The foundation for an optimal utility capital project delivery model is built on a thorough understanding of the expected portfolio of work that the organization needs to accomplish. Portfolio spend profile analysis provides capital program organizations with the insight needed to determine the appropriate resourcing and risk mitigation strategies to employ in its delivery model.
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.
Maintaining profitability in a rapidly fluctuating market environment is a challenge for any firm. For utilities, structuring a Capital Program Office to meet the specific needs of projected workload is a key success factor. Achieving the optimal Delivery Model requires considering a wide range of factors – and a significant investment of time and resources. Before refining an existing or transitioning to a new Delivery Model, it pays to first understand the transitional costs, value, and ongoing savings opportunities.
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.
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.
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...
The Trump Administration has ushered in a new era of policy uncertainty for your sector. While it’s not yet clear how “America First” proposals will translate into actual policy, there’s a lot at stake for utility and power companies.
PowerAdvocate’s Energy Intelligence Group has assessed the potential implications of Trump Administration proposals on the global Supply Chain, what it could mean for your organization, and courses of action you can take to mitigate risk.
Last fall, renewed optimism resounded across oil markets. The North American rig count had fallen by almost 50% since January of 2016 and was a tiny fraction of where it stood prior to the oil price decline that began in mid-2014, foreshadowing weak supply growth. Moreover, the Organization of the Petroleum Exporting Countries (OPEC) appeared to finally be ready to take advantage of these lower levels of shale activity by cutting output and paving the way to a recovery in oil prices. North American oil prices jumped jubilantly when this action came to fruition and OPEC signed a major deal in which members agreed to curtail production.
Figure 1: A Brief Oil Market Deficit and the OPEC Deal
Sources: US Energy Information Administration (EIA); PowerAdvocate Energy Intelligence Group
There has been no shortage of discussion about the new White House Administration’s policy change. But how will anticipated trade and market-related shifts affect your Supply Chain options and planning?
Watch our Q4 2016 Quarterly Market Outlook webinar on-demand to get answers to questions like these and more.
Utilities rely on supply chain to manage resources efficiently and effectively across a wide range of projects and operations. Delivering on this mandate is increasingly challenging – and critical – as utilities adjust operational cost models and investment strategies to satisfy stakeholders and stay competitive. By connecting new data sources for more accessible, powerful historic usage data, many utility Supply Chain organizations are enhancing their enterprise-wide value.