Identify a challenge or opportunity in schlumberger (oil& gas ) company that has multiple and varied approaches to its resolution.
The oil and gas industry volatility make investors fear to invest in the industry, particularly in the upstream sector. The oil and gas industry is divided into upstream, midstream and downstream. Upstream is the major focus of this paper as this sector presents an investment opportunity that has not been considered. In addition, the sector has resulted in the low supply of the oil products leading to supply chain problems. Schlumberger is an example of those companies that have prospered in the upstream sector of the oil and gas industry. The Schlumberger being a leader in the industry has wider opportunities to invest in the sector. Moreover, the company has all the resources required to invest in the sector. Some the resources the Schlumberger have to include technology, expertise in the industry, investment systems and reputation to accumulate financial resources. The main aim of this paper is to identify the investment opportunities available for the company to invest and the opportunity identified is an investment in exploration and production sector of oil and gas.
Schlumberger is the leading oilfield service company in the world that provide various services that include exploration and production, technologies and integrate project management services. Schlumberger is the main supplier of various services in the Oman oil industry that help in the exploration of production of oil. The company employs more than 123000 employees across more than 85 countries it operates in. Schlumberger of three type of oilfield services and this can be grouped into integrated project management services, integrated service management and integrated abandonment management (Schlumberger 2018). Integrated project management assists in delivering various project services that include exploration, technologies and production services. Integrated service entails others services that include technological services that assist in exploration and mapping of oilfields. Lastly, the abandonment services aim to turn oilfields that have been abandon into more economical and environmental beneficial areas. The company has been on the forefront in the provision of integrated project management system that sets the platform for oil and gas industry in Oman and around the world (PSAC 2017).
This paper identifies low investment in exploration and production sector of the organization or industry. Based on the analysis of the Schlumberger Limited, the identified issue is an impending opportunity within the industry that the company can use for more revenues. The exploration and production investment is identified due to high chances that currently exist that may help the company to solidify its strategic position in the oil and gas industry. Exploration and production have been listed as one of the high risk and high rewarding sector of the oil and petroleum industry. Schlumberger Limited has the opportunity to invest in exploration and production sector of the oil and gas. As many companies slow down their exploration and production the Schlumberger need to take the advantage of the opportunity to invest in this sector to increase its dominance in the industry.
Background of the opportunity identified
Exploration and production sector of the oil and gas industry has a high opportunity that is attributed to a number of reasons. Firstly, supply chain challenges have been a problem within the oil and gas industry with many players recording value loss on their shares (Marcelo et al 2017, pp 297-304). The supply chain challenges are majorly attributed to underinvestment in exploration and production sector of the industry. The drop of the investment in the sector in the past years has made to the sector to face challenges that include unbalanced demand and supply across the supply chain of the oil and gas industry. Secondly, the declining production of oil over the past few years by major oil and gas producers is also affecting the investment in the sector (Chima & Hills 2011). Some of the countries whose oil and gas production has highly decline are Angola, Malaysia, Norway, China, Mexico, and Indonesia. Thirdly, oil production problem, particularly in the united state of America, has also affected the exploration and production chain globally. Some of the key issues listed as affecting the production of oil and gas in the US are poor infrastructure, constraints on pipeline capacity, and low production due to the drilling of oil wells closer to each other. These production challenges in the United States of America has affected the oil and gas supply chain leading to production challenges that felt within the Schlumberger Limited exploration and production department of the company (Kasriel & Wood 2013).
There is an opportunity for Schlumberger Limited to invest in the exploration and production sector of the oil and gas industry. There is a serious need for exploration and production investment concerns with many of these challenges dating back to more than five years. Firstly, there is high demand for oil within the global oil supply chain and this is estimated to be 1.4 million b/d to 1.7 million b/d in the coming year. This figure is most likely to increase as the global economic growth continues to increase. This leaves a deficit of 20-25 million b/d to the global supply chain that needs to be filled by more investment in exploration and production sector of the industry (Jahn, Cook & Graham 2008).
There are many different approaches to investment in exploration and production sector of the industry that Schlumberger Limited can invest in. some of the possible approaches to investment in this area can take the form of technology, assets and integrated approach to exploration and production.
Integrated project management
Integrated project management (IPM) approach to exploration and production is an approach that the company has taken to improve on its production of oil and gas. Exploration and production is an expensive sector of the industry. This approach requires collaboration with various companies within the upstream oil production. Some of the areas that the project manager has the opportunity to bring together various exploration and production components to increase investment in the sector include the use of its Integrated Project Management (IPM) and Integrate Services (IS) that are already in place. In order to realize the full potential in the sector, Schlumberger can sue the already in place system to invest in the exploration and production sector (Schlumberger 2018).
Integrated project management brings together various factors together and some of these include technological factors, management, operators and key players. Firstly, integrated project management brings together all technical experts in the exploration of better project management. The company needs to increase the level of expertise in the field of exploration so as to increase the production of oil and gas. For instance, integrate project management has helped the company to grow its operation in Oman oil and gas industry. This makes the company has the opportunity to increase its activities in the oil industry. This can take the form of projects in the industry to increase its exploration investments. One of the ways to ensure more investment in the upstream sector is collaboration with other companies that are part of the system (American Petroleum Institute 2011).
Secondly, the technological component of the integrated project management involves bringing together many different technologies that aid in exploration and production sector of the oil industry. There are many different technologies that range from those technologies that help in the search for hydrocarbon to those that are used in the drilling of oil from the ground. Integrating these technologies help in bringing together the technology available for more production. Moreover, the integrated project management assists in utilizing these technologies to lead exploration campaigns for production. Some example of technologies that are integrated are Seismic solutions include proprietary Q-Technology, Omega Seismic Processing System and Q single-sensor that are used in exploration (Stéphane 2017).
Integrated of management so that more focus is placed on exploration and production sector of the industry is promising for profitability. While most companies focus on many areas of the oil and gas value chain, the company needs to focus its management towards exploration and production sector of the oil industry. The company needs to invest in three main integrated systems to help in exploration and production sector. These three areas include integrated service management, integrated drilling management, and integrated abandonment. Firstly, integrated drilling management involves various drilling technology and machine that is part of exploration and production sector of oil and gas industry. Secondly, integrated service management involves service that aid oil production and has proved to add more value to the sector (Mian 2011).
Integrated services
Integrate services that are a platform that is developed by Schlumberger for the purpose of bringing various elements together and can be sued to intensify investment in exploration and production. The system combines services that are provided by the company to help in exploration campaign and monitoring of the whole upstream activities. The platform offers a multifaceted system that enables the good information technologies. The overall aim of the system is to reduce operating time by 40% within the exploration and production. The success of the platform is based on high technologies software that is produced by the information system of the company (The Financial Times 2018).
Integrated value chain creation
The exploration and production opportunity require a close integration of various elements of the value chain for the Schlumberger in taking advantage of the opportunity. Being a major player in the oil and gas sector global chain the Schlumberger has high opportunity to maximize the opportunity. Integrate value chain optimization is one way to invest in the exploration and production sector of the oil and gas industry. The investment needs to integrate all players within the value chain from upstream to downstream (Energy Conference Network 2018).
Integrated value chain involves collaboration with various operators within the values chain especially those companies within the upstream. Upstream investment operators offer a solution to the investment opportunity that the Schlumberger being the main player can bring together these companies for better production. Upstream investment involves integrating companies that are part of the upstream oil and gas value chain to enhance exploration and production. This collaboration also increases the financial capability of the sector since most investors prefer already established a system for their investment. There are many different operators that can be integrated to achieve a more optimized value chain. For instance, integration of exploration and those operators within the production sector to increase the value chain optimization (Tzimas 2005).
Technological approach investment in exploration and production
Schlumberger is listed as the main supplier of technology in Oman oil and gas industry especially in exploration and production sector of the industry. Exploration and production is a sector that requires much technological and infrastructure investment to tackle the deficit present in oil and gas industry. Firstly, based on the Schlumberger technological advancement, the company is capable of using its technical capabilities to increase its exploration and production of oil. According to Avata.com (2018), the company is also facing technical challenges that are lowering the exploration and production of oil in many places. Exploration and production sector of the industry requires many different technologies to increase production. Schlumberger has most of these technologies and this increases its chances of investing in the sector (Ross 2014).
The company needs to invest heavily in exploration technology to increase exploration and production. The core of the exploration and production challenge is the technology and technical capability that require high investment. Technological approach aid in search hydrocarbons in the ground is important for more production. Currently, automated and digital simulation systems offer a solution to various challenges to the production of oil. Using technologies to search for hydrocarbon offers a lasting solution that may help in exploration and production of oil and gas. Some of the production technologies that have assisted many companies to excel in production are a virtual production system. This technological approach has also capabilities of helping the company to monitor its upstream activities for more profitability. For example, Omega Seismic Processing System is used to run multiple systems that are used in exploration and production of oil (Inkpen & Moffett 2011).
The technological expenditure is most likely to be profitable to the company give the long history the company has in the global oil and gas industry. The expected profitability of the technological expenditure includes the capital expenditure and operating expenditure of the technological assets. Technological expenditure has the benefit of building the capital base for the company that enables the Schlumberger to remain in the strategic position it has been enjoying since the historical time (Ajak & Erkan 2015, pp. 109-120).
Information technology is an example technique that can be used to improve its technology. The Schlumberger needs to integrate sensor technology into the project management system that will help the system to monitor the performance of various machines that are used in exploration and production. Information technology is important for linkage of various aspects of the production system. This also combines various technologies such as sensors and drilling technologies. The information system that brings together elements of the technological system has been named integrated services (IS). IS technology is an information system that aid in mapping and monitor of activities in the oilfields (Worthington 2010).
Financial investment approach
The financial approach is another area that Schlumberger needs to invest in E&P as an opportunity that currently exists in the oil and gas industry. There are many options to financially invest in E&P as this offers a high investment opportunity. One way to invest in the E&P is to increase the company assets that are in the sector. Physical assets form the most important aspect of the investment as this is the core financial value of the investment (Bordner 2015). The company needs to produce for purchase in the market as this is the faster option to take on the opportunity. This will require Schlumberger to align its investment on the cash flow schedule with its corporate cash flow planning. The company investing in the sector through assets can opt for operating stake in the consortium elected for bid. Upon the profitability of the assets, Schlumberger can share the profit with investors (Guedes & Pedro 2016, pp 377-386).
Increasing expertise in exploration and production
One option to increase the investment in exploration is through increasing experts in the sector. The Schlumberger has demonstrated that it has high expertise capacity that can be used to improve the investment in the sector. Firstly, training of new experts in the exploration and production sector has a high probability of improving the company’s performance in the industry. Building a strong human resource in the sector requires high training of more people in the sector as this increase the chance that the company will increase its oil production (Abdel-Aal & Alsahlawi 2014). Secondly, mentoring is another area that can help the company to realize success in the exploration and production. Being a larger world oilfield company in the world, the Schlumberger has a larger number of experts in the sector and this can be used to bring more people into the sector. Moreover, the technical team needs to be increased in number to help the company take charge of most oilfields within the country and globally (Feng & Rangaiah 2011, pp. 8–22).
In light of the identified opportunity for the company, there are some recommendations that can help the company to use this opportunity. Firstly, the company needs to develop an integrated project management team that will focus on developing project roadmap for intensive investment in the upstream sector of the industry. This team will also come up with clear project scope and risk management strategy. Secondly, the company needs to come up with various ways to get finance for investment as this will ensure the project succeeds (DiLallo 2017). As much as the company has invested in the oil industry, studies show that underinvestment is increasing in the upstream sector. Thirdly, the company needs to use its technology increase its investment in the sector as this remains the challenging area of the industry. The company has both the capability and technological resources needed to start investing in the opportunity. Fourthly, investing in exploration and production sector require a number of things to put in place for the successful project. The main reason for this project is to ensure the opportunity is utilized for high reward. In many instances, the company has conducted many exploration campaigns and even rented its resources to other companies. One such case was in Argentina oil market where the company’s resources lead a campaign with an effort to search hydrocarbons in the underground (Inthanongsone, Carsten, Jan & Phongpat 2016, pp. 142).
Conclusion
In conclusion, oil and gas industry has seen low investment in the recent years especially in the exploration and production sector of the industry. The company remains the leading provider of exploration and production services in Oman and globally. This leaves no doubt that the company has to set the pace in investment in the industry. Exploration and production sector of the industry is the only area that has underinvestment due to many reasons. Supply chain problems have been one of the reasons why there is a low investment in the sector. In addition, high cost and risk in the sector make sector have a low number of people willing to invest in the upstream sector. There is an opportunity for investment that will increase company capital base in the industry and reduce oil and gas deficit created by high demand for low supply in the global oil supply chain. Some of the approach to invest in this opportunity are integrated project management, technical approach, financial approach, human resources approach and value chain optimization. It is, therefore, recommended that the company invest in the opportunity present in the exploration and production sector of oil and gas industry.
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