Upstream Companies – Need For A New Focus in 2019!
January 3, 2019
After a number of years in a slump, the upstream oil and gas industry has been in a recovery phase as energy companies have restructured their upstream processes to be more profitable.
Looking ahead to 2019, while conditions do seem somewhat better for energy companies as well as those selling oil royalties and mineral rights to them, upstream production focus needs to shift once again to stay profitable.
Keeping up with demand, societal change, and other factors will once again require a shifting focus that begins with the sale of mineral rights and continues through the upstream process to acknowledge longer-term effects that come in the midstream and downstream processes.
Staying on top of profitable oil and gas production will require making changes throughout the entire production process.
Oil and Gas Production Landscape Continues to Change
Until the past year or so, energy companies have been fighting a slightly uphill battle to stay profitable due to the price slump that began around 2010-2011.
Upstream companies have had to reconsider their entire production process, from dealing with owners selling oil royalties and mineral rights to reworking their E&P process to make it more efficient and affordable.
Most companies have done quite well in rebounding from that slump with more cost-effective production methods as the industry itself has rebounded.
There are new challenges on the horizon; with a growing, worldwide interest in renewable energy and decarbonization, the growth of electric vehicles, evolving consumer habits, and newer technology, energy companies must up their game, once again to remain profitable.
Energy Companies Must Focus on the Long-Term Picture
As the oil and gas industry landscape goes through more significant change even with prices more favorable today, energy companies need to shift their focus in 2019 to developing new processes across the board.
Although these changes may start in the upstream phases as early as when dealing with sellers of mineral rights, the long term plan requires changes that will affect the whole E&P process:
===>> Workflow Methods - Companies must review and rework their day-to-day workflows to adopt more efficient, cost-effective practices that build a performance-centric environment. Faster delivery, better performance, and employee incentives are important goals that companies should be looking toward.
===>> Operating Models - Making use of more recently available technology, upstream companies must develop an operating model that achieves performance goals while incorporating newer, more efficient daily workflow methods.
===>> Portfolio Management - The next 12 to 18 months is projected to be a time when companies should consider things like mergers and acquisitions to expand their portfolios and become more resilient within the E&P landscape.
===>> Align with Ecosystem Partners - Seek the benefits that can be gained by partnering with other companies looking for the same rewards. Working together in terms of cost management, E&P, and asset management, energy companies and their partners can be more profitable as a whole in an environment that is affecting all companies.
Continued Change on the Horizon for Upstream Companies
In summary, while today’s upstream companies may now be doing well after successfully rebounding from lower oil prices, social and industry changes promise to keep it challenging.
Moving into 2019, energy companies must rethink their upstream processes, from the land they explore and the oil royalties and mineral rights they buy to the daily work process as well as making other important financial moves to develop a more cost-effective and profitable operation!
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