Towards a New Reality: A Perspective on the Future of the Oil & Gas Industry

With the green shoots emerging, the oil & gas industry may have reasons to hope for, and perhaps foresee, better times ahead.

Optimism is gradually creeping in the oil & gas industry.

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Towards the end of 2016, the industry witnessed developments that herald a promising future for oil & gas. For instance, OPEC members and a number of non-OPEC producers have agreed to cut production, rig counts were steadily rising and the US natural gas sector continued to claw as it spurs the US’ rise as a global LNG exporter. M&A and divestiture activities have also started picking up.
With the green shoots finally emerging, the industry may have reasons to hope for, and to some extent foresee, better times ahead.

The general confidence, however, does come with caution. The industry and allied stakeholders admit that the recent downturn will leave long-term effects on a number of aspects of the oil & gas sector. Therefore, the collective opinion is that moving forward, the industry will be defined by the way it adapts to the changes and responds to the salient issues confronting the sector.

Below, we take a look at a few talking points (on partnerships, shortening project cycles, and manpower) and shed light on certain business and operational strategies that oil & gas companies may espouse.

Strategic partnerships with specialists

The industry is increasingly seeing new forms of business alliances. The industry once dominated by generalist companies (or those that discover, develop and operate an oil or gas field and provide all other allied services) is evolving into one that features partnerships among specialists in specific aspects of the operating environment. Such a collaboration offers the opportunity to leverage the specialties of the various entities involved. It furthermore ensures that each relevant process within the operation is looked after by companies most able to manage them.

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This is exemplified in the partnership of international oil companies and specialists, like British Petroleum (BP) and exploration company Kosmos to seek assets in Mauritania and Senegal. Then, there are oil-field services providers, like Schlumberger, Halliburton and Petrofac, which aligned with various oil & gas producers to offer their integrated field management services.

Oil & gas entities are also partnering with power services provider to ensure the continuous supply of electricity to their operations wherever they may be. The importance of electric power in oil & gas facilities cannot be understated, and by collaborating with reputable power providers, oil & gas companies can increase their production, avoid downtime and enhance operational efficiencies while minimizing operational expenditure.

A shift to shorter-cycle projects

At the height of the downturn, the industry saw a staggering USD 620 billion worth of projects through 2020 deferred or canceled. This fact epitomized the real risks of operating within the industry amidst the prevailing market situation. This, therefore, prompted oil & gas companies to train their sights on more viable shorter-cycle projects.

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For oil & gas companies, dealing with shorter-cycle projects entailed a new mindset, a heightened attention to capital allocation and more innovative ways of doing business. For example, in shorter-term projects, it may no longer make sense to devote a large chunk of capital to permanent facilities, like power generation systems, which will only serve for a limited time. In this case, instead of building their own power plants, oil & gas companies can choose to rent temporary power plants for the duration of the project.

By renting power plants, oil & gas companies, like ConocoPhillips, EOG Resources, and Anadarko, will no longer need to invest a huge amount towards the construction and operation of a permanent facility, and will no longer have to grapple with substantial upfront costs. Oil & gas companies can conveniently pay for the rented electricity from their operational profits, and can easily plan for their financial allocation throughout the project because payment schedules are fixed and regular over a contracted term.

Once the project is over, the rented power plants can be rapidly demobilized by the power provider, thus leaving no permanent power facility not utilized or that will require further maintenance and service.

An encouraging manpower landscape

At the height of the downturn, oil & gas companies had to streamline operations to survive the recession. This resulted in massive job cuts, estimated to have affected more than 100,000 through November 2016.

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On a positive note, the layoffs have ebbed in recent months, and encouraging numbers of oil-related postings for oil-producing states have started to manifest. But, despite the gradual increase in manpower requirements within the energy industry, most oil & gas companies remain lean and conservative in recruiting new employees.

This is another area where renting power can prove to be advantageous. A full temporary power service includes expert manpower to install, operate, maintain and service the power plants throughout the project. This means oil and gas companies will not need to hire, re-train or transfer employees to manage the power plants.

For more information on rental power solutions for the oil & gas industry, visit: http://www.altaaqaglobal.com/industries/oil-gas

Marching on to the future

The oil & gas industry has proven time and again that it has the ability to reinvent itself in the face of challenging times. The tough last couple of years has prompted the oil & gas sector to tighten its belt in order to thrive in an environment of low oil prices. Looking to the future, the emerging oil & gas industry will largely depend on how it reacts to its new reality. With the appropriate business strategies and responses to prevailing industry issues, a more resilient sector can emerge from the rubbles of the downturn.

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PRESS INQUIRIES
Altaaqa Global
Tel: +971 56 1749505
rbagatsing@altaaqaglobal.com


Sources consulted:

http://www.strategyand.pwc.com/trend/2017-oil-and-gas-trends

http://www.epmag.com/2017-outlook-optimism-abounds-oil-gas-sector-1454786#p=full

http://deloitte.wsj.com/cfo/2017/01/04/the-slow-road-back-oil-gas-industry-outlook-for-2017/

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/energy-resources/us-er-2017-oil-and-gas-industry-outlook.pdf

https://www.forbes.com/sites/rrapier/2016/08/08/the-top-10-u-s-oil-producers/#31a8e4e76d20

Utilizing Stranded Gas to Boost Long-Term Production: A Case for Temporary Power Technologies

Oil & gas operators are constantly in search of innovative ways to optimize field operations, enhance long-term production, keep operational expenditure in check, and minimize the environmental impact of their operations. In this light, oil & gas operators are increasingly looking into in-field power generation.

Traditionally, oilfield equipment is powered by generators running on diesel, owing to the fuel’s wide availability, safety, and economy, and to the ease of installation of diesel-run generators. In recent years, however, natural gas-powered generators are progressively gaining acceptance as a workable alternative to diesel-run ones. Previously, using natural gas as fuel for in-field power generation was an unattractive proposition, primarily because of the absence of proper infrastructure and appropriate technologies to capture, process and utilize stranded natural gas. Today, with the existence of cutting-edge power generation solutions that can run on onsite natural gas, together with the increase in unconventional gas resources and the emission regulations in vigor in many countries around the world, oil & gas operators are gradually realizing the economic and environmental advantages of using natural gas to provide power for their operations.

Natural gas generator systems prove particularly beneficial in bigger and longer-duration projects. While it is true that natural gas units require a significant upfront expenditure, operating them have been shown to be more economical compared to generators running on other fuels, mainly due to fuel savings. Additionally, with natural gas generators, oil & gas operators can ensure maximum field uptime, because such equipment has longer run times in between service intervals.

At present, oil & gas operators have been keenly looking into expanding the scope of natural gas-powered generators, beyond the traditional drilling and hydraulic fracturing.

While power solutions running on natural gas are gaining ground, deploying them on a large scale still comes with particular challenges. Oil & gas operators will find benefit in partnering with a reputable and reliable power solutions provider, who can help them address the related obstacles and meet the power requirements of each stage of operations. Temporary power providers can offer alternative fuel technologies that represent a viable solution to the wide range of challenges related to the utilization of natural gas-powered units in oil & gas operations.

In this context, what should be expected of a reliable power partner?

A reliable temporary power provider should be capable of supplying a complete and integrated power solution to ensure an efficient and smooth installation of natural gas temporary power plants. It is imperative that the solution on offer should provide for modules to condition on-site natural gas, a complete electrical infrastructure (including generators, cables and other allied equipment), and provisions to utilize an alternative fuel source, in cases when the gas supply from the main source is insufficient.

A temporary power partner should offer flexible power technologies that can ensure consistent power generation amidst fluctuating gas supply volumes. This provision can particularly prove beneficial for nascent field operations, before a consistent source of field gas is established. For instance, the temporary power plants can initially run on liquid propane, then seamlessly transition to natural gas once the infrastructure to access gas from proximate pipelines is set up.

An efficient temporary power provider should also have the experience, expertise, and necessary provisions to be able to act swiftly in case problems arise at the site. Various field parameters should be constantly monitored and communicated to operations personnel at the site. They should be immediately notified of any problem relating to gas supply or generator function, and should always be ready to resolve the problem and restore the optimal operations of the temporary power generation systems.

Oil & gas operators are progressively understanding the opportunities of leveraging natural gas as a power source. However, without the proper infrastructure and appropriate technologies in place, oil & gas operators are restricted in capitalizing on this valuable resource. Temporary power solutions, such as gas generators or generators capable of running on more than one fuel, can help oil & gas operators in effectively utilizing natural gas to decrease overall operational expenditure and reduce field emission levels while keeping optimal production up-time.

End

PRESS INQUIRIES

Altaaqa Global

Tel: +971 56 1749505

jsanchez@altaaqaglobal.com

For more information on temporary power solutions and their application on oil & gas operations, visit: http://www.altaaqaglobal.com