By Dan Munro, Owner of PJ Valves
We can do this. We can help the oil and gas industry respond to current pressures by emerging as more efficient and less environmentally damaging. There is going to be blood on the carpet during the next few months and years – but there will also be clear winners. Winners who embrace the opportunity of change, and supply chains that support their customers to deliver this change. Empathy is central to the solution. The suppliers that will survive (and maybe thrive) through this period must understand the challenges that their customers face and really own finding the solutions to help them get over these hurdles.
An obvious challenge at the moment is cost. Oil and gas project financing is tight, the oil price is weak, and projects are under huge commercial pressure to make savings. The “just get it done, whatever the cost” ethos that we saw pre-2016 has been replaced by a “get it done and do it at a low cost” approach. The “more for less' mantra is a standard buying expectation today and will be tomorrow.
As suppliers, it’s easy to get frustrated when spends are squeezed when in fact we should get proactive. We’ve recently worked on project scopes where we have devoted significant energy to value-engineering and driven strong savings for our customers. Our factory engineers have refined designs and our supply chain has provided fantastic support.
We have also helped customers to improve their specifications so that they are not over-engineering products, thereby creating savings – sometimes very high savings. Price is not something that suppliers traditionally like to talk about, but let’s empathise with our customers and do everything we can to reduce the costs of our products. Because that’s what our customers need.
As well as upfront purchase prices, many are also interested in better ways of doing things. Lots of our customers are looking to reduce operating costs or deliver other goals, such as reduced environmental impact.
There are smart ways in which we as suppliers can help reduce operating costs and operating risk. We’ve all read and heard about digitisation and big data and it sounds (and often is) costly. However, the benefits that can be delivered through understanding, improving flow and reducing risk and downtime by using these tools on an oil and gas asset are fantastic. The opportunity to reduce the environmental impact of oil and gas exploration and production is equally so. But how do we pay for this technology when customers are under pressure to operate at low prices? This is where my favourite topic of customer-supplier partnerships comes to the fore. Partnership creates a longer-term alignment that provides the conditions to resolve just this kind of challenge, as it facilitates investment from both customer and supplier.
So, what are the three main ways suppliers like us can support our customers? It’s as easy as one, two, three. One: reduce the cost of our own products. Two: reduce the cost of operating our products, and three: help our customers adopt technologies and practices that will reduce the cost and environmental impact of production and exploration.
We all know that partnership provides great potential – but it faces head winds in the form of an industry tradition of transactional buying and buyer’s commercial fears. We’ve worked closely with operators and EPCs to help them overcome these challenges by bringing together senior management, engineering teams and supply chain to deliver an integrated approach. Please let me know if we can help you on this journey.