Thursday, October 22, 2020

Oil and Gas Industry: The New Approach

 The status of the industry remains in the struggling phase. Although there are some glimmers of hope with projects starting here and there, overall, the industry is still stagnant and reluctant to “grabbing a gear” and moving forward. There are lots of reasons for not wanting to make that move. First, the playground bullying mentality between the foreign countries abroad rocked the boat with their pricing spat. Next, COVID-19 drifted into the equation coupled with an election year. Those three ingredients make the perfect recipe for tanking the industry. In a significant way, I might add. The only difference (and it is a big one) between this lull in the industry from others in the past is we are dealing with an unprecedented ingredient, COVID-19.

I have weathered downturns in this industry several times in my career. I have had to diligently seek work like a crazy man at times but was always able to find another project within a few months. I remember a stretch back in 2001 that lasted longer than a few months but overall, I was able to find another project relatively soon. In past downturns, a person could not be so picky as to where the project was located or what pay was being offered. If you wanted to keep working that was the stipulations at the time so you just bit the bullet and went to work making whatever changes you had to make to make ends meet.

Except for the pricing spat at the foreign level the ingredients by themselves would not have had such a huge and significant impact on our industry. And even with the prices of oil being manipulated, our industry would have taken a “pause” and jockeyed themselves into a position to continue making profit although at a smaller margin until oil stabilized. Before all the oil and gas economists attack me, the information presented here is strictly my personal observation and opinion. I claim no expertise in the economics of raw materials in the world.

The one area of the industry I feel comfortable about hanging my backside out on is at a much lower level in the industry yet an especially important one. That is the area of construction. I mention in an article I wrote titled, “Still Fighting the Fight” that I see the construction phases of the oil and gas industry heading toward a change. I expect it to be streamlined in a lot of different ways and the reasons for this change will be based on budget and timing. I predict changes in contracts/agreements between the clients and contractors, changes in the engineering of projects, changes in the budget allowances (much tighter oversight and accountability), and changes in oversight (third-party services) of the work being performed in the field.

I call these changes “streamlining.” I have started seeing this take place about 5 years ago on a small scale. Companies are starting to look at contracts and agreements with contractors to define and capture costs differently for budget and accountability reasons. You will see more creative concepts regarding the sharing of costs and profits of a construction project as we move forward in this industry. They will re-evaluate their third-party services and determine if they can cut costs and still maintain safety, integrity, and environmental requirements during construction activities. There are many other areas that will surely be examined by the companies for added value to the bottom line.

With my prediction of the streamline effect becoming more prominent in the months and years to come, I see some specialized opportunities for many individuals in the industry. However, before these opportunities become known, the clients/companies need to educate themselves. This education needs to come from reviewing past construction project data in the most transparent way possible. There needs to be a self-evaluation (company accountability) of these projects broken up into several areas of data that can be reviewed. This data needs to be thrown into the “company think tank” seeking options for improvement based on purpose, budget, safety, environment, and integrity.

Many companies will argue they have this type of process in place, but I would argue that their process has flaws. My evidence of that is seeing project after project of the same company throwing money into the same pit time and time again. And this continues even after a person points out their “budget leak.” More times than not, the person who sheds light on the budget leak is not accepted by the company as a reputable source or the information relayed about the leak does not get passed on for consideration or review. And I haven’t even scratched the surface of the amount of money that is lost or thrown into a pit from these construction projects.

On the other side of the equation referencing the contractors. They too are throwing a lot of their budget out the window. Contractors are losing money in their fabrication work, their start and end times of work, preplanning work activities and execution of those plans, not recognizing their talented employees, and putting them into positions that will generate more production. Again, I haven’t even scratched the surface on their money pits.

My hope is both entities, the companies and contractors are preparing for the changes that are coming to this industry and seek out the resources needed. I do not have anything tangible to speak up to prove my prediction. I am relying on my intuition and the last 5 – 7 years of experience in this industry. The “winners” will be determined by who thinks outside the box and acts first.

Take care and be safe!

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