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OUTLOOK


Reversing the fortunes of upstream oil and gas companies

Collaboration — not slashing costs — is the best way forward during an oil bust.​

AT A GLANCE

In a downturn, oil and gas companies are often quick to turn to cost cuts to preserve financial viability, a dangerous approach that can expose companies to even greater shortfalls in the near future. What's more, the preferred business model of the past decade—one that pits operators against suppliers—has not been effective in tackling turbulent markets and increasingly complex operations. The result? Upstream players are missing out on the key benefits of a more collaborative approach.

Here are three tactics for achieving better integration—and profitability—between operators and suppliers.

Joint operator/supplier cooperation

Why join forces?

Joint partnerships can reduce spread cost and improve the ability to use equipment and engineers more efficiently.

How to make it work?

Form a Joint Efficiency Team (JET), which can perform a holistic efficiency assessment, combine lean methodologies and find ways to adopt each other’s best practices.

Who has done it well?

A North American operator and its service company were looking to improve efficiency and performance. The collaboration led to a sizable increase in the number of sections they could frac as well as major time and cost savings.

Technology integration

Why join forces?

Buying technology-driven services piecemeal means operators miss out on the real prize—increased production thanks to end-to-end technology consolidation.

How to make it work?

Integrate workflows and decision making to increase the impact of breakthrough technology.

Who has done it well?

A North American operator sought to quickly adopt new technology to boost production, so it created an integrated design and decision-making team with its service company. The results included a 30% increase in well production.

Performance alignment

Why join forces?

The transactional relationship between operators and their suppliers, which hampers common goal setting, is the single most important barrier to growth.

How to make it work?

Establish a partnership model that aligns stakeholders along a set of shared performance objectives, like improved well recovery.

Who has done it well?

The country of Ecuador and one of its service companies teamed up to improve declining output from a mature oilfield. As a result, production doubled in just two years.

A CLOSER LOOK

Learn why the oil and gas industry needs to turn a corner — and quickly.

READ MORE

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