How to Survive and Thrive in a Variable Economy

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High natural gas and oil prices fueled a boon in the drilling industry from 2005 to 2014. Companies across the entire value chain thrived with numerous midstream and downstream projects. In 2015, however, the industry was hit with one of the worst downturns in decades. Faced with an uncertain future of lower oil prices and surplus supply, the oil and gas industry initially responded by cutting costs. Some cost-cutting measures included workforce reductions and renegotiating vendor contracts to help maintain margins. While prices are showed some signs of recovering in 2016, a significant recovery seems unlikely in the foreseeable future. Short-term, quick fixes are no longer enough. Instead, fundamental changes in operations and business processes are necessary. For this reason, oil and gas executives are turning to technology to help their companies survive the ups and downs of the market.

Although the oil and gas industry has been highly automated and connected for years, the general drill mentality has remained relatively unchanged — drill a well, deplete the resources, drill another one. Unfortunately, this type of capital-intensive business model closely ties profitability to fluctuating oil prices. In light of recent economic turmoil, oil and gas companies now are asking themselves, “How can I make existing operations more efficient?” The answer is to invest in new digital capabilities to gain real-time visibility into operations.

Today, data from exploration, drilling, and transportation is connected in real-time. Management knows exactly which wells to prioritize for investment and which ones to shut down. Causes of asset failures can be pinpointed in an instant and variable workforces can be dispatched with the necessary 3D maintenance procedures on their mobile devices. This new ability to combine data with operations technology has given oil and gas companies increased flexibility and transform the way the industry meets global energy needs.

How to Add Agility to Your Company

Ultimately, the goal of increasing a company’s flexibility is to be able to alter operations in real-time not only in response to various conditions, but also in anticipation of change. Having an agile business model means workers are empowered to quickly make decisions. Below are a few benefits of having a more flexible business:

Quickly deploy resources. Using cloud-based technology, companies are able to access information on available resources when needed and then quickly deploy them, whether it is physical resources such as equipment parts, or talent resources (e.g., third-party service providers, contingent labor, in-house experts or field technicians). The ability to resolve an issue or make a pipeline repair fast is a must-have capability to compete now and in the future.

Easily scale workforces up or down. While reducing one’s workforce is a fast way to lower costs in the short-term, what happens when conditions change and it is time to staff up again? Integrated workforce management systems are important for staying in touch with workers and rehiring them when needed. Using a single system, companies access real-time schedules and employee records including qualifications, certifications and availability, allowing them to assemble crews from anywhere, at a moment’s notice.

Align production with market conditions. There’s an old proverb that says, “Make hay while the sun shines.” Following this advice means profiting from favorable market conditions while one can. The ability to anticipate market changes and then adjust operations accordingly could have a significant impact on profitability. Data analytics combines multiple sources of data, internal and external, to identify patterns or trends. This information can then be used by executives to make business decisions, such as adjusting daily production output.

Collaboration without limits. Today, collaboration and information sharing is more ad-hoc with participants in different locations. Tools now exist that bring together the right people for the job independent of boundaries and help them share resources. Greater collaboration amid departments, among drilling sites and between employees can lead to faster problem solving or new innovations.

Maintain asset readiness. A primary factor in flexible operations is maintaining equipment for use when it’s needed. Digital remote monitoring constantly captures and analyzes sensor data from multiple assets across oilfields and along pipelines. Types of data monitored could include daily oil production, pump pressure, conditions of various pipelines and asset emissions. Once data is collected, it then can be benchmarked against competitors or past performance to uncover issues, which allows them to be addressed proactively rather than wait for weekly or monthly reports. Predictive maintenance prevents problems from occurring so that assets are always available.

Transparent transportation logistics. In a complex and heavily-regulated, global business environment, flexibility relies on having an integrated supply chain. Data from sensors embedded in oils barrels or in other transportation assets can help track and trace the location, condition and authenticity of products. Sensors also can help with locating containers and even track moving assets to prevent loss. With connected logistical systems, supply chain partners could also immediately analyze impending routes, pickups and deliveries, then reroute supply to where it’s needed most.

Maintenance can happen “on-the-go.” In today’s mobile data world, maintenance can be performed on the spot. As an example, imagine a digital work order is issued for a pump that needs repair. The request is displayed on the tablet of the technician close to the pump’s location who also has experience repairing the particular part. While in the field, the technician notices an additional problem, accesses the company’s inventory management systems and locates the part. He or she drives to the closest location, picks up the new part and returns to the site. The technician then views a 3D video illustrating the repair process for the problematic piece of equipment and completes the repair. Mobile devices track when the technician arrives, confirms when the work is complete, and send the information directly to the company’s HR and billing systems.

The digital economy has been fueled by opportunities uncovered when connecting assets, people, products and processes. For oil and gas companies, the newly found data is helping lower costs and drive efficiencies within their existing operations. But, data is also giving them power to take control of their destiny, rather than let the market dictate their success or failure. Some visionary companies are using real-time data analysis to add agility into their business processes, allowing workers to make operational decisions that align with market conditions and maximize revenue. In doing so, they are not only surviving the current economic situation, but thriving.

Brent Potts is senior director of industrial marketing for oil and gas at SAP, an enterprise application software provider.

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