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How oilfield service companies can lower operating costs with remote operations

How oilfield service companies can lower operating costs with remote operations

Ken Hartman
Ken Hartman

Sep 06, 2021

The dual shock of the oil price crash and COVID-19 pandemic has severely impacted the Asia-Pacific oilfield services (OFS) industry. Since the crisis started in the first quarter of 2020, OFS companies in the region have prioritized maximizing liquidity by preserving capital and reducing costs to protect their people and sustain business continuity.

This is EY Singapore’s take on the current state of the Asia-Pacific OFS industry, which can be generalized to the domestic U.S. as well as the global industry.

EY goes on to say: While focusing on immediate priorities, OFS companies must also prepare for the next phase when oil and gas markets stabilize in a reduced addressable market. As the sector continues to evolve in tandem with the energy transition, companies need to accelerate the re-evaluation of their operations and strategies, as well as increase digitalization.

The company observes that many OFS companies…face intense competition, exacerbating overcapacity in a shrinking addressable market, significant debts and poor returns. Companies need to take a hard look at their value to both customers and the broader group of stakeholders, and allocate capital accordingly.

EY says OFS companies have two options: they can choose to scale up by acquiring businesses to increase market share, concentrate product and service segments and rationalize supply. For this approach to work, companies should have a concrete plan, capital resources to acquire sufficient market share and the requisite pricing power to maintain sustainable margins.

The other option is to scale down and be differentiated. This means divesting businesses that do not fit the strategic direction, are capital-constrained or are unable to build meaningful market share. Differentiation can be achieved by focusing on niche markets, driving offerings via technology and looking at new business models or partnerships.

EY believes digitization will be at the center of any transformation. OFS companies must now move beyond using digital technologies for cost reductions to become solution providers to oil and gas businesses by combining such technologies with existing product and service lines. OFS companies can play a greater role in enabling their customers to reduce the cost per barrel and accelerate time to first oil via optimized well design and planning, supply management, reduced operations and maintenance costs, and maximized operational uptime.

Since the COVID-19 pandemic started, oil and gas companies have rapidly deployed remote operations and cloud-based digital infrastructure to improve drilling efficiencies and sustain employee well-being. The current crisis is likely to accelerate the digital strategies of oil and gas companies.

In particular, EY notes that asset-light services providers will focus on their service offerings. To succeed, they will need to leverage emerging technology effectively and stay agile.

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How oilfield service companies can lower operating costs with remote operations

How oilfield service companies can lower operating costs with remote operations

How oilfield service companies can lower operating costs with remote operations