Cost Insights
by PowerAdvocate

Intelligence for energy companies seeking a data-driven approach to cost management

PowerAdvocate, Toby Kearn, and Jaclyn Tran


Recent Posts

Navigating Harvey's Aftermath: How Supply Chain Can Manage Market Risks

September 22, 2017 at 4:42 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Utility, Midstream, Downstream

As the Texas and Louisiana Gulf Coast recovers from Hurricane Harvey, Supply Chain organizations face the challenge of navigating its effects, from chemicals to logistics to labor.

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[Webinar] Buckeye Partners Presents: Driving Out Cost with Data

July 11, 2017 at 2:00 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream

Buckeye Partners presents a webinar in our Q&A with the Experts series. 

In this webinar recording, Buckeye Shares:

  • How they've used data to achieve >$10M in cost reduction through improved supplier negotiations and bids
  • Specific strategies they've used across CapEx and OpEx categories
  • How they've prioritized and executed on specific cost reduction opportunities
  • And lots more... 

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Annual Oil & Gas Executive Forum: The Highlights

July 7, 2017 at 3:01 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

We’re thrilled to share that more than 60 Oil & Gas executives attended our Annual Oil & Gas Executive Forum on June 22, for our best event yet.

The 2017 Executive Forum provided a platform for sharing and discussing new cost-cutting strategies

2017 Executive Forum

Each Executive Forum is designed to enable operators to exchange innovative approaches to cost reduction with one another. This year’s event featured:

  • A keynote speech by the Vice President of Global Supply Chain at Hess Corporation
  • Spotlight presentations on pressing Supply Chain concerns led by 7 industry leaders:

A New Mindset for a New Market. Former CEO of Maersk Oil Houston discussed the importance of cost control in Oil & Gas and provided a new perspective on the market

Cost Reduction in Practice. Director of Strategic Sourcing at DCP Operating Company, Sr. Commercial Manager at Motiva Enterprises, and Head of Procurement at Jonah Energy shared how supply market insight and data were used to decrease their operating costs

Cost Reduction Outside the Box. Vice President of E&P Services at WPX Energy and Head of Procurement at Statoil explained how rising costs were averted by their companies

Elevating Costs. Director of Supply Chain at Southwestern Energy spoke about the factors that drive business unit engagement and their effects on category management success

  • Networking opportunities that brought together over 67 executives across 38 firms

A keynote speech on current economics of Oil & Gas and how to envision Supply Chains of the future

Keynote Speech

We want to extend our gratitude and appreciation to all who attended the Forum and shared their perspectives on the Oil & Gas market. If you would like more information about any of the presentation topics, please send us an email at [email protected].

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How a NAFTA Renegotiation and New Executive Orders Could Affect O&G Supply Chains

May 26, 2017 at 1:41 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

In this latest clip from our Energy Intelligence Group, we share how recent political actions could affect Oil & Gas supply chains.

Specifically, we share which categories would be at risk in the event of a NAFTA renegotiation, as well as the impact of recent Executive Orders on "Buy American" rules and the importation of steel and aluminum. 

For more information on how these political actions could affect your U.S. supply chain activity, feel free to contact us here
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OCTG Risks: What Supply Chain Teams Need to Know About Recent OCTG Tariffs

April 24, 2017 at 12:11 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in E&P

Recently, the O&G world has been faced with challenges around supply and prices for critical materials. Just a few months ago, we covered the risks facing O&G firms when President Trump issued a first-of-its-kind memorandum mandating that American pipelines use only domestic steel. And just last week, the Department of Commerce (DOC) made a tariff decision that will affect supply and prices, this time around OCTG. Read on to learn what happened, what the risks are, and how Supply Chain teams can tactically reduce risks.

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Beyond the Supply Chain Toolkit: Creative Approaches to Cost Reduction in Today's Oil & Gas Markets

April 13, 2017 at 9:32 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

Oil & Gas Supply Chain teams have built up a tried and true toolkit of approaches to cost reduction spanning everything from negotiation strategies to RFP’s to demand planning.

But beyond that standard toolkit, what are the most innovative Oil & Gas firms doing to drive cost out of their organizations?

In today’s article, we provide specific examples of out-of-the-box ideas that other Oil & Gas firms are using to creatively reduce costs. We’ll also share several tools from renowned creativity experts to help Supply Chain teams think about how to brainstorm their next big idea.

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Hot and Cold Rig Stacking in Oil & Gas (Part 1)

April 12, 2017 at 7:47 PM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

This post is the first of a two-part series on rig stacking. Part 2 will cover stacking in onshore drilling.

Are you actively tracking which Oil & Gas service providers have made the decision to stack their rigs? While rig stacking was the farthest consideration from our minds just three years ago, today it’s a concern of grave importance for E&P’s.

In today’s post, we cover the different methods of rig stacking, why they matter to E&P’s, and what impact they can have on your operations and cost structure.

Two Methods of Rig Stacking

Since the market downturn in mid-2014, stacking of rigs has become a strategy commonly employed by service providers to save money, helping weather the storm that is low-cost oil. For those new to the world of stacking, it can take two different forms:

  • Hot (or Warm) Stacking involves paying a skeleton crew to stay on the rig and conduct regular maintenance to ensure a smooth reactivation when the equipment is once again in demand and brought back online.
  • Cold Stacking is the equivalent of shuttering a factory in manufacturing—rigs and equipment are packed up and stored, and employees tied directly to the operation of the equipment are laid off.
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Risks of President Trump's Steel Memorandum to O&G Firms

April 7, 2017 at 9:28 AM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

On January 24th, President Trump issued a memorandum mandating the use of domestic steel for American pipelines. For Oil & Gas firms, this could drastically alter the viability of existing capital and maintenance programs and pose a threat to procuring critical materials.

On March 8th, we were joined by 30+ Oil & Gas firms to discuss what risks the memorandum could pose, including questions like:

  • How will the memorandum affect steel plate prices?
  • What supply constraints will O&G firms face?
  • Which items are most at risk of price escalation and short supply?
  • What can we do to prepare?
  • And much more...

Click here to view our recording of the event

 

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3 Common Justifications Suppliers Might Use to Raise Prices

March 9, 2017 at 9:32 AM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, E&P, Midstream, Downstream

As suppliers enter 2017 looking to recover lost margin with double-digit price increases, we’ve found that the operators with the most successful responses are the ones who most effectively use data.

In this post, we share how Oil & Gas Supply Chain teams can respond to the 5 most common arguments suppliers use to raise prices.

1. “My costs for X are up”

We often hear suppliers come to the negotiating table with arguments like “our overhead is up by 3% this year” or “our labor costs are up by 5%, which means that our costs are rising by 7%”. So what are some effective ways to respond to a supplier who necessarily has better visibility into their own cost structure? We suggest starting with 3 key questions:

  • Have the costs really gone up that much?
  • What are the other cost drivers doing?
  • Are factors like supply/demand offsetting the cost structure?

Developing a standard negotiation packet filled with market data on the particular item or service can be an effective way to respond. In this case, we suggest starting with a cost model that breaks down the cost of the item into its individual cost inputs, and then tracking how those inputs have moved with the market over time.

For example, if a joints supplier came to you saying “the price of labor for steel mills services is rising,” you could instead point to the other commodities that are exerting downward pressure on joints. In the graph below, we can see that steel has a much stronger impact on the price of joints than iron and steel mills services does, suggesting that the overall outcome should be a price decrease.

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5 of the Top Chemical Savings Opportunities for Oil & Gas

March 3, 2017 at 9:30 AM / by PowerAdvocate, Toby Kearn, and Jaclyn Tran posted in Cost Reduction, Downstream

Everyone knows that commodity markets are volatile – but volatility can also translate into opportunities to capture market declines and turn them into savings. So how can downstream procurement teams ensure that suppliers pass on savings from market declines in chemicals, which are critical to operations?

Last year, we shared the top chemicals that Oil & Gas firms should be saving on based on actual market data that tracked changes in input commodities, margin, and overhead from 2014 to 2015. Before prices start going back up, it’s time to assess whether you’ve taken advantage of the declines that have occurred since the peak of the market. Read on to see an updated list of top chemical savings opportunities for downstream firms.

 

The Top 5 Chemicals You Should Be Saving On:

1. Ammonia: 43.6% Decline Over Last Two Years

1-Ammonia.jpg.png

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