Service Focus Changes the Cost per Barrel

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During a protracted period of depressed prices in E&P, the customer focus for service companies and suppliers shifts to finding ways to reduce the cost of producing a barrel of oil.

Step one in the process was meeting the demand by operators to discount services and supplies to maintain customers in a shrinking market. Last year, cost cuts were quick, often substantial, and not likely to be repeated this year.

“There is a limit to that (discounting) where you begin losing capability,” said Ethan Phillips, a partner for Bain & Co., who recently did a report on changing opportunities for oilfield service and supply companies. “The easy stuff, cutting capacity and pricing, came quickly. Now service and equipment companies are looking to that next stage, which is: How can we collaborate with our customers to look for ways to shave costs, promote new development, and gain efficiency?” he said.

Optimization used to be associated with maximizing production. Now it must offer a way to profitably produce, even from higher-cost reservoirs.

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Service Focus Changes the Cost per Barrel

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

29 January 2016

Volume: 68 | Issue: 2

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