THE end of the oil and gas industry as we know it has been predicted for many years as the planet turns towards renewables. What is little known, however, is that green energy's appeal isn't just environmental: it's also economic. A recent aggregation of industry research based on data from the UN Environment agency indicates that by 2020, renewables will be cheaper than fossil fuels in many G20 countries.
What does this mean for Singapore - one of the world's leading oil trading and refining hubs and a global leader in offshore and marine engineering, which relies on the oil and gas sector for around 5 per cent of its gross domestic product?
After several rough years, the temptation might be to enjoy the recent burgeoning oil prices and rising demand. But these mask serious challenges for the global energy industry.
While oil demand is growing for now, new development and production is seriously slowing. Worse still, the low prices of recent years forced companies to heavily reduce spending on technological development and exploration. They now have a reduced capacity to improve production - and the several years it takes to set up a new project means we will be feeling this slump for some time.
If oil and gas companies want to survive as a crucial component of the future global energy supply, they must face some inconvenient truths and radically change their approach, both to business structure and to technology. It's a time that demands leadership and innovation - but that can mean opportunity for companies and countries that rise to the challenge. Finding large deposits is becoming an increasing challenge requiring complex and costly technology. Those technologies and agile structures are already being developed, but need to be more aggressively adopted by international oil companies.
Fundamental investments must include making exploration and refining more efficient and cost-effective. For instance, according to a Bain report, one company was recently able to reduce its unit costs by 10 per cent just by digitising a remote offshore operations centre.
Recent events and developments have, at least, aligned neatly with the world's largest oil and gas event - November's Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) - because if ever there was a time when heads need to be put together, it's now. Green energy is making full use of "Industry 4.0", the fourth industrial revolution, that has seen huge strides in automation and digital transformation. Oil and gas companies will have to make major leaps just to keep pace.
Digitisation will be one of the core themes to be tackled by industry leaders in Abu Dhabi, where the Singapore pavilion will be a platform for 16 of our most innovative companies to showcase the new technologies that are possible throughout the oil and gas value chain.
Many firms around the world are accepting gradual technological improvements to exploration and exploitation but few are taking the steps needed to ensure long-term survival; one key ADIPEC theme will be how to bring a vital industry into the 21st century.
While it may be disruptive in the short run, radical structural and technological changes are vital. To quote BP chief executive Bob Dudley: "The energy industry is in a race to lower carbon, not a race to renewables."
With renewables projected to make up between 27 and 53 per cent of the global power supply by 2040, it is no longer enough to ride out peaks and troughs of oil prices. Singapore is already leading the way here. The new Tuas facility is flying the Industry 4.0 flag via the use of automation, data analytics, and robotics. These include amphibious drones, automated quay cranes, exoskeletons for port staff, and robotic claws deployed for vessel management.
This move offers proof that Singaporean companies have never been ones to shirk change and innovation. So amid all the challenges for the global energy sector, it is clear that there are opportunities for Singapore not just to be a part of these conversations, but to lead them.
The writer is a business and commodities commentator and a columnist at Forbes.