Here’s How Oil Companies Are Cutting Costs

In the middle of an international oil slump, companies are saving pennies through standardization.

By Alain StephensNovember 8, 2015 6:59 pm| ,

This past weekend, the Houston-based Marathon Oil Corporation said it will be cutting 200 jobs in a plan to restructure. The cuts will amount to about a 20 percent loss of the company’s workforce this year in the wake of the crippled oil market.

Marathon isn’t the only one making moves to try and pinch pennies to survive. Companies in the oil and gas industry worldwide are laying off workers and looking for other ways to help ease costs during the most recent oil slump. One company is trying to save money by changing the color of paint they use during projects; others are standardizing their pipe-laying plans.

Selina Williams reports on oil, energy, and the economy for the Wall Street Journal. She says companies have been finding creative ways to protect themselves through the slump.

“There are lots of small savings to be made across the sector,” she says. “At least this is what the service companies are saying – that it’s time to standardized such things [like paint pigment] and simplify such things to takes some costs out of projects.”

Williams says companies are tightening their belts through job layoffs across Europe, as well as Texas. For example, the French engineering company Technip said in July that they would begin laying off 6,000 workers.

“That’s the big savings right there,” Williams says. “There are other savings to be made, things like simplifying the engineering on a big project … redesigning them so there are less pipelines.”

She says the idea is that simplifying the design of big projects leads to the need for fewer supplies and less build time. “There are savings all the way up the chain,” she says.

Williams says this is a change from cost-cutting tactics in the past.

“It’s different in the sense that the oil industry is renowned for these sort of big bespoke projects,” she says. “Perhaps what’s needed – or at least certainly some people in the industry are saying what’s needed – is to get away from that. [There’s] a way you can standardized and simplify. You can bring the costs down.”

Williams says this type of cost-cutting to could mean positive results overall for the entire industry. “If they are successful in changing the way that the industry looks at such things, then it could potentially mean more efficiency in companies,” she says. “[It could mean] higher margins at some of the oil service companies, which would be good for everyone in the industry, and cheaper costs for the oil companies.”