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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 does the unemployment picture look like?
It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.
Will it work to fine people who refuse to wear a mask?
Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.
How are restaurants recovering?
Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.
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