Data-driven Strat­egy

The Economic Times - - Breaking Ideas -

RICHARD WARD

The com­put­ers in the of­fices of the av­er­age big oil com­pany can find an ad­di­tional $1 bil­lion in value, if you let them. Mod­ern ad­vanced-an­a­lyt­ics pro­grams are able to di­ag­nose, sort, com­pare, and iden­tify cost sav­ings, or op­por­tu­ni­ties for in­creased pro­duc­tion, in a man­ner be­yond the ca­pa­bil­i­ties of the av­er­age em­ployee. The tools have been avail­able for sev­eral years, but adop­tion has been slow. This is partly the re­sult of the re­cent crash in oil prices, but com­pet­ing in­ter­nal IT projects and re­luc­tance to put in the ef­fort re­quired are also fac­tors…

A su­per-ma­jor drilling hor­i­zon­tal shale wells in North Amer­ica found that its costs, as well as those of its com­peti­tors, var­ied highly across plays. The com­pany as­sem­bled a data team and col­lected in­for­ma­tion from fi­nance, oper­a­tions, com­peti­tor in­vestor pre­sen­ta­tions, and in­dus­try news sto­ries. A soft­ware pro­gram did bot­tom-up anal­y­sis, churn­ing through mil­lions of records. At the end of this mul­ti­week process, the team could con­fi­dently pro­pose crit­i­cal changes to cas­ing de­sign, pro­cure­ment, and cas­ing crew se­lec­tion. The sav­ings came to $700,000 per well. As this com­pany had about 1,300 fu­ture wells to drill, the to­tal po­ten­tial was $910 mil­lion—not quite a bil­lion, but aw­fully close.

From: ‘A bil­lion-dol­lar dig­i­tal op­por­tu­nity for oil com­pa­nies’

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