Finding efficiencies in the oil and gas industry

Efficiency is a crucial consideration for any industry, but perhaps none more so than the oil and gas sector. With environmental concerns, energy demands and technology developments creating a more complex business landscape, manufacturing and production in this industry is more challenging than ever before.

Oil and gas business barriers

According to the Boston Consulting Group (BCG), these are complex times for exploration and production companies in the oil and gas industry. Weathering several years of buffeting forces, such as steadily rising costs, increasing project risk and ongoing transfer of value into other energy production sectors, has impacted production and activity in the industry.

Figures from Ernst and Young (EY) show that a number of factors have led to global oil prices falling by more than 50 per cent in 2014. One of the primary trends leading to this decline, EY suggested, is geopolitical uncertainty. However, with governments across the globe establishing new trade agreements and regional communities, this factor may become less of an issue as the years pass. 

Stripping back the processes and achieving a more efficient production line is crucial for managing costs and keeping oil and gas businesses afloat. To help, here are three key ways oil and gas manufacturers can improve effectiveness and sustainability within their supply chain.

1. Embrace technology

Advances in technology are expected to drive the next wave of manufacturing productivity gains, according to the BCG. However, cybersecurity remains a primary concern for any business adopting technology and taking processes online. 

According to EY, oil and gas companies typically operate on the leading edge of technology, due to the need for operations, networks and telecommunications to be at the forefront of efficiency and sustainability. There are a number of other advanced technology options ready to improve efficiency, such as investments in autonomous robots, integrated computer modelling, digital manufacturing and additive manufacturing, which were all identified as key investment areas by the BCG.

Unlike other industries, however, oil and gas facilities typically include offshore, remote and mobile facilities that need to be connected to operation centres across the globe via satellite, cable and fibre, putting businesses at a unique risk of cyberthreats.

EY's recent Global Information Security Survey 2014 report looked at how organisations deal with online security, and found there are some issues putting oil and gas businesses at risk of attack. The study found that 61 per cent of oil and gas organisations consider it unlikely they would be able to detect a sophisticated attack before it happened. Another 29 per cent have no real-time insight into cyber attacks and just 13 per cent believe their information security is fully meeting their organisational needs.

It is therefore important that any technology developments are supported by security solutions to protect the efficiencies your company gains.

2. Invest in the right regions

Between 2012 and 2035, EY forecasts that production in natural gas and crude oil in Asia Pacific will increase by a compound annual growth rate of 4.2 per cent and 2.3 per cent, respectively. This is significantly higher than the global figures of just 1.6 per cent for natural gas and 0.8 per cent in the crude oil sector.

It is easy to see, then, why investing in the right area can lead to substantially more gains than other locales. In Asia Pacific, oil and gas production is a major industry, contributing significantly to the region's gross domestic product (GDP).

With economics and geography named as the major concerns impacting on oil and gas efficiency and value, it is clear that Asia Pacific is a strong market. This area is a popular industry destination due to its position in the centre of most demand channels, and proximity to major export routes. Being able to produce and ship products across the globe and over political jurisdictions with little hassle.

3. Make or buy

When you require parts and products to support the manufacturing process, should you make it in-house or buy it from a supplier? Manufacturers seeking efficiencies should be focussed on make-or-buy decisions to enhance the company's capability to address today's uncertain business environment. 

Trimming reliance on supply chains and services can be simple for manufacturers who are willing to expand their productions and try creating their own parts and products. As well as reducing costs along the supply chain, this initiative can help your business achieve maintenance optimisation, according to the BCG.

Lowering costs by optimising maintenance and reducing wait times for parts to be delivered is simple when your manufacturing systems are flexible and able to adapt to new and evolving business needs. In recent efficiency-focused reports, BCG found that more than 20 per cent of the overall savings is the result of improved maintenance practices.

Manufacturers that embrace make-or-buy decisions across their product lines can gain significant competitive advantage. In addition to achieving cost savings, organisations should be able to improve manufacturing efficiency across their business through increased practice and design.

Designing or manufacturing for the oil and gas industry? Contact us at SOLIDWORKS to see how we can help inspire engineering innovation and improve every aspect of your product development.