Adapting to a world of low prices and plentiful supply
Supply is up, demand is down and it looks like the conditions that created the rapid price slump at the end of 2014 will remain in place for the foreseeable future. Whilst Oil and Gas Industry veterans are no strangers to the boom and bust cycle, the slower than anticipated recovery has exposed entrenched operational inefficiencies that need to be addressed. Some industry leaders saw the writing on the wall back in 2014 and began implementing measures to drive inefficiencies out of their business. Others chose to watch and wait, perhaps in the belief that, as in 2008, low crude prices were just a blip and would soon return to the normal $80-$100 range. The message to those organizations is that doing nothing is no longer an option. Producers and refiners can survive, and indeed thrive, in a market where supply outstrips demand (figure 1) but, to do so, they need to rapidly adapt to the industry's new reality.
Figure 1: Source International Energy Agency IEA
Four operational improvement areas many oil companies have overlooked
Lower oil prices are here to stay and that will put pressure on all parts of the value chain. The fundamental challenge for Oil and Gas executives is to identify further areas for improvement across the value chain including operations, logistics and procurement to protect and enhance their profit margin. In our experience, there are 4 key areas for potential savings which are frequently overlooked:
- Develop strong, sustainable relationships to get more out of your suppliers and service providers
- Make major saving in your Crude and Refined Product logistics operations by building strategic relationships with carriers and reducing costs
- Focus on more efficient capital projects and plant turnarounds
- Tap into the savings potential of your Remote Site and offshore services/Field Logistics
As specialists in procurement, logistics and operations, we know that there are cost savings to be found almost everywhere in the key areas of your value chain. Not only that, we have the experience, methodology and capability to deliver significant savings and help clients move up the maturity curve to achieve Total Value Optimization™.