No one enjoys a downturn in their industry. But when circumstances take a turn for the worse, it forces us to think outside the box, innovate, and improve more than favorable conditions ever would. Oil and gas companies are no strangers to downturns and volatile market conditions, but it takes constant vigilance and innovation to prepare for downturns and make the most out of those circumstances.
In this post, we’ll look at the innovations and changes that O&G has achieved during recent downturns—and how the industry can continue to push to be as efficient and profitable as possible.
The Positives From Downturns
Being pushed to innovate out of necessity and because of poor circumstances is never a comfortable experience, but there can be positives that come from downturns. When a downturn happens, there are three areas of improvement found among the successful O&G companies.
A Drop in Production Cost
Production costs are not much of a concern when the market is booming. For example, S&P IQ looked at the production costs of 37 O&G companies from 2008-2016. Between 2008 to 2014, production costs increased by $60 billion. When the market went into a downturn, there was a 29% decrease in production cost between 2014-2016.
While production costs are partially lowered during a downturn because of lower activity levels, other factors include operational changes, negotiating better pricing, product switches, deferral work, technology implementation, and more.
Fewer Production Losses
During the same period of the 2014-2016 downturn, McKinsey found a 15% reduction in production losses between 2013 to 2016. McKinsey explains that the drop in losses comes from a reduction in unplanned outages, less planned shutdowns, and a covered scope of work.
Instead of the goal being to survive the downturn, the goal for O&G companies should be to prepare for the upswing by implementing new technology and making changes that will drive productivity. By adding technology during a downturn, oil and gas companies get better insights into operations, access to data (and in turn better decision-making capabilities), automate and improve tedious or manual heavy tasks, and much more. The technology implemented in a downturn will help O&G companies survive, but most importantly, prepare for the inevitable upturn.
What Should Be Taken From a Downturn?
Operating in a downturn is never the ideal condition for oil and gas companies. But there are some important lessons learned that can continue to be applied during an upswing:
- Continual vigilance on reducing spend
- Not getting too comfortable in the way things are done (reassessing and realigning operations)
- Always be looking for ways to increase efficiency and productivity
- Create easier/faster/better processes through technology
- Don’t be afraid to innovate
Implementing Technology During a Downturn
When the right technology is implemented your company gains insights, offloads tedious tasks, improves operations, and so much more. When technology that is both easy to use and effective is applied during a downturn, it makes the necessary steps easier to identify and pursue with confidence. For example, the increased access to data that comes with technology brings better visibility into your operations. With better insights, you are able to analyze and make vital decisions with certainty.
That same technology brings even more benefit when the inevitable upswing happens. The same factors, such as automation, convenience, visibility, and efficiency, that help save money and time during the downturn will help your company capitalize on favorable market conditions.
Insights for Operations
Industrial technology can revolutionize the way we do work during the good times and the bad. Here at FieldEye, we take pride in building a job site management and procurement platform designed to bring efficiency to O&G companies no matter the market conditions.
FieldEye takes time-consuming and complex processes like site management and asset procurement and turns them into elegant yet simple workflows. The FieldEye platform provides real-time visibility into operations, easy-to-use vendor management, and an innovative marketplace solution, all wrapped up in an intuitive interface.
If you are ready to make your company more efficient during downturns and rebounds through powerful technology, we’re ready to help.