When disturbances, such as a global pandemic, change the market conditions, enterprises face the challenge to realign their cost structures. Although adjustments are necessary, companies also need to ensure minimum losses or negative impacts on other operations elements.
Currently, organizations in the oil and gas industry need to constantly and actively develop practices to cut operational costs in order to set their businesses for unstoppable growth. As they do that, enterprises will remain competitive while sustaining high-performance levels.
Challenges striking the O&G industry today
Although the energy sector has faced prominent disturbances over the years, the global oil and gas market is expected to grow at a CAGR of 25.5 percent in 2021. The industry constitutes about 3.8 percent of the global economy.
With innovative technologies transforming how businesses handle digital transformation challenges and opportunities, decreasing costs to remain competitive has become the biggest hurdle. To that, we can add the fragility of integrated supply chain planning and execution, plus the lack of real-time insights, hindering collaboration and decision-making.
Next, we’ll share some tactical practices to help you tackle the major challenges facing the oil and gas industry and take advantage of present opportunities.
Technology adoption is vital to cut costs in oil and gas
Although technology advances were seen as a threat initially, they have become an excellent resource for oil and gas companies that want to retrench. These are some of the leading technologies that can save you time and money while keeping you at the forefront of your competition:
- Drones and IoT. The ability to monitor expansive and risky areas remotely using robotic assistants and sensors has reduced staff’s need to travel to every inspection point. The outcome has been dramatically beneficial since travel expenses have almost disappeared while efficiency has improved.
- Cloud computing. Operations in the oil and gas business aren’t done in one place only, meaning that filling and tracking data can be confusing and costly. Adopting cloud technology allows the workforce to access data, enter readings, and streamline inspections or maintenance from their tablets or mobile devices. Without needing to have workers physically present, this practice will optimize the workflow, reduce overall costs for your business, and improve the decision-making process.
- Artificial intelligence (AI). When joining this technology with traditional equipment, advances can provide outstanding benefits. The use of smart bits, for example, can reduce replacement expenses since they have a longer lifespan and a more consistent rate of penetration. Intelligent rigs are another excellent tool to help companies save on maintenance and equipment. Finally, artificial intelligence as a service (AIaaS) has become commonplace, allowing industry leaders to test innovative tech solutions but with lower risk and initial investment.
In reality, oil and gas organizations are changing how they work as they strive to integrate new technologies into their operations. The urgency to build a sustainable cost structure will help companies adapt to the price climate’s volatility while smoothly making a digital transition.
Applying long-term strategies to manage costs
Embracing technology with a profitable digital strategy should be vital for oil and gas companies. Enterprises like Brazil’s Petrobras, which have already started a complete renovation, consider digital as the answer to improving their operations and value. To achieve this, companies need more than just adopting innovative technologies. An effective digital transformation along with workforce upskilling is fundamental to placing your business for perpetual growth.
Companies need to build a digital strategy that focuses on improving remote and autonomous operations more than adopting different technologies. A well-structured digital plan supported by technology innovation will become a long-term solution to bring down expenses throughout the value chain.
The World Economic Forum predicts a 20 percent decline in drilling and completion costs when using new technologies, plus a 25 percent reduction in inspection and maintenance costs by 2025. These savings will come as a consequence of implementing an effective digital transformation strategy.
Shortly, when more robots take over field workers’ tasks, operating costs are reduced drastically. However, with the adoption of modern technologies and intelligent automation, workforce upskilling becomes inevitable. Talent will need to have a more robust technical skillset to execute more valuable tasks and meet new oil and gas industry needs.
The existing skill gap craves more than just money investments. It requires a comprehensive approach where stakeholders, educators, and employers are engaged. Companies can start to retrain existing employees with cross-functional skills as a quick response to current hiring difficulties.
With more enterprises making upskilling a priority based on a long-term strategy, savings will eventually be reflected. In fact, the World Economic Forum predicts 20 percent lower employee costs across all areas of the industry.
Required investments to secure long-term profits
To be ready to face the inevitable and drastic upcoming changes, oil and gas companies need to be quick to adapt and transform the way they work. Implementing and planning a strategic digitalization will become a key factor. Organizations need to ensure that this transformation happens throughout all phases of the industry and within their companies to guarantee success.
Senior executives should be promoting digital as a top priority and make sure that it becomes a part of the company’s culture. To change workforce mindsets, investments in programs promoting technology adoption and digital thinking will be necessary. Significant investments in human resources to sustain a culture of innovation will be vital.
Efforts to improve and reset the company’s data architecture will also be needed. Although the investments may seem overwhelming initially, they will make all the difference when it comes to securing long-term profits in such a volatile ecosystem. Setting your business for vigorous growth starts today. Contact us and let us guide you through your digital transformation journey.