Imagine if just a fraction of the pre-owned equipment, inventory and spares sitting idle in the yards and warehouses of the world’s oil towns today could be re-used. What would this do to the industry’s balance sheet, the need for new capital and the economics of projects where the re-use of pre-owned equipment made sense?
Such a thought would have been unthinkable during the years of unparalleled growth and activity in the years leading up to 2014 however the contraction of the past three years has created a paradigm where an opportunity to challenge conventional thinking now exists.
And as confidence begins to return in line with an oil price sneaking steadily upward, the demand for products and services has, in turn, started to increase. Whilst clearly welcome, higher activity levels raise the spectre of price spikes and project delays as the supply chain, which in some areas has been seriously eroded, struggles to react to rising customer requirements.
Therefore, within this context, what role can the re-use of equipment, spares or inventory play in reshaping the supply chain, improving industry economics and reducing waste?
An alternative solution to buying new
Traditionally, when sourcing equipment for a project, the approach for procurement managers or buyers has almost always been to buy new. And whilst this tends to be driven by the industry’s aversion to risk, what if we were to ask: “can we find a pre-owned alternative?” before always buying new. Of course there will be times when such an approach cannot be considered, however when it is appropriate, this can result in a considerable saving to schedule and/or capex/opex.
Indeed it can often be the case that a similar product or item of equipment exists and can be readily sourced and closer to the required location in a quicker timescale. Being able to source a product that can be reused or repurposed in this way has clear and significant cost benefits over buying brand new equipment. It also means buyers can avoid lengthening the time scale of a project to accommodate for equipment design, manufacturing and commissioning.
So when does buying pre-owned or used equipment make sense?
Certainly, in adjacent industries, where specifications can be of a lower requirement than in oil and gas, the re-use of oilfield equipment can offer real opportunity. But even within the oil industry, when budgets are constrained, or when the lead-time for buying new impacts project economics, sourcing a pre-owned alternative can be an option. And for smaller projects, where lower-tier operators or service providers have a different approach to risk or during operations, where the maintenance of non-essential equipment is involved or when the life of the asset is shorter than the component or equipment being replaced.
Therefore, being able to instantly access a market place of readily available equipment around the world could improve not only the supply chain’s capabilities but also the economics of projects and the balance sheets of those companies involved whilst in turn reducing waste.
Digital intelligence and market understanding
Dockstr is an online marketplace for buying, selling, trading and renting energy industry equipment and services, providing one solution to supply chain demand issues. Buyers benefit from using the platform as it avoids commissioning new equipment, project delays as assets are sourced and can be more cost efficient. Sellers use the platform to sell unwanted surplus equipment to a captive audience, making best use of time as they don’t need to invest effort in protracted sales deals. In this way, we believe we can be a driving force in bringing the circular and sharing economy to the energy industries.
An emerging trend, the circular economy offers the opportunity for the industry to see what is available for re-use prior to committing to new build. This can potentially help in waste reduction as less equipment will need to be commissioned. Such an approach can go some way towards tackling the traditional perceived excesses of the oil industry, even if those perceptions may now be somewhat outdated.
Already used by some of the industry’s leading companies, Dockstr’s disruptive platform also mitigates risk by providing the support services required to enable transactions, such as audits, inspections, transportation and logistics.
By providing a platform where a live inventory gives users access to available equipment listed for sale around the globe, we are able to reuse and repurpose more equipment. A digital catalogue gives users instant access to other options that they may not initially have been aware of and thus reducing the time associated with sourcing equipment.
An example of this approach involved an established equipment provider being required to supply a key part of a marine construction spread to a project for an international oil company.
Four years ago, this company would have almost certainly decided to build a new piece of equipment. However, in the current climate the economics did not support such a decision so an existing unit was sourced. Despite it not having worked for several years and not having the capacity to perform the work required, a detailed evaluation and engineering assessment allowed the old equipment to be upgraded, completely refurbished and re-certified at a cost saving of several hundred thousand dollars.
The end result was a piece of equipment which was effectively new, met the needs of the project, cost almost 50% less than a new build and was delivered in just over half the time. This was a very positive outcome for all concerned even before taking into account the waste reduction associated with disposing of the old equipment had it not been re-used and the saving of raw materials had a new unit been commissioned.
Such examples provide evidence that if just 10% of the unused equipment, spares and inventory could be re-used or re-purposed, the effect would be to reduce the industry’s working capital requirements and improve balance sheets potentially to the tune of billions of dollars in addition to improving project economics whilst improving the environmental footprint of the industry.
Despite its remarkable technological achievements, the oil and gas industry lags behind other industries in the adoption of digital technology. However there is a growing trend towards greater alignment between the two. We are at a significant stage in time, where the industry must make best use of technology. We know that today, in our industry, a very small percentage of all purchasing transactions are truly digitalised compared with the world of B2C transactions. We also know that this will increase in oil and gas; the only question being the speed of such transformation.
The emergence of the need for digitalisation in the industry is clear, this, as well as changing set processes, can transform the way we do business. Online platforms, such as Dockstr, interrupt existing purchasing strategies and can provide solutions to the issues that the recovering supply chain is trying to overcome.