Working remotely is a cost-cutting reality for oil and gas companies amid COVID-19
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When the price of oil dips, there’s a phrase that gets tossed around on energy company earnings calls a lot: maximize efficiency. As in, executives telling shareholders that they understand they have to spend spend less money getting oil and gas out of the ground. Daniel Holmedal, a research analyst at Rystad Energy in Oslo, Norway, recently published a study called “Remote Work Technology: The One Oil and Gas Services Segment That COVID-19 Has Benefited.”
“During the last downturn in 2014, we estimated that these service companies were able to cut their costs about 35-40%,” Holmedal said. “And since then, their margins have stayed more or less flat.”
Oil companies raced to digitize as much as they could to reduce the number of people they had to pay on-site. Nowadays, they employ sensors attached to oil pumps to flag glitches before they cause a shutdown and software that allows engineers to watch a well’s output from their laptops.
“Monitoring the equipment, anticipating when equipment is going to be needed to be replaced, those kinds of things can be done with artificial intelligence and people working remotely,” said Daniel Yergin, vice chairman at IHS Markit, who has been speaking with oil and gas executives and others about market conditions.
COVID-19 is pushing the industry to embrace remote working technology even more. Oil service companies Schlumberger and Halliburton noted in their earnings calls last month that the current downturn could accelerate the adoption of even more digitization, especially if it can expand remote operations.
“It’s really like a forced march to digitalization,” Yergin said.
On a traditional rig, dozens of workers assemble the oil pipes and carefully feed them down the well to get the oil out of the ground. Oil wells will always require some workers on-site, but robots will be doing more and more of the work, according to Eric van Oort, professor of petroleum engineering at the University of Texas at Austin.
“Manual labor will probably shift to maintenance rather than actually working on the rig floor and handling pipe,” he said.
Van Oort thinks opportunities in the oil and gas industry will likely favor those who understand big data analytics and machine learning, which could spell more trouble for roughnecks, those blue-collar workers who are currently the backbone of the oil and gas industry.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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