Study: Oil Price Downturn Creates Need for 'Cost Culture' in Industry

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Oilfield industry workers also have resisted time-based monitoring technologies, not wanting to be micromanaged. The characteristics of oilfield workers, which make them willing to search in difficult places in the far ends of the earth for oil and gas, “doesn’t lend itself for people who like being micromanaged from corporate headquarters.”

Pressure from Wall Street analysts and shareholders to keep stock prices up and dividends flowing also has spurred oil and gas companies to focus on production ahead of cost and project management, Cassidy said. The higher oil price environment reinforced this focus as the value of volume in this environment was greater than cost overruns.

“As painful as this recession is, it’s healthy,” Cassidy explained. “It will force companies to be more resilient and have a more balanced strategy.”

The survey also found that:

  • 66 percent of exploration firms surveyed said it takes significant longer to see returns on capital from projects, compared with 38 percent of integrated oil and gas companies surveyed and 47 percent of drillers surveyed
  • 55 percent of integrated oil and gas company executives surveyed said they “always” or “very often” deliver projects on time, compared with 74 percent of respondents
  • 55 percent of integrated oil and gas company executives said their company culture is not focused on project management; half said they do complete reviews at key project milestones

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