Many companies within the Oil & Gas industry are suffering. We should know that here in Alberta!! Our economy has been suffering ever since crude oil crashed back in 2014 where it almost touched $35 a barrel at one point in time. Ofcourse oil price has improved since then but still O&G sector is suffering… the reasons are manifold.
I still remember those times (way before 2013/2014) where anyone in the investing world you spoke to, went on a rant about how oil prices were bound higher. They predicted $100 per barrel as the “new norm” for crude oil. After all, they gushed; oil was a natural commodity and like other natural commodities there is only so much available. And with our increasing consumption, their prices were bound to rise.
BUT what they failed to foresee was that- the oil capacity they were using for their forecast calculation was based on the data that was available at that time- i.e. based on the oil deposits that were already discovered.
They failed to consider true effectiveness of technological advancements like big data which would allow us to better understand and evaluate extensive geological data in minutes. It would also allow us to better map analytical data from several varied sources in real time; all of which would help to cut down oil exploration and production costs!! Big data has played a vital role in disrupting how oil and gas were traditionally explored, sourced and supplied!! It has helped these petro-companies to better manage their rigs, reduce waste, increase efficiency and thus reduce the overall production cost per barrel!!
Now when we think of an Oil and Gas company, typically we do not think of technology or software applications. And this is where the oil forecasters made their grave and expensive mistake!!
Back when breakeven cost for oil production was in the $50-$60 per barrel range, at that time, the OPEC countries (i.e. the official oil cartel) controlled the global oil price by controlling their output. Saudi Arabia could easily produce oil at below $20 a barrel and still make sizeable profit when their oil sold for $60 per barrel in the global market! But others could not compete, and OPEC continued to rule the global oil scenario.
But technology changed all of this. Ofcourse there are many political and other factors that has influenced this change, but we definitely need to give due credit to the rig-transformation that was brought on by technological advancements such as Big Data.
Big Data has allowed these oil companies to better utilize “information” technology. It has allowed them to introduce higher efficiencies and reduce production-process wastes as well as foresee issues and challenges; ultimately lowering their overall production costs.
Technology is powerful and can play a very disruptive role when we consider an innovation framework.
Always try to see how you can better utilize technology to introduce efficiencies and lower your costs- not just production costs but also service delivery costs. And you don’t need Big Data for this!! Most companies do not fully utilize all the applications that they already pay for in terms of license fees and maintenance costs!! Even enterprise wide applications like PeopleSoft, Oracle Apps and SAP go under-utilized.
When you start leveraging technology, it can help you to introduce process efficiencies that you probably never thought possible!! All this while not spending an arm and a leg- Better utilizing technology needs comprehensive understanding of these applications and their integration points, proper methodology as to how to better utilize such existing applications and finally a wise and willing team of decision-makers, who want change and are willing to make it happen! These leaders take responsibility and commit to introducing meaningful change within their organization!
If you are such a leader and would like to learn more about how you can better utilize your existing technological applications, reduce your departmental costs and increase your profitability then feel free to contact me for a complimentary consultation.
Sandhya Bhat MSc, CSSMBB, CSSE has developed several new (under patent filing) and enhanced existing strategic methodologies to improve technology and human capital utilization, produce greater ROI on investments and streamline service delivery. She is an acclaimed author, speaker, a sought after thought leader and an avid world traveler.
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