Since late 2014, oil prices have fallen dramatically, and capital budgets across the oil and gas value chain are being slashed. Large oil and gas majors have cut capital costs by 19%, national oil companies by 18%, and U.S.-focused E&P independents, who have been the hardest hit, have reduced capex by as much as 43% (See figure 1). Given the environment, the oil and gas equipment market is becoming increasingly difficult with limited opportunities from new capital projects. In addition, oil and gas operators are asking product and service vendors for discounts and simultaneously evincing greater interest in new innovations that can further cut costs. Collectively, these trends are placing original equipment manufacturers (OEMs) serving the oil and gas industry under terrific pressure.
As the industry embraces a 'lower for longer' outlook for oil prices, there are several approaches an OEM can take to stay competitive. Based on our firm's work advising a number of turbomachinery OEMs serving the oil and gas industry as well as conversations with oil and gas asset operators, EPC firms, and end users, we recently wrote in CompressorTech2 about how successful OEMs are competing and differentiating themselves by (1) innovating through the cycle, (2) engaging across the product lifecycle, (3) focusing on solutions, and (4) optimizing costs.
– Uday Turaga
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