Slumping Oil Prices Have Met a Worthy Opponent

Integrating enterprise workflows is “the step that companies now need to take”

First, the good news:

At a recent oil and gas conference in Stockholm, the International Energy Agency’s chief economist, Fatih Birol, said he expects the days of $100 oil to return soon.

“We shouldn’t be blinded with what’s happening now,” Birol told the conference crowd. “Looking at the geology, looking at the economics of the oil markets, one shouldn’t be surprised if we see in a few years’ time, again, a rebound of prices.”

And now, the sobering news:

The price of Brent crude skidded to 61 bucks and change on Monday, Dec. 15, 18 days after OPEC’s decision to maintain output during a time of overstuffed markets and sluggish global growth.

So how will E&P organizations weather the latest storm that has moved in over Oil & Gas Land?

Answer: They must adopt a different, more efficient business model.

“There’s no room for slop anymore when operating,” Matt Rogers, a director on McKinsey & Company’s West Coast team, said at P2’s recent ASCEND conference in Grapevine, Texas.

The industry’s traditional economic model is broken, Rogers said.

Consider: Projects cost two and a half times more than they did just 10 years ago, time to first oil has more than doubled, and major capital projects are consistently late and/or over budget.

All of this as the price of oil continues to take a beating.

And yet, “People in this industry still have tremendous scope for profitability,” Rogers said.

Profits? Now? In these times?

Yes.

The key, Rogers said, is integration.

“Connecting the field and the back office is the step that companies now need to take,” Rogers said.

True integration is achieved when an organization’s core domains – geospatial data and mapping, land management, finance and accounting, and production operations – are connected and data flows seamlessly across the enterprise, from application to application, from team to team.

When a company’s silos are vanquished and everything works in harmony, what follows is a story of true success … even in the tough times:

• A single source of the truth is created: Information is shared rather than entered over and over again
• Data integrity is improved: Not only is data more accurate, it's less likely to become corrupted by error-prone manual processes
• Operations are simplified: Redundant efforts and unneeded steps are eliminated
• Execution is enhanced: Sound data and operational transparency enable teams to make better, quicker business decisions

And if you’re one for numbers, Rogers said companies whose front and back offices are connected are 3 to 5 times more productive than their non-integrated counterparts.

So when will a barrel of oil once again fetch $80, $90, $100? Nobody knows for sure. But if past is prologue, the price will rebound soon enough.

Until then, in this age of sub-$70 oil, companies can take steps to not only survive, but thrive.

That is good news indeed.

About P2
P2 Energy Solutions Empowers the People Who Power the World. Upstream oil and gas professionals who are focused on solving tough challenges rely on P2 software, data and analytics solutions to optimize their business performance. More than 1,500 companies from around the world use P2 solutions every day to manage their land assets, measure and process financial information, optimize production, manage their reserves and so much more. www.p2energysolutions.com.