A golden era for players in the oil and gas industry came to a halt in 2014 when oil prices plunged dramatically. The result was an immediate slowdown in investments and demands on cost cuts after years of expansion.
Tough, indeed, but for those dedicated to survival there is only one way to go: use the downturn to improve competitiveness irrespective of the oil-price scenarios. Better to prepare for the worst and hope for the best. In this endeavor every stone must be turned.
Over the last couple of months we have witnessed investment cuts and staff reductions. Short term cost efficiency measures of around 10 percent have emerged as an initial target. Regional differences aside – efficiency targets in the medium term would be much higher.
We are all part of a value chain that has witnessed a structural shift in cost competitiveness.
This has to be addressed as an industry and we are already seeing that tighter demands on project break-even rates are producing significant results. Yet we are only at the beginning of a process to bring the cost curve down to a sustainable level. This will take time.
But at the company level we have to think about the next step right now. We need to do what we can do in order to move from the immediate cost cutting to the next level of competitiveness. What does it take to take the next big step?
Cost efficiency measures
Looking ahead, a tough period can also be viewed as a welcome opportunity to improve business processes, review IT solutions and prepare for the future. Focusing on operational efficiency, I’d like to highlight a few potential areas for improvement:
- Create consistency. During the industry’s heyday, there was no pressure to streamline processes. This has left many companies with non-integrated, proprietary systems, inaccurate, cumbersome data retrieval, resulting in reduced decision-making capability. This produces several inefficiencies for operations. A recession is a perfect time to dig into structural and organizational matters – while motivation to think new is also naturally high.
- Get more output for less input. A company can rapidly gain improved operational efficiency by automating several mundane tasks. By integrating Engineering and Procurement, for example, data can be reused, giving advantages such as fewer quality errors, fewer interfaces, and reduced time for entering, searching and controlling data. Furthermore, it also increases the possibility to use statistics to improve negotiations and decrease purchase prices.
- Go from document to database systems. Many of today’s projects are run as document processes, using the traditional Microsoft Office suite. By implementing a common database instead, data will flow between disciplines and people, increasing data quality and saving time, with less updating and documents circulating.
- Prepare for growth. Some years ago, when oil prices were on the rise, there was a sudden shortage of manpower, having an impact on competitiveness. With a TCO effective IT platform, you’re prepared for expansion without having to grow the organization. A strategic approach to ERP is necessary if you’re aiming at larger contracts: by facilitating process simplification and efficiency throughout the value chain you avoid expensive quality costs and the risk of losing contracts.
- Meet client’s expectations. A new IT platform helps you to meet client demands both on project execution and on smarter technologies, such as mobility and apps. This will support you to perform complex projects more efficiently, with improved overview.
Invest for the future
Currently we have several exciting projects going on within Oil & Gas. There is an opportunity now to use a “quiet phase” to review and strengthen operations.
We have helped our customers streamline processes while increasing efficiency and capability to deliver, thanks to integrated systems, increased automation, higher data quality and greater visibility.
Our message to you now is simply this: we have the knowledge, experience and solutions that will help you through the baptism of fire and to make you a winner both during this phase and when the market turns.