The COVID-19 pandemic could induce a positive cultural shift in the oil and gas industry if an effective at-home workforce encourages senior management teams to embrace flexibility, the CEO and founder of Pink Petro said in a recent webinar. But change won’t be easy.

“I think that people have to remember is that it gets back to human pain,” said Kate Mehnert. “Pain has to happen in order for change to happen. Change only happens when we’re really put against the wall and right now, I think, across companies, the folks I’ve talked with are trying to make very difficult decisions, trying to help support their staffs, trying to help support their families.”

Valentina Kretzchmar, London-based vice president of corporate research for Wood Mackenzie, agreed.

“The sector will have to embrace change and unfortunately, it’s a part of the human psyche that managers embrace change when they are on the defensive rather than when they see opportunities,” she said.

ESG

Among the changes the speakers addressed was environmental, social and governance (ESG), which has grown into a major corporate concern.

“Hopefully, the new normal will be ESG but there is a big fear that the S [social] and the G [governance] in particular might take a back seat as a priority in these times,” said Anna P. Howell, London-based co-chair of Gibson Dunn’s global oil and gas practice.

The multiple pressures on companies during this crisis make it easier to push those issues to the bottom of the agenda.

“The issue with the S and the G is that it does take a more positive commitment in order to move to a new normal,” Howell said. “It just needs continued pressure from shareholders and others in order for companies to actually keep the S and G there. Having social diversity and gender diversity is extremely important.”

Kretzchmar noted that governance, the G, had been driving performance for many companies for the past few years.

“It was very much E that was neglected,” she noted. “It was only in the last year or two that E was the forefront.”

Staffing

Halliburton Co. has set the tone in large-scale staffing decisions with its furlough of 3,500 workers in its Houston headquarters, but more, and possibly more dramatic announcements are likely on the way.

Howell advised that companies should tread carefully.

“The issue with the oil and gas industry is we already have the oil price crash, we already have the need for companies to cut costs and look for ways to cut costs, but at the same time, they need to weigh out the fact that they need people, they’re in a critical industry,” she said. “It may be, hopefully, in the oil and gas sector, that redundancies can be reduced.”

Short term, though, brace for brutal.

“I think it’s going to get really, really ugly,” Mehnert said. “You’ve already seen that the service companies are cutting and I think that the bigger you are and the better cash position you’re in, obviously, the more insulated you are. But I would also say to all of the companies out there that, given that we are in an energy transition, we are typically very short on resource.”

Digital technologies have already removed much rote work, she said, so more staff cutbacks could compromise work being done for the long term.

“It’s going to be very difficult to make deeper cuts, more cuts than we’ve already seen, but I’m optimistic for the future,” Mehnert said. “At the end of the day, the transition will be delivered by people and through people.”

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