It’s doom and gloom all around the Oil & Gas sectors at the moment; Operators have slashed maintenance budgets, cancelled development and upgrades, and many Tier 1 and 2 suppliers to the industry are facing project cancellations and / or much reduced project values.
In some respects, here at SCM, we have been insulated from the turmoil because our service deliverables are targeted at helping an Operator become ‘smarter’ in how they decide what needs to be maintained on their facilities and the most cost effective way to implement it – all whilst managing safety and future plant availability.
When the oil price crashed back in the 80’s the industry was faced with similar challenges to those we are experiencing today. Many companies went bust, and others reduced in size by half or more. It took 6 months or so for the Operators to recognise the advantages of adopting our technologies and allow us to help them re-appraise the way they did things – some saved over 80% of their maintenance budgets with our support.
Well, here we are again!
It’s not an easy task reaching out to some of the Operators and stakeholders these days, they are all under pressure and some have simply closed their doors, no communication, until the storm blows over. If the past is any predictor of the future experience has shown that some of them will never know the storm has ended as they will be long-gone by then.
However, I genuinely believe NOW is both an opportunity for some of them to get smarter, better, faster, safer and save a good few million barrels worth of cash too, and it’s our obligation to get the message to them – there is something you can do!
PwC seem to be saying something similar here on the BBC: http://www.bbc.co.uk/news/uk-scotland-scotland-business-31361008
Back in the 80’s, those who chose to simply ‘pull down the shutters’ and stop maintenance investment and corrosion control paid a hefty price. Some of their assets are non-productive or in decommissioning right now – not because of field economics but because of the degraded facility condition and the struggle to maintain HSE standards on it.
HSE is now very aware of asset conditions in the industry; plant is typically mature and often maintained on the borderline between ‘scarcely operable’ and ‘unacceptable’. HSE vigilance will, hopefully, ensure standards don’t drop too far in terms of controlling corrosion and integrity. But … here-and-now Operators have an excellent opportunity to ‘get efficient’, and helping them understand the possibilities and the benefits / economics of deploying our tools and technologies has to be our main target here at SCM.
One major Operator suggested they were planning to spend $14 billion on Fabric maintenance worldwide this year and a further $1 billion on Integrity management – that was before the crash! They are now reducing those budgets by more than $3 billion per year.
The question has to be asked, if $14b was required and now that is reduced to $11b – what is NOT getting done? We know they didn’t implement new efficiencies in the last 2 months; the only thing that has changed is the shedding of personnel, in their hundreds.
The oil price drop has been the ‘tipping point’ for many, however industry and supplier costs have become incredibly bloated over the last decade too. The most trivial supply is now 200 – 300% higher than it was, and is reflected in everything from personnel and training to basic travel and accommodation . Most have known this for a number of years, yet no company has made the first move to combat the bloat.
The sector has been ready for a ‘costs’ realignment for some time and it’s unfortunate that it has come so suddenly and cut so deeply.
Operators can ‘do more with less’ and the industry has an opportunity to demonstrate that right now!
It may take some persuasion but the time is right, and the tools are all available today and at incredibly small levels of investment.
What do you think?