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Five key sources to long-term value in upstream oil & gas
Five key sources to long-term value in oil & gas
Despite falling margins, upstream Exploration and Production firms have exciting opportunities to deliver long-term value and gain competitive advantage.
The underlying economics of the upstream Exploration and Production (E&P) industry have fundamentally changed. It has become a margin business, with relentless pressure on unit cost performance and global competition for capital.
To adapt to this new economic reality, companies have to go further than recent tactical responses to the downturn. Instead we believe that for those players prepared to challenge conventional perceptions of ‘best-in-class’ and look outside of the sector for inspiration, exciting opportunities exist to deliver a step change - including bringing new technologies to the fore.
We believe there are five key sources of long-term value:
- Zero-based asset costs. Engineering excellence is no longer an end in itself – standards and processes need to be stripped right back to what is affordable for individual assets, to take out up to 25 percent of operating cost.
- Value-based prioritisation. With reduced staff and budgets, a far deeper level of commercial thinking needs to inform the prioritisation of activities, only performing work that adds value and constantly assessing costs versus benefits.
- Using machines to make decisions. By starting with performance rather than ‘big data’, there is an opportunity to use new technology to improve performance outcomes in high-value day-to-day operational decisions.
- Agile supply chains. The industry needs to move beyond traditional ‘zero-sum game’ behaviours by thinking more like a manufacturing business – with far deeper integration and collaboration through the supply chain, to reduce third-party costs by more than 10 percent.
- Intelligent process automation. New automation technologies are helping to reduce transactional back-office support costs by up to 30 percent, while simultaneously reducing error rates.
Delivering the prize in E&P calls for targeted execution of high-value opportunities to complement continuous improvement efforts, along with a new entrepreneurial approach of ‘start small, fail fast, scale fast’.
Find out more about delivering long-term value in the Exploration and Production (E&P) industry.
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