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Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Acce...
Learn how to zero in on cost optimization.
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The Price of Agility in Oil & Gas Zeroing in Cost Optimization

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Oil & Gas companies need to adopt new approaches to spending, adopt three components of a go-forward cost strategy.

Increasing supplies of oil, coupled with decelerating demand, will keep oil in the $50-$80 price range for the foreseeable future. At the same time, volatility will increase. In this new reality, traditional approaches to managing costs and operations will make it hard for Oil & Gas companies to achieve the agility they need.

Some players are already taking action and aligning their spending to a strategy for growth and profitability. Along the way, they are cutting capex by 20 percent and opex by 30 percent. What’s their secret? Zero-based budgeting, digital innovation and new operating models all play a role.

Learn more: https://accntu.re/2sTfZ78

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The Price of Agility in Oil & Gas Zeroing in Cost Optimization

  1. 1. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
  2. 2. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. AMID SUPPLY AND DEMAND DISRUPTIONS, OIL & GAS COMPANIES NEED TO EMBRACE AN ENTIRELY NEW APPROACH TO SPENDING There’s no longer any time or money to waste. • Forward-thinking oil & gas players are taking action—becoming leaner and more adaptive with new operating models, processes and digital technologies. • “Business as usual” is out. “Competitive agility” is in. Just half (51%) of all companies that have reduced their spending were able to sustain cost savings for one to two years. Source: Accenture Strategy, Strategic Cost Reduction research, 2015.
  3. 3. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. THERE IS NOW AN INCENTIVE—AND IMPERATIVE—FOR OIL & GAS COMPANIES TO DO THINGS DIFFERENTLY Economic downturns are a way of life for oil and gas companies. When oil prices fall, so do industry expenditures. But cost-cutting measures don’t last. • Industry downturns in the last 20 years typically have been short-lived. • During these downturns, oil & gas companies only needed to tighten their belts until oil prices rose again—which they always did. • Spending cuts were indiscriminate and reactive.
  4. 4. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. THIS TIME IT’S DIFFERENT The downturn is prolonged. Prices will not rebound soon. This is the new reality. • Global investments in efficient, renewable energy sources have tempered the world’s reliance on oil and gas. • At the same time, fracking makes it possible for operators to extract light tight oil more quickly, cheaply and in greater volumes than ever imagined. With increasing supply and decelerating demand, oil prices are expected to remain between $50 and $80 per barrel for the foreseeable future. Source: Accenture Strategy analysis, 2017
  5. 5. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. COST OPTIMIZATION IS THE NAME OF THE GAME Will oil & gas players create a foundation for sustained growth? • Current cost levels will no longer sustain the margins to which oil & gas companies have grown accustomed. • Traditional approaches to managing operations and costs will hold them back from achieving the agility they now need.
  6. 6. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. IT’S TIME THEY PIVOT FROM COST MANAGEMENT TO COST OPTIMIZATION… FROM PROCESS IMPROVEMENT TO PROCESS TRANSFORMATION… AND FROM DIGITAL ENABLEMENT TO DIGITAL DISRUPTION. HOW CAN OIL & GAS COMPANIES PIVOT TO THE NEW NOW?
  7. 7. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. BY ADOPTING A ZERO-BASED MINDSET Re-imagine budgets & spending based on what things “should cost” and re- imagine organizations, supply chains and processes from a zero-base. • Assess all opportunities to apply zero-based approaches. • Commit to gaining forensic visibility into costs and eliminating waste. • Set aggressive targets that break the habit of incremental cost cutting. Cost optimization strategies with a zero-based mindset can reduce oil & gas companies’ annual supply chain spending by 15 to 20%. Source: Accenture Strategy client experience
  8. 8. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. BY INNOVATING TO ADDRESS SPENDING IN CAPITAL-INTENSIVE, INDUSTRY-SPECIFIC AREAS Process transformation, digital disruption and operating model reconfiguration are all on the table. • Develop new ways of working by customizing concepts and solutions from other industries. • Invest in digital capabilities—especially data analytics—to achieve a new level of efficiency and technical innovation. • Identify opportunities to transform how work is performed. 80% of oil & gas executives are planning to invest at least as much in digital over the next 5 years as they have in the past. Half will invest more. Source: Accenture and Microsoft, 2016 Upstream Oil and Gas Digital Trends Survey
  9. 9. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. BY COMMITTING TO SUSTAINABLE CHANGE Put mechanisms in place to ensure that new cost strategies evolve over time, in lockstep with the needs of the business. • Employ a closed-loop process to prevent ineffective spending from creeping back in over time. • Identify areas where freed-up cash can be reinvested in growth and innovation. • Continually assess the organization’s objectives and portfolios, and pivot priorities and resources, as needed. • Create a sustainable cost-management culture through change management.
  10. 10. Learn how to zero in on cost optimization. Download the full report at: linkedin.com/company/accenture_energy linkedin.com/company/accenture-strategy Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. The price of agility in oil & gas: Zeroing in on cost optimization JOIN THE CONVERSATION: @AccentureEnergy @AccentureStrat

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