Facing the challenging global environment—the trend to costs and financial discipline for oil and gas companies and insights for Australian players
Michiel SoetingGlobal Energy and Natural Resources Leader, KPMG
The APPEA Journal 49(3) - https://doi.org/10.1071/AJ08090
Published: 30 June 2009
Abstract
The past year was one of extraordinary global economic turbulence. The economic downturn has resulted in significant challenges for oil and gas companies. The oil price plunged from a record high of around US$145 to under US$35 a barrel. With cost levels flat or decreasing at a much slower pace, there is a need for a fundamental re-think of cost structures.
In these unprecedented economic circumstances, the need to cut costs is paramount. Research from KPMG shows that in the past, the energy sector has been one of the worst performers when it comes to cost savings, with less than 50% of the intended cost savings achieved.
This presentation highlights the key elements for successful cost optimisation projects, including:
leadership commitment;
a sense of the urgency;
the connectivity between cost initiatives; and,
managing complexity.
An overview will be provided of the initiatives that various major oil companies have undertaken and the lessons they have learned, for the benefit of Australian oil and gas companies.
Insights into short term cost-cutting actions taken in response to the economic down-turn, include:
supplying policies and reviewing prices;
investment delays; and,
freezing salaries.
In addition, more strategic and structural cost optimisation initiatives will be covered, such as looking at private equity, including a top-down cost optimisation methodology; and disaggregation and activity-based costing.
Michiel is Global Chairman of KPMG’s Energy and Natural Resources Group and global lead partner for one of the firm’s major advisory clients, Royal Dutch Shell. Michiel has an extensive understanding of major international oil and gas operations and the key operational and strategic challenges facing the broader oil and gas industry. During his tenure, Michiel has had the opportunity to visit and support many of Shell’s key projects around the globe. As Global Leader of one of KPMG’s major international practices—energy and natural resources—Michiel leads over 5,000 professionals based in all major cities across the globe and delivering audit, tax and advisory services to organisations industries such as: oil and gas; power and utilities; mining; energy and mining services; renewables; and forestry. The Energy and Natural Resources Groups clients include major international and Australian accounts such as BHP Billiton, ExxonMobil, BP, Total, Woodside and Chevron. The role has provided the opportunity for Michiel to continue to drive the development of KPMG’s global Oil and Gas Centre of Excellence and Global Energy Institute. The key focus of Michiel’s 20 year career has been oil and gas. This extensive experience has positioned him as a global authority on the oil and gas sector and provides him with a solid platform to deliver leading insights on the challenges and opportunities facing upstream and downstream oil and gas organisations. |
