Unlocking the Full Potential Of Oilfield Services

The oil and gas industry has been a driving force in regional economic expansion, helping to improve living conditions in many nations. The US Energy Information Administration (EIA) projects that worldwide energy consumption will rise by over 50% from 2007 levels by 2035. Considering that "cheap oil," or conventional energy resources, have mostly been exploited, any further volume increases will have to come from "unconventional oil." Increases in the price of oil mean more expensive capital project implementation. Increasing production via well-executed capital projects is becoming more important, but the cost-benefit analysis is becoming increasingly complex.

Issues and their causes may be broken down into four broad classes.

External Challenges:

A shortage of available workers has resulted from the last decade's dramatic rise in capital expenditures. The domestic markets of many nations cannot sustain themselves with the local supply of trained labor. Briefly, the following may be said about the origins of such an issue: Several factors are contributing to this problem: the impending retirement of many experienced professionals, a shortage of particular skills, and insufficient recruiting efforts. In order to attract skilled labor, less developed countries pay such employees more money. Some nations' training infrastructures, employment rules, and needs for knowledge transfer are immature, which contributes to the tight labor market. Some rules, such as the restrictions that some nations implement to limit the movement of skilled people, might further limit the quantity of skilled employees. In contrast, regulatory organizations are overburdened and unable to adequately assist the sector. The majority of regulatory agencies are coping with this growth using the same amount of resources as they did 30 years ago, or even less.

Projects Challenges:

Major investments in the oil and gas sector have undergone a major shift in recent years. The amount spent on capital expenditures in 2013 was seven times more than it was in the year 2000. In spite of profound changes in geology, human safety, standards, operational risk, and political stability for capital projects, approaches, methods, legislation, and relationships among stakeholders have not kept up. With project governance models based on "stages and gates" throughout the value assurance process, the "oil ecosystem" must pivot its attention from schedule and cost management to value generation and delivery.

Planning Challenges:

The capacity to effectively fund and design major capital projects has been hampered by the industry's emphasis on attaining economic and schedule objectives. Projects with realistic budgets are deemed "economically unviable." Tendering for a project sometimes ignores or undervalues crucial technical characteristics like quality, health, safety, and environmental implications since they are more difficult to quantify.

Execution Challenges:

Intense investment over the last decade has strained supply networks on a global and regional scale, leading to price hikes and delivery delays for goods and services. Multiple initiatives at once need a finite supply of available resources. Since oil and gas suppliers were not heavily involved in the early stages of projects, the sector was reluctant to respond to a sudden uptick in demand. Instead of prioritizing supply chain management, project owners are laser-focused on cutting costs. As a result, many suppliers are unable to increase production since their profit margins are being cut. The two most common types of contracts, the "lump sum" and the "reimbursable rates," do not lend themselves to fostering long-term, strategic partnerships.

In my perspective, a new operating model is needed in the oil and gas sector in order to efficiently complete large-scale construction projects. The development of long-term strategic connections may be helped by trying out various contractual structures. To maximize cost savings, quality, and customer satisfaction, the most effective models have project owners and suppliers agree on projects early on based on a shared vision. Such contractual arrangements include "Master Relationship Agreements," which are nonetheless constrained by scope, information flow, and commitment level.

Establishing a governing organization, or delegating this responsibility to an existing industry group, might standardize engineering techniques and design requirements across sectors.

Rather than relying only on existing methods of attracting and retaining human talent, the oil and gas sector should actively seek out and initiate conversations with all relevant parties in order to shape public opinion and so increase its appeal. The results of collaborative efforts involving several parties may be substantial. The ability to satisfy projected demand will be enhanced by the collaborative use of a shared pool of technical expertise amongst participating companies.

As a result, a new strategy for delivering capital projects reliably is required to take advantage of the significant value creation possibilities presented by today's and tomorrow's complex and multistakeholder issues. The rising cost of capital projects is mostly attributable to the worldwide need for energy. This exemplifies the significance of collaboration in resolving issues involving resources such as people, money, and supply chains.

Joint problem prioritization among oil and gas stakeholders is essential. Non-traditional stakeholders, including as regulatory agencies, universities, and the government, must be included in open communication and cooperation among all parties participating in initiatives. The key to realizing the industry's full potential is gaining a firm grasp of the foundations of capital projects.