by   |    |   4 minutes  |  in Oil & Gas, Strategy   |  tagged ,

Low oil prices make it a top priority to reassess all conventional ways of conducting business.

While an ERP strategy leads to significant cost savings, it’s still considered complex and time-consuming rather than beneficial by some Oil & Gas companies. The fact is, this used to be true, but when focusing on best practices and a template-based implementation approach, efficiencies are achieved faster than before. Another way of looking at this is to consider the real value an optimized and automated process can add to your operations. The best way to get through the current downturn and to come out with an increased competitive edge is to focus on internal improvements—now.

As the average oil price has halved in the space of 12 months, no part of the Oil & Gas industry is left unaffected. The pressure is on for offshore mobile asset owners, challenged as they are by multi-company structures, global supply chain, resource optimization, visibility across an ever-changing global fleet, project control, and management of investments on top of the financial problems. Other industries, like the automobile industry, have continuously worked with streamlining their processes. Meanwhile, the Oil & Gas sector has focused merely on capacity and maximum utilization within the regulators’ HSE standards.

Measurable results

Oil & Gas companies that want to remain competitive need to leave no stone unturned. But how do you pursue cost optimization without compromising on operational excellence? If not a magic wand, both EOI and ERP are reliable tools that enable you to do just that in order to start competing on cost. What about ERP implementations being complex, expensive, and without desirable ROI then? Take a look at these benefits experienced by IFS’s clients after implementing IFS Applications:

  • Joint operational and maintenance planning—a joint operational (mobilization, operation and de-mobilization) and maintenance plan (preventive, predictive and legislative/class requirements) provides a new level of overview—a forecasted asset utilization, cost and resource requirements plan.
  • Inventory stock optimization—joint planning, corporate part standardization and inventory visibility across the fleet reduce overstock, not only for a single asset but across the entire fleet. In addition, clients achieve a forecasted fleet resource requirements plan, a known demand plan, e.g. a 5-year rolling forecast.
  • Improved spend on frame agreements—clients achieve bargaining power, taking advantage of forecasted global requirements, and, when the supplier is a global player, frame agreements are negotiated, for both suppliers of goods & services and 3PL companies.
  • Centralized key operational support functions—standardization of equipment, maintenance plans, part catalog, suppliers etc. across a global fleet not only reduce overheads by centralizing operational support (e.g. asset integrity, supply chain etc.), but also maximizes the turn-around of integrating new builds and acquisitions into the company’s operations.
  • Fleet-shared capital equipment—in an industry where equipment costs are high, operational utilization pushed to a maximum, and HSE standards of first priority, capital equipment shared across the fleet is a proven concept. Clients achieve capability to respond more quickly to market demands (e.g. the availability of risers across the fleet) and maximize uptime (e.g. an offshore thruster exchange due to re-certification requirements).
  • Improvement of inventory value and utilization of actual purchasing costs
  • Process time savings thanks to finance process automatization
  • Improved project forecasting and better cost control

Together, these are some of many improvements that can lead to a total reduction in operational costs by 20–25%. Needless to say, that puts you in a completely new position.

Proven, no-risk solution

Many leading Oil & Gas companies rely on IFS Applications to realize efficient operations. Our longstanding expertise and proven track record of successful implementations make us a trustworthy partner. IFS Applications is designed to address Oil & Gas issues; its foundation is onshore/offshore operational integration across a global fleet, connecting the entire value chain in providing a full line of sight. It brings about increased control, real-time information sharing, and the possibility to instantly see all costs, enabling you to accurately forecast and improve decision-making. What’s more, IFS also makes available the entire library of documented best practices and processes, allowing for IFS Applications to be implemented on time and within budget, and supporting both project and training.

IFS Applications empowers you to deliver your projects, eliminates unnecessary costs, and reduces capital investments while maintaining operational excellence. An ERP strategy with IFS is profitable and offers direct monetary benefits—with a rapid ROI within reach. What are you waiting for?

3 Responses to “Where would a 20–25% reduction of operational costs take you? How to manage your oil & gas business in the market downturn”

  1. Christian Morales

    The main reason why are they implementing new policy is because of an economic crisis in Middle East especially in Saudi Arabia. Many labours are losing their jobs due to crisis and sudden fall the oil price. One of the major challenge of oil companies is they meet their supplier for large demand.

    Reply
  2. Andy Roehr

    The issues confronting the O&G sector are both cyclical and fundamental. While supply and demand issues will be addressed by the market, there are a couple of long term issues that we need to address including:

    Variable production to optimize pricing. For the US Energy industry in particular, participants in all aspects of the value chain will need to retool their processes, cultures and operating norms to optimize their role as the world’s “Swing Producer”. This is a massive change from the historical model of multi-year capital investments followed by multi-year consistent production and returns, and requires a rethink of fixed and variable costs, as well as a highly adaptive supply chain, including owned vs. contingent labor management.

    Cost/well (onshore) is reduced by multi-lateral architectures which leverage the pad, pipelines and other expensive fixed assets. This is good for the cost side of E&P, but presents a major challenge to manufacturing/services companies who are seeing lower revenues/site for many of their traditional offers.

    Field service costs must be reset at a step function down. This will require a much more efficient and optimized workforce, from labor scheduling to contract/employee optimization. It will also demand much better knowledge of fixed assets, parts sparing and route optimization. For example, how can contingent transportation alternatives be used? We must reengineer the field services function.

    Quote to Cash has to be reworked to embrace many of the “lean” and “Just in time” concepts that other industries have already adopted. The ability to “configure to order”, ascertain real “available to promise” timeframes and even see pricing discount models will force new behaviors. For example, when scheduling services at a site, a customer is presented with a “discount” if service dates are flexible. If they wait until the last minute, they pay a premium.

    Engineering must become part of a business optimization discussion, looking at opportunities to standardize subsystems for accelerated assembly, reductions in capital trapped in inventory, decreased

    Enterprise Operational Intelligence takes the place of instinct as the basis for Enterprise Asset Management. Gathering real time data from operating assets and understanding the correlation of factors from motor speed/temp to vibration changes can produce a pro-active maintenance and performance optimization strategy. For example, by understanding pre-fail signals, production curtailment can be scheduled instead of taking a run to fail approach, resulting in shorter downtimes and dramatically reducing the risk of a negative HSE event.

    We can go on, but the bottom line is that Energy is an industry in need of re-engineering. It is ironic that an industry that has leads the way in technology adoption in many areas continues to be a laggard in the optimization of fundamental business processes. For companies to thrive and win in the next iteration of the Energy industry, they will need to adopt an agenda of innovation from the backoffice to the field in order to operate efficiently, manage increasing regulation and oversite, engage millennials who have different expectations for how personal and corporate technology gets used. They will need to embrace collaboration and new work flows/styles as scarce experienced resources exit the industry. Conventional “ERP” solutions, designed for the industrial complex of 20-30 years ago simply will not meet these needs while being cost effective and agile.

    Reply

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