Profit hunting in the brave new world of oil & gas
Until 2014, the oil and gas industry enjoyed high oil prices, high levels of activity and wages.
Margins were high and demand was even higher. Since 2018, however, most operators have made cuts in just about every aspect of their investments, headcounts, projects and maintenance activities. The price per barrel is also now less than half of what it used to be prior to 2014.
Even before the Covid-19 crisis, many oil and gas watchers were predicting a transformative year for the industry, with consolidation through mergers and acquisitions widely expected, as well as on-going transformations in supply and distribution through the adoption of digital technologies. While Covid-19 has thrown a grenade into the workings and predictions of all industries, it’s become more essential than ever to find ways to optimize existing services and ensure business continuity.
It’s a well-worn word but efficiency will become essential to the future viability of any oil and gas organization. However, efficiency doesn’t just mean cutting costs. It means doing the best you can with what you already have, and this is where an intelligent field service strategy can help.
Equipment in the field will need to be running at optimum levels to ensure a good return on investment. This equipment also needs to be running as and when it is needed, with limited, or better still, no downtime, if things go wrong. It’s also important for every organization to understand the performance and state of any equipment, giving a better insight into when it is reaching end of life and may need replacing.
Working on the frontline of equipment performance, field service teams have the ability to obtain this level of intelligence and deliver this level of service - but is it really possible with manual-intensive, paper-based ticketing processes? Do existing methods for managing service engineers ensure there is complete visibility of service contracts and warranty entitlements, as well as track routine equipment maintenance, any repair jobs including parts ordering, billing and job invoicing?
If this is all being done manually, it is inefficient. There will be understandable gaps in equipment status and repair work could be costly with multiple journeys to inspect equipment, order parts, collect parts and then return to complete the work. How can an organization be efficient and realize its potential if it lacks intelligence on its assets?
The answer lies in technology and a different approach to service strategy. Field service management tools can deliver huge benefits to oil and gas service maintenance, such as automatically tracking routine maintenance of rig and pressure equipment, quote and invoice customers quickly and accurately, track contract entitlements and perform depot repair/RMAs and deliver a 90% reduction in time to invoice, helping cash flow.
But technology alone is not enough. Oil and gas businesses need to think differently, take a service-led approach to not just managing field service teams and equipment better, but to also understand growth opportunities and potential new revenue streams. That’s where servitization comes into its own. Oil and gas organizations are embracing servitization and leveraging technology to increase profit margins and core service offerings. A well-oiled, digital field service management strategy not only improves business continuity, but also keeps the lights on for longer for all aspects of an oil and gas value chain. And most importantly, it can also provide opportunities for new service delivery models.
According to a Forrester study, entitled From Grease To Code: What Drives Digital Service Transformation, “as-a-service businesses and predictive maintenance models will contribute most of the revenue within five years. Offering assets on subscription, enabling preventative maintenance and shifting to as-a-service delivery models are seen as critical for improving customer experience.”
It’s an interesting point. While predictive maintenance - using IoT sensors to deliver real-time data to enable automated analytics to foresee problems before they occur – and subscription models are exciting forward steps for service, they are only made possible through digital field service solutions.
Field service management and asset management software tools are the foundation for future opportunity within field service, and indeed across entire organizations. The ability to invoice quickly and accurately as the job is completed should see a significant reduction in invoice times. This should go some way to improving cashflow. Ultimately, it is the knowledge of assets and quick and efficient management of those assets that will determine the future viability of oil and gas businesses in this difficult time.
For more information on energy digital topics - please take a look at the latest edition of Energy Digital Magazine.