Kemp: Operational Excellence Becomes Oil Industry Watchword (Again)

Kemp: Operational Excellence Becomes Oil Industry Watchword (Again)
Cost-cutting is set to remain the main focus for the oil industry for at least the next two years as petroleum producers adjust to an environment of much lower prices.

John Kemp is a Reuters market analyst. The views expressed are his own

Reuters

LONDON, June 9 (Reuters) - Cost-cutting is set to remain the main focus for the oil industry for at least the next two years as petroleum producers adjust to an environment of much lower prices.

If the boom was characterised by an emphasis on ambitious and complex engineering and technology projects, the downturn has brought a renewed focus on simplification and efficiency.

It marks a return to what was called "operational excellence" during the long years of low oil prices in the 1990s.

Operational excellence is about more than just short-term expenditure reduction.

But not even the free fruit for employees at BP's giant campus at Sunbury near London has been spared from the search for economies.

The fruit is a good symbol of the industry's approach to cost control: it was also axed during a previous cost-cutting drive in 2008 only to be restored when prices and revenues boomed again.

But the current round of cost cuts and efficiency measures seems set to go deeper and last longer than in 2008/09.


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Martin Ranstead | Jun. 10, 2015
Our industry will pay for all this economizing when the demand for oil drives the price back up. Many of the service companies are trimming their payroll by laying off their senior personnel that are at the apex of the payroll pyramid, while retaining younger, lower paid (and less experienced) employees. Much of the cost cutting that has transpired involves faces and families - the lazy and flabby comments from Transoceans CFO may ring hollow if he is down-sized to improve their cost efficiency!


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