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
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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