Study: Oil Price Downturn Creates Need for 'Cost Culture' in Industry
Companies across all sectors of the oil, gas and chemicals industry will need to better plan and manage projects to ensure their survival during the recent downturn in oil prices, according to a recent study by global business advisory firms AlixPartners. Oil and gas companies not only need to improve their ability to plan and manage projects, but create a “cost culture” inside of their companies.
Only 30 percent of respondents in a study of 250 high-level industry executives across the world said their companies had explicit return-on-capital targets for projects before the oil price collapse. Perhaps most surprising is that 12 percent of respondents believe their companies are any better than competitors at project execution, AlixPartners noted.
AlixPartners also found that 19 percent of study participants from North American firms said their companies finish projects on budget, versus 29 percent of all respondents globally. Additionally, 34 percent of the executives surveyed said they agree or strongly agree that project management is executed at the company level across all projects, which suggests that many projects are not benefiting from economics of scale and institutional knowledge.
The found that only 30 percent of oil and gas drillers had a strong series of checks and balances to ensure projects were on time and on budget, compared with 39 percent of total survey respondents, while only 11 percent of respondents said they employ a stage-gated process to assess project viability at defined milestones when developing a new capital project.
The survey results were influenced by the time of the study, which took place in the summer and fall of last year, said Dennis Cassidy, head oil and gas consultant with AlixPartners, in an interview with Rigzone.
At that time, the “gold rush” mentality had set in, and cost was a secondary focus as the industry hastened to accomplish an abundance of projects while oil prices were still high, Cassidy explained.
The lesson to be learned from the recent downturn is that companies must maintain a balanced focus.
123
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension