The Middle East petroleum industry must take a strategic approach to cost transformation in order to maintain a competitive place in today’s challenging oil economy, according to global management consulting firm A.T. Kearney.
Fluctuating oil prices have made it critical for businesses to make a ‘step change’ in their operating models to remain agile and resilient amid ongoing market variability, said Richard Forrest, Global Lead Partner of A.T. Kearney’s Energy and Process Industries Practice.
Speaking at a recent Al Multaqa networking event held for members of the Middle East Petroleum Club (MEPC), Forrest said the oil price outlook requires a structural response from both national and international oil companies.
“The current oil price outlook requires all companies to take a hard look at costs. Oil companies need to prepare for a future with continued market uncertainty – it requires a structural change from across the industry,” said Forrest, who will also be speaking at ADIPEC in November. “Strategic cost transformation goes beyond today’s traditional response of delaying projects and renegotiating with suppliers.”
North American shale companies have been among the first to respond to this new market environment. With bold ambitions and new innovative thinking some players have managed to drastically cut upstream costs by more than 50 percent in the past couple of years.
“We are at a critical point in time where oil companies globally need to reflect and act on the oil market outlook,” said Forrest. “Industry leaders will look to implement the next wave of comprehensive strategic cost transformation. They will consider how to optimise their portfolio, reduce costs across the value chain collaborating with suppliers and other operators, reshape their operating models, and explore how best to leverage the abundance of M&A opportunities in the market.”
