How to handle the New Normal Conditions in the Oil and Gas Industry
The Oil and Gas industry was used to having oil prices somewhere between 80 to even 120 dollars at some point. That was the case of the good years between 2011 and 2014. The situation got critical when in the second half of 2014. Oil price experienced a significant drop since then and went as low as 30 dollars.
As a consequence, the industry took some restructure measures to survive. Some companies even made substantial cuts to their staff. At first, it was expected to be a temporary situation. Several years later, we have seen how it is stabilizing, but not at the price of those golden years. It is now somewhere between 40 and 50 dollars. A bit less than half the price it used to be.
The show must go on, and now companies are readjusting and reinventing themselves to handle the “new normal conditions” in the Oil and Gas industry. On this article, we will explore some of the adjustments that companies can make to keep on running operations in a more efficient way.
The experienced professionals that used to run operations until a couple of years ago were used to have big wages. That was possible due to the profitable oil price. Compensations got higher particularly after 2005 when the panorama was looking good.
Now, those professionals retired and can be used as external consultants to share their experience. They are aware of the new situation, and if they are looking to come back to the industry, they must be aware of their new role.
A new generation of oil and gas professionals is coming. The new Millennial Generation is taking job positions to fulfill the industry needs. Unlike the previous generation, not just in the oil and gas sector, but everywhere, they are not looking for the high salaries of previous generations. There are other assets a company can offer to attract talent. For example, time is valued more, and a flexible scheme with a more balanced life is part of what young employees seek.
The new and young employees are willing to sacrifice some dollars for the sake of time with family and friends. Oilfield operations, in particular, are very demanding. The companies need to evaluate how they will leverage extended periods of time on the field to the new generation. With the price of oil more stable, it is easier to make a prediction. Indeed newbies will be cheaper than their antecessors as they were newbies. That is a good thing for the industry as it is right now. Nevertheless, the roles and demands of the job need to be readjusted as well. That will be the way to create a win-win situation for everyone and achieve retention to build experience for this new generation.
Make the most of Past Investments
During the golden years, much was invested in research and development. That resulted in the design and acquisition of an impressive amount of technology and new gears. Maintenance is the key preserving that investment.
Whereas the lifetime of technology was calculated to last 3 to 5 years, now it is time to reevaluate the investment. How would your company benefit from changing it and what is the cost of maintaining your current equipment? What can you do now to extend the useful life of the tools you are currently using?
Research and Development
It is also time to change the mindset of the R&D team. Can they make an upgrade for the current tools? How to create more efficient equipment is the challenge of this department.
Let’s not forget that technology is getting cheaper every day. Some exciting developments are now produced in mass. That lowers the costs significantly. It is time to break a paradigm and look at what other industries have achieved. Not just the oil and gas industry can create new things for other sectors, but it can also benefit from the developments of other businesses around the world.
Real Time Information
To get real-time information is an essential part of the strategy to make accurate decisions. Efficiency is achieved through the availability of information when it is needed. The fastest, the better, and there is no fastest way than real time.
Fortunately, technology to transmit directly from the rig site is affordable, and the return of investment will pay off and show savings quickly. The systems integration is also necessary. For example, for the production and distribution phase, you can detect leaks and prevent production decay much better. To implement sensors during the process is a good way to manage risks. It is the way to get in control.
Safety more than ever comes first. The integration of new people requires the implementation of an effective training program towards safety. To create awareness on how to run safe operations is not just a matter of compliance with current laws. It is also a question of costs. The potential accidents are not just natural disasters. They drive a very high financial cost. Working in prevention is what has always been more cost-effective.
To keep an eye even on the little safety issues has always been important. The small flaws are an indicator that a potentially bigger disaster is coming. To stop it, everybody has to wake up and create a new awareness state. Practices like pausing operations to resend the security message are good. To change the way the message is delivered can also reset the awareness counter and prevent accidents.