In a paper titled Oil and gas after COVID-19, McKinsey analysts said some companies will use the crisis to "redefine their reasons for being" but others would without a doubt fall by the wayside.
While industry rebounded after the first two crashes, McKinsey warned "this time is different."
"Our research suggests that without fundamental change, it will be difficult to return to the attractive industry performance that has historically prevailed," the firm said, though overall the oil sector may remain a multi-trillion dollar industry for decades to come.
"Given its role in supplying affordable energy, it is too important to fail. The question on how to create value in the next normal is therefore fundamental," it said.
That said it sees peak oil by the next decade before a slow decline, though the price of Brent will recover to between $50 per barrel to $60/bbl between 2021-22. Until then the lack of demand across the jet fuel sector will see prices remain low.
Global gas and LNG will still have a favorable role, thanks largely to energy transition policies, but the cyclical capacity expansion of LNG over the next decade will "add pressure and volatility to global LNG contract pricing, and hence to regional gas prices."
Industry is struggling to come to terms with how to operate safely, how to deal with full storage, oil prices at below cash costs, and capital markets closing for "all but the largest players."
McKinsey also noted growing climate change concerns were also weighing on oil executives.
All these challenges are being accelerated under the current crisis, which according to McKinsey will be "one of industry's most transformative moments." Those which "boldly reposition" their portfolios will do well, and those which do not will atrophy.
Those who change tack could do so via buying up assets while they're cheap or pursuing transformative mergers to access new market segments and looking at scale and technology.
The idea of asset buys by companies with spare cash after delaying sanction on spend on big projects was flagged during a recent media conference call by Woodside Petroleum CEO Peter Coleman, who suggested asset buys were a more likely bet than a new round of company takeovers.
It recommended reshaping oil and gas asset portfolios, and "radically reallocating" capital to the highest return opportunities.
"Companies should make fundamental choices across the asset base and permanently reallocate capital away from lower-return businesses toward those best aligned with future value creation," the consultancy group said.
It also said now was the time to take "bold mergers and acquisitions" and that winners would emerge with advantaged portfolios that are more resilient.
"They should settle for nothing less than the absolutely best positioned assets in upstream, refining, marketing and petrochemicals," McKinsey said.
Despite industry already making deep cuts to capital expenditure and operating spending it sees further cuts inevitable.
"We believe that general and administrative expenses and operating costs can be reduced by another 30% to 50%."
Throughput from existing assets can also be improved significantly - in upstream average performers have more than 20% opportunity, and even top-quartile performers can improve production by 3% to 5%," it said.