The Comprehensive Business Transformation in Oil and Gas Industry

Author: Baha Fadul

Most Oil and Gas companies follow the traditional business operation, but more is needed. If companies don't advance with technology and customer expectations, they will lose business and fail to win opportunities to increase revenue and decrease expenses. So, why not go to Business Transformation?

To some extent, the answer is?that Transformation?is one of the most challenging initiatives in modern business. Transformation is an integrated process of changing companies' operations, including technology, process, personnel, and supply chain. However, these changes lead organizations to compete more effectively and profitably. Transforming the organization is the key, but various challenges come with it. Defining a framework for Digital Transformation is a lot harder and probably one of the most drastic moves.

As a practitioner, most Oil and Gas executives care about the cost impact of the Business Transformation. I am concerned that cost-saving and performance improvement are more significant than the cost impact.

Consider the benefits of Digital Transformation as an example; Oil and Gas companies need to engage in their role in the digital ecosystem and prioritize skills and personnel acquisition for futureproofing.

Let's look at two potential Oil and Gas companies that implemented the Transformation Program and succeeded in improving performance and reducing expenses. Alkhorayef Petroleum Company (APC), the leading Oil and Gas services company in the Middle East, Africa, and Latin America, and Schlumberger Overseas (SLB), the world's largest Oilfield services company, both made dramatic changes to their business and reduce operational cost.

Alkhorayef Petroleum Company (APC) used multiple traditional complicated workflow processes from operations management, manufacturing, service delivery, and supply chain that incurred high operational costs. Alkhorayef Petroleum Company started an Artificial Lift Transformation Program journey in 2018 when the company was led by President Mohamed Doghmi, a global expert leader in the Oil and Gas industry and previously employed by Schlumberger in a senior management role. Doghmi holds a master's degree in Thermal Power from Cranfield University in the UK, recognizing him among other leaders in managing a technical organization.

Alkhorayef Petroleum Company divided the Transformation Program into three phases. The first phase addressed weaknesses in the company's supply chain and manufacturing. The issues were identified quickly as a significant problem given the long lead times (over 12 months delivery time), continuous conflicts, and finger-pointing between the organization departments. The second phase was on Human Resources, upgrading key positions from Regional VPs to Training and Development and revamping career ladders. The Final phase is engaging in Digital Transformation, moving all applications to the cloud, and going paperless across all organizational functions. As a result, Alkhorayef Petroleum Company succeeded in decreasing costs, becoming more competitive in the market, and expanding exponentially. Doghmi is continuing in the company's Business Transformation Program with remarkable effort.

The?Schlumberger Transformation Program?has four main themes—technology, reliability, efficiency, and integration; the engineering sense for each one develops performance improvement, customer engagement, and cost reduction. The program started in 2015 to restructure the company's overall process, reduce costs, and integrate the business. In the??2019 Schlumberger Annual Report, the company was a leader in the Digital Transformation of the Oil and Gas industry.

The Schlumberger team approached staffing levels for remote operation, reducing operational costs per well to?$10 million?in the Det Norske Ivar Aasen project in the North Sea, an offshore Oil field in Norway. In North America, the Transformation Program improved the reliability of Well Service operations and generated?$17 million?in cost-saving.

In the reliability theme, the program increased service delivery in multiple environments by applying Standard Work Instructions (SWI) and reduced equipment numbers and tool repair costs by?48%?in The Middle East and Asia regions using Technology Lifecycle Management (TLM).

Schlumberger's Transformation Program is considered unique among other Oil and Gas companies. From product development to new processes of technology life cycle management. Schlumberger succeeded in combining seven functions of the business unit and structured a customer-integrated workflow. In addition, implementing the Transformation Program reduced cost per barrel, which enlarged market intelligence competition.

Transformation is changing how organizations operate, manage, and behave. Digital technology's emerging into business models enables systems integration to provide business intelligence with a fundamental organizational structure change. Therefore, enhanced data collection, resource management, data-driven customer insights, and increased profits are all benefits of Digital technology.?

Transformation becomes no longer an option that some organizations think to pursue. Yet, it is only possible to function with a transformation-based strategy. The loss of revenue does not tolerate sustainability, return on investment, and price fluctuation. Therefore, Transformation is crucial for cost reduction, decision-making, and growth.

Despite the challenges, it's easy for Oil and Gas companies to transform their business, especially in the 21st?century; considering Oil price fluctuations, technology is advancing with increased market competition.

The effective way for Oil and Gas companies to sustain themselves in the business is to transform their organization by leveraging research and development through data analytics, immersing the service precisely using marketing revaluation. Then, finally, the company will advance in the modern business models.