
The first and most obvious change in the market is that renewable fuel consumption is going to increase dramatically. Figures from the International Energy Agency (IEA) suggest that by 2023 renewables will be in double figures as a percentage of fuels overall and that the size of the market will grow by one fifth between 2019 and 2024; CNBC issued a more pessimistic forecast as recently as November 2019. However, consumer demand for renewables has never been higher and this is likely to increase worldwide.
In fact, the IEA has suggested the world’s total renewable-based power capacity will increase to the equivalent of the USA’s current power output. Even as wind and solar power are becoming more reliable and cheaper to install, I predict that in 2020, oil and gas will continue to meet around 50 percent of our energy demand (before a sharp decline in around 2030), while renewables will continue to grow. Fast.
Prediction 2: Demands for increased accountability introduce new tech – and complexity – to the mining industry.
Related to the above-mentioned factors of consumer demands and macro-economic forces, we will see a clear move along the entire mining value chain toward increased accountability.
Blockchain Will Guarantee Provenance.
I see enormous potential in blockchain technology to help businesses involved in the precious metals and minerals value chain prove provenance and compliance. A blockchain will provide an indisputable account of where, how, and under what circumstances a certain raw material was sourced, refined, shipped, and retailed.
Since the main driving forces behind this is the need to appeal to the ethical consumer and to fulfill compliance obligations, I predict that in 2020 we will see some early examples of blockchain technology being deployed across the mining ecosystem to prove to consumers and business customers that their gold, platinum, lithium, etc. has been sustainably and ethically mined.
IoT-enabled tracking will add new levels of rigor – and complexity – to mining operations.
Consider the following scenario: A mining company’s earthmover has been fitted with IoT-enabled sensors to capture and record the temperature, pressure, and vibration of critical parts. As the machine’s gearbox failed, the mining company made a warranty claim to the manufacturer. Analyzing the sensor data, the manufacturer disputed the claim referring to the data, which proved the earthmover had been operated in an unsafe way.
The obvious question is why the data wasn’t used at an earlier stage to warn the operator that the machine was being subjected to undue stress. The answer: there was no strategy behind the data.
This scenario (based on a true story) highlights a trend that will become increasingly prevalent in 2020 and beyond: the move toward more complex contractual terms between original equipment manufacturers (OEMs) and mining businesses. Where equipment contracts may have been based on simple metrics, such as number of days used, number of feet drilled, etc., I predict that we are likely to see terms regulating the operating temperature or engine revolution range within which a vehicle must be operated. OEMs will use IoT sensors to monitor the assets in real-time to make sure penalties are levied if the threshold levels are exceeded.
This trend will require mining companies to bolster their commercial skills and contractual risk analysis, creating a need for a robust ERP backbone on which to secure their financial models to forecast contract costs.
Prediction 3: Traditional business models evolve as 55 percent of all major energy companies diversify over the coming three years.
Feeling the pressure to build a business that is sustainable in the long term, several traditional oil and gas companies have started diversifying and indeed marketing themselves away from being purely oil and gas concerns.
Shell, which is known for oil and gas extraction, refining, and trading, is now retailing not just domestic energy but also broadband, smart home technology, and boiler service. Not all will choose these specific routes of diversification, but all companies in the oil and gas and power generation sectors will diversify in some way – whether that’s bringing alternative power generation methods into the mix or utilizing a company’s offshore expertise to pivot from fossil fuel to supporting offshore wind farms.
I predict that in 2020 we will see many household names changing their businesses and offering new or peripheral services. Major players will expand to dominate an energy value chain end to end or react to an adjacent opportunity leveraging existing infrastructure that can be exploited relatively easily.
The move to renewables, traceability, and the complete willingness of the industries to adopt new business models are going to characterize the market in 2020 – as long as they continue to succeed this should give us hope.
Colin Beaney is the global industry director for Energy, Utilities & Resources within IFS, where he has worked for nearly 20 years. Colin has been involved in implementing and project managing IFS software into many project and asset-intensive organizations in Europe and worldwide. These cover many industries, including energy, utilities, pulp and paper, aviation, and defense. He is therefore ideally placed to understand the real challenges faced by organizations working in the service and asset-intensive industries. He is a key member of the IFS product directions board and plays an instrumental role in the decisions regarding IFS product strategy.
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