PDO eyes $900 million savings over next 5 years

May 9: Galvanised by the steep fall in oil revenues, Petroleum Development Oman (PDO), the nation’s top energy producer, is targeting savings in excess of $900 million over the next five years through the implementation of a slew of far-reaching cost-cutting and waste elimination strategies.

Already in place is a string of initiatives designed to reduce expenditure in the face of a severe revenue crunch that has also impacted much of Oman’s oil and gas sector.

The initiatives, which include ‘Contract Optimisation Reviews’, ‘Smart Contracts’, and ‘Lean Business Strategies’, have been designed to yield hundreds of millions of dollars in savings to the company over the 2015 — 2020 timeframe.

“We are relentlessly pursuing ever stricter cost control and have identified a number of significant opportunities to execute work more efficiently and reduce waste,” said Raoul Restucci, Managing Director — Petroleum Development Oman.

“Indeed, the current environment is enabling us to challenge the status quo and seize the opportunity to create a more effective, productive and leaner business model. From discretionary expenditure to redeployment of hoists and other resources, we need to ‘serve Oman’ by ensuring we are all working to remove inefficiency and waste,” he stated in the company’s recently released Sustainability Report 2015.

The targeted savings come on top of the estimated $1.6 billion reduction announced by PDO in its planned expenditure for 2016 – a direct consequence of the slump in global oil prices.

In PDO’s sights are around $450 million in potential savings that it wants to garner in collaboration with contractors over the next five years. “Together with its contracting community, the Company has seized the opportunity to review and challenge its modus operandi and standards. Engagements were held with key contractors to identify opportunities for value improvement and cost reduction in a collaborative manner, leading to almost 300 cost-saving, efficiency or productivity improvement ideas worth $450 million over the period 20152020,” the company said.

Separately, Contract Optimisation Reviews (CORs) — an initiative that was launched last year — promise to yield over $400 million in additional potential savings over the 2015-2020 timeframe, according to the company. The reviews, says PDO, aim to identify and eliminate waste in the scope of contracts in order to make them fit-for-purpose, as well as reduce costs for both PDO and the contractors.

Furthermore, through the implementation of ‘smart contracts’ — where the prices of materials are renegotiated every six months — PDO’s Well Engineering and Logistics Directorate is eyeing savings of around $53 million in 2016 alone.

The current environment is enabling us to challenge the status quo and seize the opportunity to create a more effective, productive and leaner business model.