Reducing Costs Tops the List of Midstream Operational Excellence Priorities

Cost cutting remains the top focus for operational excellence in the midstream oil and gas sector, according to an informal Oil and Gas IQ poll of attendees at our recent online summit Midstream Operational Excellence.

Nearly one in five (18.75%) respondents, reported that reducing costs was the key focus of their operational excellence program, followed closely by increasing productivity (16.96%). Increasingly, reducing carbon emissions (12.5%) and implementing new technology/automating processes (12.5%) also figure high on the agenda.

Over 100 midstream operational excellence leaders responded to the poll, conducted February 2022. The following chart highlights the findings:

Midstream oil and gas – which include oil and gas pipelines and storage facilities – is expected to face continued uncertainty in 2022. While the economic recovery after Covid and the potential for widening military conflict with Russia have sent oil prices soaring, the sector is less affected by volatile price swings.

According to a research report published earlier this year, for instance, the oil and gas midstream sector came through the COVID-19 pandemic relatively unscathed. Demand for storage facilities and use of pipelines remained consistent even though oil prices and demand experienced a significant drop. Despite the push for decarbonization, the demand for oil and gas is expected to increase, ensuring that companies in the midstream sector have a sustainable future.

While many midstream market leaders continue to focus on traditional operational excellence metrics such as cost cutting and increased productivity, some are finding that much of the low hanging fruit in traditional process improvement has been harvested.

The key to operational success in the future will be the ability to leverage technology and harness data to improve decision-making.

“Prior to this most recent downturn, most efficiencies—by changing processes, altering the supply chain, improving the way we engineer and design equipment—had been achieved. Now, we as an industry have to examine where we can further improve,” said Uwem Ukpong, Executive Vice President, Regions, Alliances & Enterprise Sales at Baker Hughes, the global energy technology company quoted in Bloomberg.

“It is clear that AI is at the core of this next productivity and efficiency step-change. AI is required to process the vast amount of historical and real-time energy data, analyze that data to generate predictive insights and drive proactive actions that improve efficiencies. It all boils down to a domain-specific approach to predictive analytics that changes industrial oil and gas operations.”

The need to reduce carbon emissions – to decarbonize – has also been rising in importance. Regulators, investors, and other stakeholders are increasingly demanding that oil and gas companies demonstrate a commitment to reducing emissions backed by concrete actions.

In response, many companies in the sector have aligned themselves with global net zero ambitions. Enbridge, a Calgary-headquartered energy delivery company, for instance, has pledged to reduce the intensity of greenhouse gas emissions from their operations by 35% by 2030.

Interested in Learning More?

While Operational Excellence is still about having efficient, safe and agile operations, it is also about being resilient in the face of disruption. About having an engaged, empowered workforce. About being a trailblazer for Net Zero. 

Hear from global industry innovators and join over 200 senior level executives at our Operational Excellence in Energy, Chemicals and Resource Summit this May in Calgary. Find out more about the event here.