O&G Trends

OG Trends

Here’s how oil and gas companies can leverage technology

to capitalize on regulation changes, infrastructure investment

and other possible market opportunities

By Brent Potts

What will be the long-term impact of the oil and gas (O&G) downturn? Is a recovery on the horizon? How will new U.S. government views on regulations affect the industry? How will fracking and shale exploration change the landscape? And what role will technology play in helping companies thrive?

O&G executives are struggling to find answers to these questions – and many others – as market conditions continue to create uncertainty in the industry.

O&G companies survived recent oil price fluctuations by reducing operating expenses, paying off debt and increasing efficiency through technology. Yet it’s hard to know what to do next. While analysts forecast an eventual rise in oil profitability, recent economic decisions, along with the promise of new government action, make an already erratic industry even more unpredictable. 

One major development drastically affecting the industry landscape is OPEC’s decision to reduce production. Last November, the oil cartel agreed to cut its overall production by 1.2 million barrels a day beginning in January 2017. The energy world’s reaction to this news was immediate, with oil prices gaining as much as 10 percent and share prices of global energy companies rising along with the currencies of large exporters. Whether or not these results will hold in the future remains to be seen. However, this breakthrough agreement to reduce output is the first in the past eight years.

A second development is the possibility of a more favorable regulatory environment under the new administration. Of course, until appointees are confirmed, any forward-looking predictions on how this new government will impact the industry remain uncertain. Yet, indicators point to a few reforms that may have significant impact on oil and gas operations including business tax reform and priority placed on infrastructure investment.

Many of the current and projected changes could bode well for the energy industry, resulting in benefits such as lower production costs and greater expansion opportunities. However, to capitalize on this potentially positive business environment, oil and gas companies also must have implemented the right technology solutions to support growth, add agility to their organizations and help executives make smart, insightful decisions.

Reducing Production Costs

A renewed focus on the United States’ infrastructure could result in lower production costs by allowing sourcing to be conducted closer to manufacturing plants. Examples include:

* New pipeline construction – The new administration has voiced support at the federal level for construction of additional oil and gas pipelines. In January, President Trump signed executive orders to clear the way for developing two major oil pipelines: the Dakota Access and Keystone XL.  Building these pipelines conceivably would decrease transportation costs for oil and gas companies by shortening the distance between the source and the processing facilities. 

* New drilling locations – The new administration also has expressed interest in opening up federal lands to additional energy development. The U.S. government owns roughly 500 million acres of land across the country, underneath which lies billions of barrels of oil and vast quantities of natural gas, coal and uranium. The ability to drill on these lands would increase global supply.

* Fewer regulations – There also is renewed focus on ways to expedite environmental reviews of infrastructure projects and reduce overall environmental regulations. Recently, the government has signed mining and financial disclosure bills that reversed regulations believed to be obstacles to growth and job development. Additionally, there are indications that there will be further reductions in various air and water pollution rules. While relaxing environmental regulations could impact the oil and gas industry in a variety of ways, less regulation would reduce compliance costs.

New technology innovations also are helping companies reduce costs and increase profitability. For example, data from exploration, drilling and transportation are 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. The ability to combine data with operations technology has given oil and gas companies the flexibility they need to take full advantage of new opportunities on the horizon.

Workforce Management

As oil prices begin to recover, companies up and down the energy supply chain that have laid off literally thousands of workers over the last couple of years will need to start hiring again. In fact, experts predict 100,000 new jobs will be added to the industry by 2018.

Advanced technology solutions are making it easier for companies to quickly scale workforces up or down, and manage diverse teams of workers. For example, integrated workforce management systems include critical tools 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. This allows them to assemble and deploy the most appropriate crews at a moment’s notice.

Additionally, technology tools give these new workers the resources they need to perform their jobs. Using cloud-based technology on mobile devices, workers can access information on available resources, whether it is parts availability, repair procedures or talent resources (e.g., third-party service providers, contingent labor, in-house experts or field technicians). The ability to resolve an issue on the first call or make a pipeline repair fast is a must-have capability to compete now and in the future.

While no one knows exactly how market conditions will change over the next few years, empowering your business with flexible, technology-driven operations will allow companies to anticipate market changes and adjust operations accordingly. In this way, they can maximize profitability by taking advantage of opportunities such as lower production costs and new job growth. In doing so, they will not only survive the current economic situation, but thrive in it.

Brent Potts is senior director of industrial marketing for oil and gas at SAP.

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