23 Jul Oil production optimization: 5 ways to lower production costs
How to lower operating costs in your oil and gas business
In this low oil price environment, cost management is crucial in your oil and gas business, so how can you lower production costs?
To start, oil and gas companies need to explore new and innovative ways to cut costs instead of relying on traditional methods. Working collaboratively with suppliers and vendors to manage costs is a must, and oil and gas companies that fail to adapt to changing market circumstances can risk becoming uncompetitive.
In order to cut your costs, there are a few Project optimization techniques that your company can start implementing.
5 project optimization techniques
1. Educate your Employees
Unfortunately, human error is unavoidable, but it can be costly and sometimes even dangerous in the oil and gas industry. The first step to lowering your production costs is to ensure that your employees are fully trained in their position and are performing to measurable standards of work. Your employees need to completely understand their roles and know what the company expects of them. With a supportive, comprehensive training program, employees are not only more likely to be happier in their jobs but are also more likely to do their job to their full potential, reducing the risk of a workplace error that could cost you.
2. Automate your Processes
Automation is crucial in any successful business, not just for workplace productivity, but for lowering production costs as well. A portfolio optimization software, specifically tailored to your business can help to reduce repetitive entries and ensure that your employees can access any data at the click of a button. These types of software reduce manual data entry, reduce additional training costs and also save time and money by reducing the risk of error. If you’re currently using spreadsheets to keep track of your data, then it might be time to consider something more regimented or incorporate advanced Portfolio optimization methods.
3. Speak to your vendors
It sounds obvious, but your vendors are probably playing a part in your high operational costs. When dealing with vendors regarding cost, all personal relationships you have with them need to go to be forgotten, no matter how long you’ve used them for. The first question is: do you need this vendor? Would it be easier to complete this task in house?
It’s always a good idea to shop around to see if you can get the same service for a more cost-effective rate, and this doesn’t just end at vendors! Speak to your contractors and even permanent staff to see if you can organize a better deal with them. If your vendors aren’t willing to budge on their rates, they may be more inclined to give a discount on the early payment of invoices if they’re a small company.
4. Set Key Performance Indicators (KPIs)
Setting expectations and KPIs keeps employees accountable for their actions and spending within the business. In addition to setting expectations, cost-saving initiatives should be incorporated into annual performance evaluations for managers and supervisors. Controlling expenses starts from managerial personnel who should be encouraged to find ways to save money within the organization and use cost-effective portfolio optimization methods in their day to day work life.
5. Scrutinize costs
Achieving sustainable cost reductions means scrutinizing every cost that the company incurs so that these can be analyzed to see whether they are required or not. Reducing the quantity or usage frequency of consumables can be an easy target for analyzing costs, as these rarely get a look at. Another way to scrutinize costs is to look at the number of staff in your company. Departments such as HR, Finance & Contracts can often be overstaffed and inefficient. These inefficiencies can be a big money waster and could be done differently to lower production costs.
Portfolio optimization software for Oil and Gas
Portfolio optimization techniques can provide your oil and gas company a way to determine optimum capital allocation. By using a portfolio optimization software, your business can adequately manage incomings and outgoings, with the ultimate goal being to lower production costs. A good portfolio optimization software will not only manage drilling and completion costs but will increase productivity, thus lowering costs once again.
If you’re looking for a flexible, configurable portfolio optimization software, check out our Generwell software.