In a growing interconnected market, implementing intangible efficiencies internally and between stakeholders is key to staying ahead of the competition. As technological advancements seep across company lines, key differentiators lie in the intangible categories. Intercompany visibility and communication, outsourcing of internal processes that can be expedited by external stakeholders, and leveraging intercompany economies of scale are just some examples.
Because of this growing trend, upstream oil and gas companies are shifting their investment focus from internal development of the intellectual property to relational development of intangible efficiencies.
CLOSING THE GAP WITH OPEN COLLABORATION
Oil and gas producers and oilfield service companies have traditionally strived to achieve internal technology system integration from conception to completion of wells—spending time and money on internal solutions and advancements to optimize drilling and production practices. With this focus on internal innovation, production companies have created a standard of siloed cooperation, rather than open collaboration, between producers and stakeholders.
“In a growing interconnected market, implementing intangible efficiencies internally and between stakeholders is key to staying ahead of the competition.”
These disparate communication processes have historically limited industry leaders—in an ever-changing market, “procurement and supply chain strategies are set to be at the forefront of critical issues plaguing oil and gas companies.”
Recognizing the value in intercompany integration and prioritizing investment into stakeholder relationships, prominent oilfield service firms like Schlumberger and other oil and gas producers have closed the gap between customer-supplier relationships to create improvements and efficiencies that have rippled throughout the entire energy sector. For example, in March 2019, Schlumberger shared its approach to industry challenges centered on a focus on innovation and collaboration “beyond company boundaries”.
As oil and gas producers focused on creating opportunities within internal supply chains and processes, effective communication with suppliers and other external stakeholders fell behind. Communication between suppliers and producers grew more and more inadequate as vertical integration and process improvements were incorporated. As producers plan wells, supply requirements for the drilling process are forecast and ordered. As the execution of a well progresses, these forecasts can change or become completely inaccurate, which can result in an imbalance in supply inventory.
For example, while executing a well, companies forecast the length of casing required. Once the distance is decided, the pipe is ordered from a supplier who then manufactures the pipe or ships it from existing inventory. The production company then stores and maintains its own inventory of casing to be used as needed—or not needed. If there’s a supply deficit, the arduous process loops back to the beginning and starts over.
If there’s a supply surplus, the production company is tasked with storing the extra pipe and paying for production materials that were rendered useless. Tenuous product requests and fulfillment processes like these can slow down drilling and production time, rendering the internal process improvements and achievements less impactful.
A 360-DEGREE VIEW BETWEEN SUPPLIER & CUSTOMER
Along with Schlumberger, other big names in the upstream energy sector are recognizing the value of breaking through corporate barriers and are following suit in the investment in stakeholder relationships and the development of intercompany technologies. Hess Corp., for example, has developed a digital platform for suppliers that centers on increasing visibility, reducing inefficiencies, and integrating systems with key suppliers.
Before the implementation of this platform—“Hess 360”—the supply process was tenuous, uneconomical, and inefficient. With this corporate-wide shift in attitude, commitment, and investment, Hess and key suppliers have developed “interconnected workflows and [enabled] proactive and integrated discussions.”
Hess’ suppliers migrated away from these rigorous processes and leveraged the Hess 360 platform to completely transform supply chain processes with suppliers. Rather than engaging in the tenuous manual casing pipe ordering process, casing suppliers can now access the platform to view well view data that are uploaded to the portal as it’s logged in the field.
As the live data pours in, suppliers can view product requirements in real-time and then begin the process of producing, sourcing, or shipping the pipe length required in production. Leveraging this flow of information minimizes any supply deficit and/or stabilizes surplus production and maximizes order efficiency.
By sharing relevant production data with individual suppliers, Hess can transition the purchasing process with its supplier to a usage basis—meaning that as well view data is updated and new piping supplies are required in the field, the company can now source and pay for supplies that are needed on an ad-hoc basis. The expedited fulfillment process and elimination of supply over or under ordering create both production and financial efficiencies.
Extracting meaningful data and creating a hub of information enables the access of data from unintegrated systems to create a 360-degree view of customer-supplier relationships and the internal, quantifiable impact of those relationships.
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