Oil and gas companies must cut expenses to survive the slow market.
In the down market, oil and gas companies are cutting expenses to weather the storm. According to Fortune article, Here’s How Oil Companies are Scrambling to Survive the Price Crash, spending must be cut to stay financially sound, while capacity and production equipment must be maintained to compete in the market. Companies have slashed overall expenditures, stopped pursuing mega projects and are working closer to home. Most companies have narrowed their focus to produce products in their areas of expertise, and are looking into opportunities in the geographic locations of their core assets.
Digital technology is a sustainable path to recovery and new growth.
While cost-cutting tactics are necessary for oil and gas companies to survive, they are not enough by themselves. In a Forbes article, guest author and Group Chief Executive of Accenture’s Resources, Jean-Marc Ollignier says, “The lengthy price slump calls for re-planned portfolios, a greater degree of business transformation and restructured operating models.” Technology can be used to simplify oil and gas operations through automation, allowing companies to transform the industry and ensure success in an unstable market.
The key to successfully implement digital technology is connecting insights from data analytics to a company’s operating model. According to a Bain & Company Bain Brief on the subject, Cisco has estimated that oil and gas companies could see 11% growth in earnings across value chains by upgrading and/or digitizing systems. The brief describes how oil and gas companies should “Identify the areas of the value chain with the highest impact on ﬁnancial and operating results and cross them with the opportunities to enhance delivery through digital technologies.” There are four substantial application areas emerging, highlighted here in red:
A 2016 Upstream Oil and Gas Digital Trends Survey conducted by Accenture and Microsoft states the four most invested in areas of technology industry-wide are currently Mobility at 57%, the Internet of Things (IoT) at 44%, the Cloud at 38% and Big Data/Analytics at 36%. Projections show these four areas will continue to be invested in and focused on over the next several years.
The survey indicates that 91% of oil and gas executives see value from digital technology. These technologies are contributing value through effective real-time decision making, enhancing asset management and lowering costs. They are also positively impacting the workforce with increased productivity, improved engagement and enhanced job training. 72% of oil and gas executives believe that the central challenge of cost reduction can be addressed through the utilization of technology. Over the next three to five years, half of the executives surveyed plan to spend more on digital technologies.
RK Energy specializes in custom manufactured and skidded equipment for the upstream, midstream and downstream sectors in the oil and gas industry as well as renewable energy. We use advanced engineering, preconstruction and CAD modeling to fabricate skidded equipment for easy installation and maintenance in the field. If you’re looking to join the oil and gas industry revival, contact Mike Malloy at email@example.com to discuss what RK Energy can do for you.