Why the Oil and Gas Industry Needs Material MDM? Part – I
Everyone and their aunt know that the price of gas is falling and this has caused great upheaval in one of our favorite industries – oil and gas. In the past decade, in which Verdantis has implemented numerous Data Governance and Material MDM initiatives, some of our biggest clients have been in the field of oil and gas (because of the huge number of MRO spare parts used by companies in this industry) and that is why I decided to talk about them in this series of blog posts.
The last few months have not been kind to companies in the field of oil and gas, whether upstream, downstream, or midstream. A number of factors have led to companies re-evaluating their short term tactics as well as long term strategies. Today we would take a look at what has led to such dire straits, what can be expected in the coming year, and why the situation might have to worsen before we can expect some improvement.
What got us here?
A root cause analysis for something like this is almost impossible. However, there are two contributing factors that are quite apparent. Let us have a look at them.
- A volatile Middle East – Political instability in any region of the world with an abundance of natural resources is sure to throw a spanner in the world economy. The Middle East, along with being one of the most oil-rich regions of the globe, is also one of the most unstable one, and this has led to a lot of volatility in the market. Libya has not reached any kind of equilibrium since the death of Muammar Gaddafi, the condition in Syria is steadily deteriorating, and the growth and spread of ISIS has ensured that anyone trying to predict the future of this region can hope to be as accurate as a very inebriated Nostradamus.
- OPEC (Organization of the Petroleum Exporting Countries) playing the waiting game – The price of crude oil has fallen to almost half of its highest levels in 2008, from almost $110 per barrel to $58 per barrel in 2015. This is one of the biggest reasons for the crisis in the oil and gas industries and it has come about due to a glut from the Organization of the Petroleum Exporting Countries or OPEC. Even with the record production of shale gas in the USA, OPEC is still responsible for over 43% of the total crude oil production worldwide, and over 20% of the global natural gas production. In the past year, even with the price of oil plummeting, OPEC has decided not to cut production. This seems to be a step taken to ensure the market share of the countries as they are in a position to take a short term hit in profits. Even though this is good news for retail consumers worldwide, oil and gas companies worldwide are feeling the heat.
These are the major reasons for the oil and gas industry being in such a pickle. In the upcoming parts of this series of blog posts, we’ll see why things can go much worse for US oil and gas companies and what material master data management and data governance can do to help. I would love to read your thoughts. Please share them in the comment section below.
Further Reading –
White Paper – 16 Epic Fails! in MRO Master Data Management
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