One of the main tenants of economic theory is that, during a recession, businesses focus on efficiency improvements rather than growth to grow profits and gain competitive advantage. This strategy also means that, when the recession ends, these organizations are leaner, fitter and better prepared to face the new – and different – challenges of a growing economy.
With the slumping price of oil, it is interesting to see these same strategies move to the forefront in the oil and gas industry today.
Major Investments Ruled The Day
For the past few years, with oil prices generally exceeding $100 per barrel, oil and gas companies have been running as fast as possible to develop new production facilities. The effect of this has been a primary focus on spending on large-scale capital projects across the globe. Because of the focus on investment in new projects, there has been a relative lack of focus and management attention on operations and maintenance of the existing production facilities.
With the price of oil dropping to $50 per barrel and many analysts predicting that these lower prices will last another two to three years, the oil companies have dramatically cut back on their investments in new large-scale projects. Capital projects that have been in planning for many years have been delayed or cancelled, just as the detailed design was due to start.
Shifting to Operational Focus
Instead of focusing on new investment, oil companies are focusing on maximizing the efficiency of the existing assets, leveraging recession-time economic theories. That means an increased focus on business operations and asset maintenance. However, spending on brownfield projects cannot simply stop without risking the productivity of the existing facilities and therefore affecting the bottom line of the company.
We are now seeing this behavior in many of our customers. While we are not necessarily seeing an increase in spending on brownfield projects, we do see widespread acknowledgement from the operations management within the industry that the brownfield projects are not effectively managed. And that makes sense: the money spent over the past few years in systems to support large-scale capital projects has not been replicated for brownfield projects.
Successful Brownfield Projects Strategies
As oil and gas companies look to better manage their brownfield projects, what should they be focused upon? We find five common attributes amongst our customers that are successfully managing their brownfield projects:
- Getting control of and centralizing their current asset documentation and data. Because many plants were built decades ago, the information is captured on paper and stored in filing cabinets. Capturing this information electronically and, more importantly, organizing this information to support your critical operations processes is essential to success today and in the future.
- Integrate documents and operations and maintenance data. Operational excellence requires more than just good document control; these documents must be well integrated with the business processes and systems that support these process.
- Designing and implementing an effective Management of Change process for both documents and data. Even at plants that are several decades old – many would say especially at plants that are several decades old – change is a constant. It’s not enough to establish a baseline and live off of that information; successful organizations make sure that they are able to cope with changing information, both managing the change process and ensuring that the most current information is always available.
- Extending the change processes outside of the organization to include partners. Given the number and global scope of contractors and suppliers that participate in brownfield projects, it’s critical to design both processes and systems that facilitate third-party organizations to share documents, comments, and participate in review and approval workflows.
- Applying the same tools and processes for both large-scale capital projects and brownfield projects. EMC has developed solutions that enable organizations to follow industry best practices and keeping your projects on track. Successful customers are leveraging these same systems to successfully manage brownfield projects.
By focusing on these five areas should position oil and gas companies to not only increase their efficiencies and adapt to today’s low oil prices but also position them to manage their large-scale capital projects when the price of oil rebounds.
How are you focusing your business strategy in today’s oil and gas economy? Share your thoughts by commenting below.