The oil and gas industry is known for going through periodic ups and downs, some of which are fairly extreme. For example, back in 2015, oil prices plummeted to approximately $30 per barrel. This made it unprofitable to pump crude oil from most wells and led to a massive production decline. However, just a few years later, in 2018, prices soared back up to $70 per barrel.
For oil and gas companies, it’s always best to avoid the hair-on-fire kind of reaction to the fluctuating price of oil and try to adopt a more reasoned approach to controlling operating costs. After all, it’s the only thing you can control because everything else is influenced heavily by market conditions which are definitely outside your control.
A number of oil and gas accounting professionals have banded together to form COPAS, the Council of Petroleum Accountants Societies. COPAS is an international organization dedicated to developing sound accounting practices in the industry, as well as sharing critical information relative to oil and gas production.
With this kind of networking, it is possible to share insights and knowledge and give members the opportunity to advance their careers.
It is imperative that oil and gas accountants stay informed about industry trends and are aware of what measures can be taken to reduce costs and expenses. The insight that can be gained from joining COPAS can help you stay in the know by connecting with other peers in the industry and continuing to learn about accounting in this unique market.
- Technological advances have led to a 40% reduction in operating and production in the oil and gas industry.
- Technological advances include artificial intelligence (AI), drones, cloud-based management systems, and anti-corrosion paint coatings.
- Integrated financial management systems afford you a real-time view of operating costs and well profitability, as well as a detailed drill-down on all receivables and payables.
- With management systems, it is possible to assess production and oilfield services, evaluate vendor performance, compare actual and budgeted costs, and assess business unit margins.
- COPAS comprises more than twenty-five different petroleum accounting societies. Become a member and collaborate with other industry professionals to gain insights into oil and gas accounting and further your career!
Lowering Costs Through Technology
The sharing of knowledge can only go so far in reducing operating costs in the industry. There must be other methods used in conjunction with knowledge-sharing. The use of modern technology is very fruitful, and it has allowed oil and gas companies to stay competitive at a time when electric cars are beginning to make significant inroads in the transportation market.
Many oil and gas companies have changed their processes to make the best use of technology, and this has resulted in a 40% overall drop in operating costs.
Advances in artificial intelligence (AI) are being incorporated into the traditional equipment used by oil and gas companies to lower costs. In fact, it has been estimated that the value of AI in the oil and gas industry will grow to $2.85 billion by 2022. The intelligent oil rig can make use of computing capabilities along with weather forecasting to dramatically increase the capacity of operations.
Using these intelligent rigs guarantees a higher level of production, as well as increased reliability because companies can now have advanced warnings about the weather which might lead to downtime. With this higher production, companies can operate fewer oil rigs, thus saving on the cost of equipment usage as well as maintenance.
Drilling can be made much more efficient by using smart bits, which are capable of recognizing different types of rock layers. This makes them much more effective at adapting to their environment, and it leads to a more consistent penetration rate, longer lifespans, and reduced equipment costs.
Drones are another way that operating costs can be reduced since they are capable of conducting inspections on equipment that is difficult to reach. This is much safer than having humans carry out inspections. It also cuts down on travel expenses because there’s no human travel necessary.
Drones can also be used to conduct other dangerous and time-consuming operations, as they can do it much more quickly. Drones can carry out several-week-long inspections in a matter of days. Utilizing drones for inspections decreases hazardous working hours for employees, increases efficiency by up to 33%, and reduces inspection costs by up to 50%.
Anti-Corrosion Paint Coatings
One of the less spectacular developments in technology is that of some of the newer paint coatings which are used as anti-corrosion solutions. Oil and gas companies have struggled for years against corrosion, which degrades equipment and costs oil companies billions of dollars each year.
Modern corrosion-prevention techniques have made tremendous progress in battling against this age-old problem. Some very effective techniques are now available for preventing the deterioration of expensive drilling equipment.
Computers and Cloud-Based Management Systems
As with virtually every other industry in the world, computers are also contributing to lower operating costs for oil and gas companies. Cloud-based computing has caused a major difference in how companies are able to manage their critical data by providing them access to data wherever they happen to be.
In some of the more exotic locations where drilling operations are conducted, this can be a godsend, because there is no real proximity to computing locations.
With data accessible from literally any place on earth, better and faster analysis can now take place, and more informed decisions can be made. All this results in better management of costs and better decision-making in general. Cloud computing has made it possible to streamline inspections, maintenance, and a whole catalog of other operations, which collectively result in significantly reduced operating expenses.
Integrated Financial Management Systems
Many oil and gas companies have begun utilizing integrated financial management systems, which are capable of providing long-term cost reductions in several ways. These kinds of systems feature full financial functions, joint venture accounting, upstream operations management, and production revenue accounting.
They allow you to have a real-time view of operating costs and well profitability, as well as a detailed drill-down on all receivables and payables. It is possible to assess production and oilfield services, evaluate vendor performance, compare actual and budgeted costs, and assess business unit margins.
Because systems like these allow for a birds-eye view of all financial and operational data, they can lead to much more informed and more effective decision-making, which will almost always result in reduced costs.
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Become a Member of COPAS!
Collectively, all the techniques described above are helping to keep oil and gas companies competitive in a world that is changing very rapidly, and which calls for more agile responses from every industry.
Members of COPAS are at the forefront of driving change and innovations that shape accounting in the petroleum industry. Being a member of COPAS gives petroleum accountants societies leverage in the industry, increased knowledge, and insight, and a platform to collaborate with like-minded professionals and advance further than ever before.
By joining COPAS, you can outpace the rest and learn more about our industry’s best accounting practices, standards, and guidelines. COPAS is comprised of more than twenty-six different petroleum accounting societies from all across the United States. Join us today to gain access to educational courses, a staggering number of resources, and create new opportunities for your career.