The recent merger between General Electric Co. (GE) and Baker Hughes is sparking up many conversations about technology in the oil and gas (O&G) industry. The first and simplest question being asked is, “why?” GE already has an O&G division and Baker Hughes alone is one of the world’s largest O&G services company. GE Chief Executive Officer, Jeffrey Immelt, said in this Bloomberg article that the merger creates “a diversified portfolio that can weather the cycles better than anybody.” Aside from creating the second biggest O&G service company next to Halliburton, the technology that will be shared between both entities is a major aspect of the deal. Here’s how the mega merger validates the need to improve oilfield technology.
The industry has been greatly affected since the major drop in crude oil barrel prices in 2008, ending at $52.51/bbl at the beginning of 2009. The damage has been compounded by the latest big drop in 2015, finally hitting a low of $26.21/bbl in February 2016. In order for businesses to keep the lights on, many have been forced to take deep cuts and lay off workers. Instead of letting go early- and mid-career talent, many businesses have looked to technology to help improve efficiency in the oilfield. The GE-Baker Hughes merger is proving that companies who improve and invest in new technology will be the ones who survive the biggest waves. These are two big players in O&G, but the same strategy will work for small and mid-size businesses as well.
A recent Upstream Intelligence report, IT Challenges and Opportunities for Digital Vendors, shows that there is a need for higher level technology in O&G. Improved field instrumentation, real-time production and reliability surveillance, and collaboration platforms are just a few pieces that must be addressed to help improve operational efficiencies. The initial investment of new technologies in the oilfield will payout greatly as businesses will be better equipped to accelerate production and better organize time and materials to quickly get wells online. Less production delays mean earlier first oil and more profitability throughout the well life cycle.
The GE-Baker Hughes merger has validated the need for improved technology in the oilfield. With the industry recently weathering historically low crude prices and continued price uncertainty, O&G businesses must do everything in their power to stay alive and relevant. Baker Hughes, an American oilfield service company, has identified the need of improved oilfield technology and is officially merging with a technology and equipment supplier in General Electric. Will your business be prepared for the continuous waves of the industry?