For the oil and gas industry, delivering value in 2017 will depend on activity—through maintenance, new wells and short-cycle projects. Peter Parry, who leads Bain's Global Oil & Gas practice, discusses how companies can potentially cut costs 25%-30% by taking a pragmatic approach that focuses on value and innovation.
Read the transcript below.
PETER PARRY: The greater focus on delivering value in 2017 has to translate into more activity—more activity in terms of maintenance, more activity in terms of new wells, more activity in terms of projects. But those projects are what we describe in Bain and Company as short-cycle projects. They're going to be quicker, more bite-sized activities, vs. the historical approach through long-cycle projects. Those are things that took many years to start to deliver net income.
As we look forward to 2017, pragmatic approach to costs means working more closely with the supply chain, working more closely with engineering companies, with service providers. That approach, through more activity levels, more consistent activity, is going to allow the service sector to release the full potential of its own supply chain, to adjust its cost base, and realize something of the order of 25%-to-30% ultimately lower costs for this industry. If we don't have activity levels, we get very spiky, very volatile bursts of activity that don't translate to efficient cost.
In 2017, plans need to be pragmatic, lower-cost, but innovative, focused on value.