Market Potential Analysis | Devising a Business Continuity Plan for a Chinese Oil and Gas Industry Client to Succeed in the Post-COVID-19 World

Apr 21, 2020

Chinese Oil and Gas Industry Overview

Although the Chinese oil and gas industry has been witnessing positive growth over the past few years, the COVID-19 pandemic has shattered oil demand and caused excessive revenue changes in the sector. Besides low demand and lower prices, social impacts, structural issues, workforce management hurdles, and supply chain complexities are increasing challenges for companies operating in the Chinese oil and gas industry. This current landscape in the oil and gas sector is pressurizing players in the industry to undertake practical steps for responding to the coronavirus crisis. To maintain a superior level of operational excellence in the post-COVID-19 era, oil and gas companies must also consider some critical factors including crisis management, reliability, productivity, supply chain management, and cost optimization.

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Business Challenge

A leading oil and gas industry client based out of China, witnessed plummeting oil prices and production declines owing to the coronavirus outbreak. Also, the Chinese oil and gas industry client encountered weak lines in its supply chain as their vendors and suppliers faced operational and financial challenges due to the fast-spreading coronavirus pandemic. Besides, faced with challenges such as geographically fragmented supplier base, potential cash flow constraints from foreign operations, and workforce management hurdles, the company wanted to gain complete visibility into spend and re-evaluate their operations. They chose to partner with Infiniti Research to leverage their expertise in offering market potential analysis.

Other key objectives of the Chinese oil and gas industry client were:

  • Implementation of crisis management and response plan to emerge successful in the post-pandemic world
  • Optimization of spend analysis and categorization
  • Reviewing of capital and corporate cost budgets
  • Divesting under-performing assets
  • Setting up risk mitigation programs around employees
  • Assessing links in supply chain and identifying potential weaknesses
  • Adjusting cash flow management
  • Determining a market-determined pricing system
  • Identifying alternative vendors and suppliers to meet the immediate demand in the post-COVID-19 era

Contact us to know the potential impact of COVID-19 on your business and for action plans to respond to the coronavirus crisis.

Our Integrated Approach

Infiniti’s market potential analysis involved a five-phased approach:

Crisis management and response: The experts at Infiniti Research carried out a review of the Chinese oil and gas industry client’s capital and corporate cost budgets to identify marginal investments. Also, the experts assessed how profitability and cash flow generation can support the ongoing operations of the client in a low oil-price climate.

Workforce management: The experts gathered necessary data on the Chinese oil and gas industry client’s employees and set up risk mitigation programs around employees.

Supply chain and operation: The experts closely analyzed the client’s supply chain complexities and identified Tier 1 and Tier 2 suppliers. Besides, the experts identified alternative suppliers in non-impacted regions of the world to help the client meet their immediate requirements post-COVID-19 crisis.

Financial reporting: In this phase of the engagement, the experts helped the Chinese oil and gas industry client to modify their risk factor disclosures and reassess the financial balance sheets.

Cash flow management: The experts reassessed the client’s cash flow statement forecasts and analyzed the best and worst-case scenarios over the short and long term.

Business Outcome

With Infiniti’s market potential analysis, the Chinese oil and gas industry client was able to improve spend data quality, visibility, and accuracy. Also, the client was able to gain complete visibility into procurement and streamlined processes. Besides, the client was able to take immediate and contingent safety measures for their employees.

By analyzing the potential market demand post-COVID-19 crisis, the experts recommended the Chinese oil and gas industry client to reduce their capacity and cost structure through staff reductions and related measures. To reduce operating costs and run the operations smoothly, the experts recommended the client to consider outsourcing portions of their corporate functions, including moving IT to the cloud and shifting internal non-core operating functions to contractors. By doing so, the client was able to lower operating costs and eliminate maintenance capital. In addition to this, the experts helped the client to identify alternative suppliers to help them at times of immediate requirements.

The Chinese oil and gas industry client was also able to safeguard the supply chain operations by understanding supply chain risks, manage cash outflows, develop a range of scenarios to predict future outcomes, and identify local suppliers to support them at times of immediate requirements. Also, the Chinese oil and gas industry client was able to examine the company’s financial spend and identify new ways to achieve a reduction in cash outflow. Furthermore, by closely reviewing in year inventory position and assessing supply chain complexities, they were able to adjust inventory for the post-COVID-19 period.

As China’s oil and gas industry is recovering from the COVID-19 crisis, it’s high time for oil and gas companies to outline action plans to succeed in the long run. We can help you achieve this strategic objective. Learn more about our business continuity support solution.

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