Cost-cutting in the oil and gas industry

The old way

The ways that companies address IT, outside core disciplines such as geology and geophysics, are marked by an unrelenting enthusiasm for cost-cutting in the oil and gas industry. However, it’s often the case that the methods employed. Outsourcing or offshoring means that there is a difficult choice between quality of service and cost. In the short term, it’s easy to cut costs. However, when you discover the things that don’t work because they’re outside scope, and the costs of putting them right, some options can be less appealing.

What to do

One common feature of many schemes for cost-cutting in the oil and gas industry is the fact that they focus on unit costs, not service. So, if you outsource the database support, you buy database administrators and you pay less. Great? Maybe, but it says nothing about what they are going to do. So the contract will also have to include some form of service level agreement. SLAs are extremely hard to write when you’re buying a technical function, like database administration. What is the right measure of service? Downtime? Recovery time? Performance? All of the above?

The answer

The answer to this painful conundrum is cloud services, or Software as a Service. Our applications, like Production Reporting and Hydrocarbon Allocation, are accessed over the web. We take care of all of the painful details. Backups, availability, network connectivity, application security, performance, and upgrades, and the customer just uses the service. The key difference here is that the definition of an SLA is now easy. The relationship with us as a supplier is transformed. If I need to be able to be able to perform my asset management functions twenty-four hours per day, there’s no dispute. The service is either there or not there.

Innovation

In short, oil and gas companies are the ideal consumer of cloud services looking to combine quality of service with low cost. We will see accelerating adoption over the next five years. Starting with the smaller companies but closely followed by larger organisations as they recognise the opportunities that exist.