Industry Challenges Drive the Need for New Business Models
- Patrick Schorn (Schlumberger)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- October 2014
- Document Type
- Journal Paper
- 132 - 135
- 2014. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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The increasing diversity of oil and gas resources presents technical challenges for our customers—and at the same time opportunities for oilfield services companies. The challenges range from reducing subsurface risk as exploration and appraisal begins, to increasing the ultimate recovery achievable when the reservoir reaches the end of its economic life. These challenges can be impacted by technology, workflow, people, global back-office support, software, and by business models, which are evolving as the demand for integrated operations has increased over the years.
Business Models Evolution
In terms of business models, the integration of products and services with workflow and process can take many forms. Fig. 1 shows the evolution of business models for our industry. As the pace and complexity of operations have grown, the traditional approach—typically known as “discrete” services—has become increasingly inefficient and expensive for our customers to manage. To control costs and minimize downtime, operators may solicit tenders for “bundled” services, lumping together several related discrete offerings from a single supplier for a lower total cost. While this “bundled” approach may reduce the price, it often fails to boost efficiency, especially when the entire product lines and in many cases, the individual service provider, continue to function independently.
Given these drawbacks and the magnitude of the challenges facing the industry today, both onshore and offshore, what we need are truly integrated operations. So you might be wondering: What is an “integrated” operation? Put simply, it is one in which the interactions among the parts are fundamentally different than they have been in conventional discrete or bundled services operations. In integrated operations, all the products, services, and personnel are streamlined and coordinated across the usual domain boundaries as if they were a cohesive system with a single objective.
As an industry, we need to integrate services in field operations, at the well site, as well as technologies and engineering workflows back in the office. The ultimate integrated operation would be one in which both parties—oil company and service provider—work together as one, removing the duplication of efforts that is currently taking place.
Our Integrated Project Management business is one example of this. It is made up of well construction and production management projects and we have a large organization that supports these types of projects. It was started 19 years ago to address a growing requirement to integrate services and technologies and has grown into a portfolio of multiyear, multirig contracts as well as into technically more challenging work in deeper and tougher wells. The majority of the contracts are long term. The evolution of these business models has changed from the mid-2000s to year-end 2013, with a trend toward integrated-type projects.
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