Could Habit Help Stabilize the Oil and Gas Industry?

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By The Maritime Executive 2016-09-21 17:28:46

As human beings, we are creatures of habit. We quickly adapt to routines and like things a certain way, ordering our favorite dish off the menu to avoid disappointment for example.

The same can perhaps be said of the oil and gas industry. We know this is a cyclical industry with peaks and troughs. For the past two years, we have been stuck in the trough part of the cycle, as oil prices have gone through a period of volatility. Still, at every level of an organization, we all need to focus on what we can control. Only then can we navigate through this challenging time and emerge stronger. As an industry, we need to increase efficiency while maintaining safety and keeping costs under control.

The current state of play of industry regulation

Great steps have been made through advances in technology and the introduction of digital industrial solutions, however the potential to improve productivity further remains vast.

One challenge that equipment manufacturers face in the oil and gas industry is the differing engineering standards and product specifications of end users. Each operator on the market has its own customized standards by which it works.

Embracing manufacturing standardization, particularly during a down-cycle period—such as the one we’re in now—would lead to higher-quality products, better productivity, increased reliability, shorter delivery time and most importantly, lower costs.

A lack of industry-wide standardization means that a large amount of time and money is spent tailoring solutions to each customer’s specific requirements. For example, the aviation industry has benefited heavily from industry-wide standardization—it is regulated in such a way that all manufacturers must comply with centralized FAA standards. This means that when an aircraft manufacturer purchases an engine, they know they’re getting a product that meets industry-wide regulations.

Simplifying and standardizing the oil and gas industry

Operators, OEMs and partners are looking at new ways to achieve a unified goal—keeping costs under control, mitigating risks and injecting speed and efficiency in the industry for the long term. From innovative commercial models to closer partnerships and new collaborative frameworks from the early stages of a project life cycle, there is a lot going on in this sector.

Designing and implementing manufacturing standards would further benefit both end users and providers alike, bringing a number of advantages, such as:

- Enhanced operational excellence: manufacturers would have a part to play in the safety, production and usage of products, making for a more streamlined operation, with the common aim of operational excellence.

- Consistency and repeatability: the largest cost reduction opportunities exist where we can make strategic inputs, reusing parts and redefining standards and designs to build business relevance, flexibility and agility. Strategic inputs are where we deliver real value and leverage collaboration to make fundamental process changes.

- Shorter production cycle and on-time delivery: standardization would mean that productivity gains, therefore enabling operators and suppliers working to more accurate timeframe for delivery and installations. Standardization would drive further collaboration, support and build better relationships between operators and suppliers.

The low oil price environment has put pressure on the industry to drive down cost. Now is the time for the industry to come together, agree on standards and simplify the way we work. If that were to happen, we could all benefit during a future upturn in the oil price.

Luca Passaleva is Oil & Gas Commercial Director for GE's Marine Solutions. To join the conversation, visit GE’s blog at:


The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.