Sapphire’s Lee Sands looks at how oil and gas companies can remain competitive while controlling costs as optimism makes a comeback
The world population is set to reach a staggering 9.1 billion by 2040, rising from an already hefty 7.3 billion today. Combine this with the predicted doubling of GDP and experts are forecasting a rise in living standards across the globe. Undoubtedly this level of growth will result in major changes for the world of business, but the repercussions for the energy industry in particular are huge, with the expected economic expansion and increasing population leading to a 25% increase in global energy demand over the next two decades.
The technological developments of recent years may have seen an increase in the supply of energy and the range of available energy choices, as it were, but ongoing socio-political uncertainty across the globe, combined with low commodity pricing has made for a challenging business environment, especially for oil and gas businesses. However, 2017 has seen the emergence of a cautious optimism across the industry, with the upstream industry seeing some upturns in certain areas. Cost containment is still a major priority but we’re definitely seeing more capital expenditure and a desire to invest in the future of the industry.
One area which forward-thinking oil and gas industries are taking steps to embrace is digitisation. Without a doubt, digitisation is happening and businesses can no longer afford to ignore it for fear of being left behind. For the energy sector, it’s crucial to seize the opportunity and invest in digitisation strategies, perhaps investing in areas which have been neglected as a result of the precarious market conditions of recent years. Where rapid returns have been the order of the day, with the speed and size of ROIs often the benchmark against which projects in the industry are judged to be a success, when it comes to digitisation, the most prudent investments look at the bigger picture.
The emphasis needs to be on those areas which stand to not only deliver value but also those which expedite growth. In short, oil and gas businesses need to develop their existing foundations to nurture a stable, robust and agile business to face the challenges that come about not only from a massive increase in demand, but to also survive and thrive in a highly digitised business environment, where suppliers, consumers and partners alike are all readily embracing the digital world.
While big ticket ROI projects might grab the headlines in the annual report, it’s often the smaller, more long-term investments that have the bigger impact on the sustainability and future success of the business. Investing in an Enterprise Asset Management (EAM) system, for example, gives you complete visibility over your asset maintenance and performance, vastly improving your capital asset management, optimising your assets to maximise performance across the board. Increased reliability, enhanced predictive maintenance and warranty management all help to secure all-important gains on the bottom line by minimising downtime and maximising productivity. And, when you factor in the business-wide visibility afforded by a good EAM solution, the business has in-depth, real time data at its disposal to underpin effective decision-making, making optimum use of all business assets.
The same can be said of an investment in your back-office function. A business is often only as good as its fundamental processes and, for many oil and gas businesses, this is an area where they’re clearly lacking. A distinct shortage of operational, back office digitisation is stifling the potential of many oil and gas businesses. Legacy IT infrastructures and systems simply cannot cope with not only the up-to-date systems of customers and partners, but are also unable to effectively process and make sense of the sheer volumes of data that are part and parcel of doing business in the digital age. The inability of ageing IT infrastructures to deliver instant, data-driven insight into the business prevents oil and gas businesses from realising their true potential. Getting the right information, at the right time is vital if oil and gas businesses are to increase efficiencies and optimise their business agility, something that’s crucial if they want to stand a chance against more agile competitors who have already fully embraced a digital back office.
If oil and gas businesses are to preserve margins while maintaining high productivity, they need to invest in the future of the business. An investment in a digital back-end may not have the glamour or speedy ROI of large-scale investments out in the field, but the long-term value such investments represent, in terms of developing not only increased business agility but the ability to withstand future economic storms, is priceless. To capitalise on growth and to guarantee the future of the business, decision-makers need to move technology much further up the agenda. Those who hesitate will ultimately pay a big price, and first movers will inevitably win out.
What to look for when it comes to your digital investment:
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