As exploration-and-development budgets are slashed, outsourcing advanced geoscience and engineering services may be one avenue to hold the line on costs, E&P companies and service providers alike say. E&P companies still have to compete using high technology, but because of layoffs and capex reductions, some may no longer have the internal resources and budgets to adequately do so.
As company after company announces layoffs, most workforce reductions are coming from the E&P sector. However, the engineering ranks may not be affected as much as other upstream work groups.
|
Samantha Meador, a Ryder Scott petroleum engineer, has found that a significant portion of the eliminated job positions in E&P are field personnel, including drilling and production workers and administrative and technical support personnel at the corporate and subsidiary levels. Technical-support personnel from engineering departments have not been spared from the cutbacks. |
Meador is serving on a special Society of Petroleum Engineers committee investigating the impact of the recent industry downturn on petroleum engineers. Although the committee’s main goal is to encourage student interest in pursuing a petroleum engineering education, in the course of that pursuit, the group has undertaken this latest research.
"Data is scarce and it is too early to see the full extent of local downsizing, but some preliminary feedback indicates that petroleum engineers not directly affected by layoffs are feeling the effects in their day-to-day jobs," said Meador. Those remaining engineers are finding that they have less support so consequently they perform more administrative- and technical-support tasks like data gathering, input and overall data management.
"As a result, engineers have less time to devote to large projects like the design of waterflood and gas-injection programs that require a considerable time commitment and advanced reservoir, drilling and production engineering expertise," said Meador. She anticipates that E&P companies attempting to meet corporate objectives of maintaining production and reserve growth will look to outside resources for additional engineering.
Besides staffing reductions, the cut in E&P budgets will also affect decisions on outsourcing. Last month, a survey by Reuters news service provided a glimpse of what kind of bare-bones budgets to expect this year. "World oil firms pounded by meager petroleum prices in 1998 and bracing for further weakness in the year ahead have already slashed capital spending by an estimated $17.4 billion in 1999," the survey showed. "The lion’s share of savings have been extracted from E&P budgets…"
The biggest capital expenditure reductions may come from independent companies. "Budget adjustments by a wide range of smaller independents are for the most part more severe, cutting as deep as 64 percent," the survey stated.
Reduced capital spending may be the driver for decisions on whether to outsource engineering or other types of services on an as-needed basis, because what was once steady work will now ebb and flow with project cycles. Doug Foshee, chairman and CEO of Nuevo, said last January, "We have already taken steps … by restructuring our outsourcing arrangements, including taking some functions in-house, outsourcing others and keeping many with Torch Energy Advisors."
Service providers also see this as a time when their services may be in greater demand. In February, Eldad Weiss, president and CEO of Paradigm Geophysical Ltd., said, "We are committed to a continuation of this expansion strategy for our geophysical data analysis services. We see the market increasingly demanding outsourced, high-value-added, expert services."
Ryder Scott has served as an outsource in good and bad times and in various capacities for a variety of clients. The most obvious example of continuing work is the current arrangement the firm has with a large independent to act as the in-house reservoir evaluation manager. In that case, an onsite Ryder Scott engineer reports daily to offices of the client and actually helps implement the reservoir evaluation work of the independent engineering firm hired to estimate reserves.
Ryder Scott has also provided reservoir-modeling services to engineering staffs without those capabilities. In other cases, Ryder Scott has provided outsourced services on an ad-hoc basis for acquisitions and divestitures, trust liquidations, prospect evaluations and other projects.
Ultimately, the management of each organization must identify which core competencies stay in-house and which should be delegated to an outside contractor.
[About] [Calgary Office] [Client List] [Contact] [Downloads] [Financial Institutions]
[International Experience] [Newsletter]
[Services] [What's New]
[Home]
Copyright © 1998-1999, Ryder Scott
Company. All Rights Reserved.
1100 Louisiana, Suite 3800, Houston, Texas 77002-5218 USA
Office: 713-651-9191 Fax: 713-651-0849
