The oil and gas companies have been the securers of supply, revenue collectors and engines of development for many countries, but with low oil prices, companies and governments are facing major headwinds.
Challenged to reduce costs and improve capital efficiency, many of these companies have cut spending and frozen hiring. Others are considering delaying maintenance and turnarounds to drive down operating expenditures.
Rather than relying on such quick fixes, oil and gas companies need to implement a strategy that yields sustainable benefits as these quick fixes only offer short-termed relief that might not see the company through the stormy gale of low and fluctuating oil prices.
Learning from the energy-related crises of 2008-09, 1997, 1992 and 1986-87, industry observers understand that companies can win with strategic action and by making targeted investments. By collaborating across the industry, making structural changes and optimising internal capability to drive higher efficiency and agility, companies can emerge from uncertain times stronger and more competitive.
Consulting specialists Accenture suggests 10 actionable ideas for oil and gas companies during this trying times.

1. Reset partnerships with core suppliers
In the past crisis, many suppliers were pressured to reduce prices. This time around, many are prepared for this simplistic tactic. It will take a more sophisticated approach for energy companies to take greater advantage of the supplier market.
The first step is to identify strategic suppliers in key categories. With these strategic suppliers – likely in categories such as drilling and completions, engineering, construction, maintenance services, materials and logistics – longer-term agreements should be renegotiated to seek immediate benefits in return for continuing and possibly expanding business.

2. Optimise industry-wide cost structure through better local content development
Local content development policies have been implemented to support agendas to build domestic industries. In some cases, however, inherent inefficiencies among local industry players have decreased competitiveness.
Oil and gas companies should work more collaboratively with local companies to structurally reduce the cost base. This objective can be done through greater transparency – such as competitive open-book sourcing – benchmarking to peers and jointly bridging gaps while maintaining margins.

3. Improve collaboration for effective execution of capital projects
Project teams frequently work with a “pilot mentality”, a notion that assumes each capital project is unique. This approach limits the leverage of best practices across projects, so many projects routinely exceed cost estimates and schedules.
Many capital projects share certain characteristics, and cost benefits can be achieved through standard designs, systems, equipment and components. Industry efforts in this area are already underway at the World Economic Forum, and the outcomes could help most oil and gas companies reduce capital project budgets.

4. Increase sharing of logistics assets and resource capacity across operators
Multiple operators working in environments near each other are purchasing equipment and assets and hiring resources to fulfil similar requirements – an approach that reduces utilisation and productivity.
By consolidating and coordinating demand and sharing logistics assets and resources across operators, large savings can be achieved. For example, a regional logistics control tower can efficiently increase utilisation rates for marine vessels and helicopters.

5. Balance the timing of asset maintenance with opportunity loss
When prices are low, the lost profit opportunity of producing assets is less. Schedules for planned maintenance and turnarounds can be brought forward to the extent possible while balancing timing and opportunity cost.
High performing companies consider the commercial impact of the asset hierarchy in maintenance strategies. Timely turnaround and preventive maintenance optimise maintenance costs and improve overall profitability. Oil and gas companies can optimise late field-life production, and focus on the most critical assets and equipment to “sweat their assets” as prices recover.

6. Equip the field with digital technology to boost productivity
Downturns are clearly the best time to invest in innovative tools and solutions to be better prepared for the future. Accelerating the uptake of digital technology in the field can create tangible differentiation.
There are diverse possibilities to address the industry choke points through digital technologies. Examples include remote operating centres, big data analytics, a mobile-enhanced workforce, materials and equipment tracking.

7. Consolidate internal support functions for a lower cost profile
Integrated operating models for finance, human resources, procurement and information technology can lead to greater efficiency at reduced cost. To achieve this objective, companies can consolidate functions to bring together similar capabilities, eliminating multiple locations that provide similar services to reduce inconsistencies and duplicative services.
Back- and middle-office activities can be run as a service to local operators or transferred to a third party. Consolidation can allow operators to ride on the IT investments made and provide access to standardised IT infrastructure through the “software as a service” approach.

8. Get smarter about people management
Human capital and capability-building should still remain a key priority for any oil and gas company. Innovative solutions should be leveraged to increase the efficiency of training while optimising costs.
Human capital is a key asset of oil and gas companies. Leading companies continue to develop various technical, functional and leadership skills. Areas of technology such as distributed classroom, mobile learning, computer-based training, virtual academies and collaborative on-the-job coaching enable cost-effective and targeted training.

9. Reassess portfolios to deliver greater value
Many oil and gas companies have expanded portfolios internationally and into unconventional oil.
The economic viability of this expansion should be revisited to ensure the intent of the growth agenda is likely to result in greater value. A crisis is always a good opportunity for targeted growth.
Amid low prices for crude, companies are scrambling to re-evaluate expansion initiatives and capital projects. This reevaluation should also include non-performing assets.

10. Develop cost transparency capability across the portfolio
Companies can benefit from having cost visibility across the portfolio of assets, and provide incentives that motivate operators to drive down costs.
Many oil and gas companies have made concerted efforts to optimise costs. However, not many companies are able to manage cost transparency in a consistent manner across their portfolio of assets. Having cost transparency will allow the asset owner to increase sharing of cost optimisation ideas across assets.
Hard times can be an intense motivator
While the business environment may remain difficult and unpredictable, Oil & Gas companies can take action in numerous areas to lessen the blow to the bottom line and emerge more competitive.
Rather than simplistic, across-the-board cutbacks that can weaken a company's long term position, leading companies focus on developing sustainable cost transparency and cost optimisation capability. Companies also use the low oil price environment to invest in training people and implementing digital solutions to improve productivity and profitability.

While low prices for crude are undoubtedly painful for Oil & Gas companies, the leaders will use today’s pain as inspiration to engineer new capabilities that will allow oil and gas companies to be agile in responding to the volatile crude cycle.

http://go.engineer-ng.net/profiles/blogs/sustainable-strategies-needed-by-oil-companies-amidst-unstable-oi

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