Oil & Gas companies need to adopt new approaches to spending, adopt three components of a go-forward cost strategy. Increasing supplies of oil, coupled with decelerating demand, will keep oil in the $50-$80 price range for the foreseeable future. At the same time, volatility will increase. In this new reality, traditional approaches to managing costs and operations will make it hard for Oil & Gas companies to achieve the agility they need. Some players are already taking action and aligning their spending to a strategy for growth and profitability. Along the way, they are cutting capex by 20 percent and opex by 30 percent. What’s their secret? Zero-based budgeting, digital innovation and new operating models all play a role. Learn more: https://accntu.re/2sTfZ78

1. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

2. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
AMID SUPPLY AND DEMAND
DISRUPTIONS, OIL & GAS COMPANIES
NEED TO EMBRACE AN ENTIRELY NEW
APPROACH TO SPENDING
There’s no longer any time or
money to waste.
• Forward-thinking oil & gas players are
taking action—becoming leaner and
more adaptive with new operating
models, processes and digital
technologies.
• “Business as usual” is out. “Competitive
agility” is in.
Just half (51%) of all
companies that have
reduced their spending
were able to sustain cost
savings for one to two years.
Source: Accenture Strategy, Strategic
Cost Reduction research, 2015.

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THERE IS NOW AN INCENTIVE—AND
IMPERATIVE—FOR OIL & GAS COMPANIES
TO DO THINGS DIFFERENTLY
Economic downturns are a way of life for oil and gas
companies. When oil prices fall, so do industry
expenditures. But cost-cutting measures don’t last.
• Industry downturns in the last 20 years typically
have been short-lived.
• During these downturns, oil & gas companies only
needed to tighten their belts until oil prices rose
again—which they always did.
• Spending cuts were indiscriminate and reactive.

4. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
THIS TIME IT’S DIFFERENT
The downturn is prolonged. Prices will not
rebound soon. This is the new reality.
• Global investments in efficient, renewable
energy sources have tempered the world’s
reliance on oil and gas.
• At the same time, fracking makes it
possible for operators to extract light tight
oil more quickly, cheaply and in greater
volumes than ever imagined.
With increasing
supply and
decelerating demand,
oil prices are
expected to remain
between $50 and $80
per barrel for the
foreseeable future.
Source: Accenture Strategy
analysis, 2017

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COST OPTIMIZATION IS THE
NAME OF THE GAME
Will oil & gas players create a foundation for sustained growth?
• Current cost levels will no longer sustain the margins to which oil &
gas companies have grown accustomed.
• Traditional approaches to managing operations and costs will hold
them back from achieving the agility they now need.

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IT’S TIME THEY PIVOT
FROM COST MANAGEMENT TO COST OPTIMIZATION…
FROM PROCESS IMPROVEMENT TO PROCESS TRANSFORMATION…
AND FROM DIGITAL ENABLEMENT TO DIGITAL DISRUPTION.
HOW CAN OIL & GAS COMPANIES
PIVOT TO THE NEW NOW?

7. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
BY ADOPTING A ZERO-BASED
MINDSET
Re-imagine budgets & spending based
on what things “should cost” and re-
imagine organizations, supply chains
and processes from a zero-base.
• Assess all opportunities to apply
zero-based approaches.
• Commit to gaining forensic visibility
into costs and eliminating waste.
• Set aggressive targets that break the
habit of incremental cost cutting.
Cost optimization strategies
with a zero-based mindset can
reduce oil & gas companies’
annual supply chain spending
by 15 to 20%.
Source: Accenture Strategy client
experience

8. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
BY INNOVATING TO ADDRESS
SPENDING IN CAPITAL-INTENSIVE,
INDUSTRY-SPECIFIC AREAS
Process transformation, digital
disruption and operating model
reconfiguration are all on the table.
• Develop new ways of working by
customizing concepts and solutions
from other industries.
• Invest in digital capabilities—especially
data analytics—to achieve a new level
of efficiency and technical innovation.
• Identify opportunities to transform
how work is performed.
80% of oil & gas executives
are planning to invest at
least as much in digital over
the next 5 years as they
have in the past. Half will
invest more.
Source: Accenture and Microsoft,
2016 Upstream Oil and Gas Digital
Trends Survey

9. Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
BY COMMITTING TO
SUSTAINABLE CHANGE
Put mechanisms in place to ensure that new cost strategies
evolve over time, in lockstep with the needs of the business.
• Employ a closed-loop process to prevent ineffective spending
from creeping back in over time.
• Identify areas where freed-up cash can be reinvested in growth
and innovation.
• Continually assess the organization’s objectives and portfolios,
and pivot priorities and resources, as needed.
• Create a sustainable cost-management culture through change
management.

10. Learn how to zero in on cost optimization.
Download the full report at:
linkedin.com/company/accenture_energy
linkedin.com/company/accenture-strategy
Copyright © 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
The price of agility in
oil & gas: Zeroing in on
cost optimization
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