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‘Nine to five plus a single employer’ is no longer an equation that the current workforce operates on. This traditional marketplace has been disrupted with the advent of new technology that has heralded gig or on-demand economy. Players like Uber, Airbnb, & Deliveroo offer a classic example of how these innovators have leveraged on this concept of gig economy and have shaken up the traditional setup. Millions of people today, prefer flexible work timings, multiple employers, interest-based projects and multiple revenue streams, the working style we commonly refer to as gig economy.
CIPD describes the gig economy as a new way of working that is based on the temporary jobs or projects, which is paid on the project or hourly basis. It is also referred to as the ‘sharing economy’ or ‘collaborative economy’
The gig economy: pros and cons in the context of the Oil & Gas Industry
The Oil and Gas industry is considered traditional when it comes to adapting to new technology or concepts. However, the notion is changing now with 30% of its workforce comprising of gig workers and the trend is expected to rise in coming years. Instead of depending on the recruitment agencies, companies are now focussing on targeted industry digital platforms to search, shortlist, verify and hire the gig contractors or freelancers. However, like everything else, there are pros and cons of hiring freelancers or gig employees:
Pros:
Reduced Overhead cost
The cost of hiring an in-house employee is immense because apart from salary it also includes costs of insurance, perks, benefits, training, leaves, and cost associated with providing the facilities like internet, sitting arrangements, refreshments, canteen, electricity, and so on. All the extra cost apart from salary gets waived off when it comes to hiring gig employees or also known as “freelancers” in the market. Thus reducing the huge chunk of overhead cost for the employing company.
Low Financial Risk
In the case of full-time employees, the company needs to pay even during “down-times” when the work is low, or the productivity standards are not met. However, in the case of temporary staff or freelancers, the company only pays for the work accomplished as per the specified standard. Thereby lowering the financial risk.
Bigger and better pool of talent
The energy sector is a highly specialized sector and hence requires employees with a specific skill set. Specially for an on-site project, location is the biggest constraint. What if you do not find the right talent at your location? Then you are left with two options: either to hire a new employee and provide training or offload and distribute the work to the current employees. Both this scenario is risky. That’s when the gig employees are a real life-saver. The boundaries are no barrier, you can gain access to any person sitting in any part of the world. You do not even have to compromise on the skills and invest in training.
Innovation and knowledge-sharing
The company spends a substantial amount on strategizing and talent development. However, when you opt for a freelancer, you gain access to knowledge that the employee brings in by working with other organizations. So, in the oil and gas sector, a new employee can bring an innovation in the process or methodology by his experience and observation with different clients.
Round the clock functioning
Sometimes, the gig employee operates from different time zone which means that you can get your work running even while you have closed down at your part of the world. Additionally, you can reach out to freelancers for revisions, urgent works, even after the fixed working hours and during weekends, which is a great relief during tight-deadline projects.
Cons
Lack of supervision and discipline
Most gig workers operate remotely, and you cannot monitor their work physically which means that you can never be sure whether the hourly rates that the employee billed you for, is actually spent on work or for leisure. However, now there are numerous monitoring sites like Hubstaff that tracks the productivity level of the employee. Also, working in oil and gas sector involves potential hazards that can lead to serious injuries and even death. In case of remote workers, managing and monitoring all safety measures pertaining to explosions and fires, equipment safety, machine hazards and so on is a daunting task.
Unpredictable work
Until you gain mutual trust, there is a lot at the stake. For example: if you hire a temporary staff or freelancer to work on a project, you cannot be certain if the person will be able to deliver his/her duties. The risk of losing time, money, and energy is high. If all turns well, you can enjoy the perks however if it didn’t go your way then you suffer a loss on multiple levels. To avoid this scenario, it is advisable to ask for previous work references and keep reviewing the work periodically so that you are aware of the direction things are shaping in.
Loyalty and company ethics
Because, each company has its own set of principles and working guidelines which forms the culture of the company, it is challenging for the freelancer to operate as per the company’s code of conduct or policies. Furthermore, they work for multiple clients at a time, their loyalty may be questionable.
Training and development issue
Every company works and operates differently though key process remains the same. The complete onboarding of the remote worker is not possible as in the case of a full-time employee where the company’s working style becomes their second nature. Additionally, the effort to organize a training program for the gig worker is tricky because of the location and time bound issues.
Thus, for a dynamic industry like oil and gas, gig employees can be an asset if they can bring in the required expertise, skill set and attitude to outperform your expectation. You can find the right talent by using dedicated oil & gas professional networking platforms that bring talents and employers together. Use it to your advantage and you are good to go.
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Nagman has diversified into dealing with Flow meters or Instruments viz Electro-Magnetic Flow Meters, Coriolis Mass Flow Meter, Positive Displacement Flow Meter, Vortex Flow Meter, Turbine Flow Meter, Ultrasonic Flow Meter.
Electro-Magnetic Flow Meter:
Size : DN 3 to DN 3000 mm
Flow Velocity : 0.5 m/s to 15 m/s
Accuracy : ±0.5%, ±0.2% of Reading
Coriolis Mass Flow Meter:
Size : DN8~DN300
Flow Range : 8 to 2500000 Kg/hr (for liquids)
4 to 2500000 Kg/hr (for gases)
Accuracy : 0.1% 0.2% 0.5% of Normal Flow Range
Positive Displacement Flow Meter:
Size : DN 15 ~ DN 400
Max. Flow Range : 0.3 m3/hr to 1800 m3/hr
(Will vary based on the measured media & temperature)
Accuracy : 0.1% 0.2% 0.5%
Vortex Flow Meter:
Size : DN 25 to DN 300
Flow Range : 1.3 m3/hr to 2000 m3/hr (Water)
8.0 m3/hr to 10000 m3/hr (Air)
Accuracy : ±1.0% of Reading
Turbine Flow Meter:
Size : DN 4 to DN 200
Flow Range : 0.02 m3 /hr to 680 m3 /hr
Accuracy : 1.0% or 0.5% of Rate
Ultrasonic Flow Meter:
Type : Hand held Ultrasonic Flow meter with S2, M2, L2 Sensors
Accuracy : ±1% of Reading at rates > 0.2 mps
Measuring Range : DN 15 – DN 6000
In its Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts that U.S. natural gas exports will exceed natural gas imports by an average 7.3 billion cubic feet per day (Bcf/d) in 2020 (2.0 Bcf/d higher than in 2019) and 8.9 Bcf/d in 2021. Growth in U.S. net exports is led primarily by increases in liquefied natural gas (LNG) exports and pipeline exports to Mexico. Net natural gas exports more than doubled in 2019, compared with 2018, and EIA expects that they will almost double again by 2021 from 2019 levels.
The United States trades natural gas by pipeline with Canada and Mexico and as LNG with dozens of countries. Historically, the United States has imported more natural gas than it exports by pipeline from Canada. In contrast, the United States has been a net exporter of natural gas by pipeline to Mexico. The United States has been a net exporter of LNG since 2016 and delivers LNG to more than 30 countries.
In 2019, growth in demand for U.S. natural gas exports exceeded growth in natural gas consumption in the U.S. electric power sector. Natural gas deliveries to U.S. LNG export facilities and by pipeline to Mexico accounted for 12% of dry natural gas production in 2019. EIA forecasts these deliveries to account for an increasingly larger share through 2021 as new LNG facilities are placed in service and new pipelines in Mexico that connect to U.S. export pipelines begin operations.
Net U.S. natural gas imports from Canada have steadily declined in the past four years as new supplies from Appalachia into the Midwestern states have displaced some pipeline imports from Canada. U.S. pipeline exports to Canada have increased since 2018 when the NEXUS pipeline and Phase 2 of the Rover pipeline entered service. Overall, EIA projects the United States will remain a net natural gas importer from Canada through 2050.
U.S. pipeline exports to Mexico increased following expansions of cross-border pipeline capacity, averaging 5.1 Bcf/d from January through October 2019, 0.5 Bcf/d more than the 2018 annual average, according to EIA’s Natural Gas Monthly. The increase in exports was primarily the result of increased flows on the newly commissioned Sur de Texas–Tuxpan pipeline in Mexico, which transports natural gas from Texas to the southern Mexican state of Veracruz. Several new pipelines in Mexico that were scheduled to come online in 2019 were delayed are expected to enter service in 2020:
U.S. LNG exports averaged 5 Bcf/d in 2019, 2 Bcf/d more than in 2018, as a result of several new facilities that placed their first trains in service. This year, several new liquefaction units (referred to as trains) are scheduled to be placed in service:
In 2021, the third train at the Corpus Christi facility in Texas is scheduled to come online, bringing the total U.S. liquefaction capacity to 10.2 Bcf/d (baseload) and 10.8 Bcf/d (peak). EIA expects LNG exports to continue to grow and average 6.5 Bcf/d in 2020 and 7.7 Bcf/d in 2021, as facilities gradually ramp up to full production.
Source: U.S. Energy Information Administration, Natural Gas Monthly
In the January 2020 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts that U.S. crude oil production will average 13.3 million barrels per day (b/d) in 2020, a 9% increase from 2019 production levels, and 13.7 million b/d in 2021, a 3% increase from 2020. Slowing crude oil production growth results from a decline in drilling rigs during the past year that EIA expects will continue through most of 2020. Despite the decline in rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rise, offsetting the decline in the number of rigs until drilling activity accelerates in 2021.
EIA’s U.S. crude oil production forecast is based on the West Texas Intermediate (WTI) price forecast in the January 2020 STEO, which rises from an average of $57 per barrel (b) in 2019 to an average of $59/b in 2020 and $62/b in 2021. The price forecast is highly uncertain, and any significant divergence of actual prices from the projected price path could change the pace of drilling and new well completion, which would in turn affect production.
Crude oil production in the Lower 48 states has a relatively short investment and production cycle. Changes in Lower 48 crude oil production typically follow changes in crude oil prices and rig counts with about a four- to six-month lag. Because EIA forecasts WTI prices will decline during the first half of 2020 but begin increasing in the second half of the year and into 2021, forecast U.S. crude oil production grows slowly month over month until the end of 2020. In contrast, crude oil production in Alaska and the Federal Offshore Gulf of Mexico (GOM) is driven by long-term investment that is typically less sensitive to short-term price movements.
In 2019, Lower 48 production reached its largest annual average volume of 9.9 million b/d, and EIA expects it to increase further by an average of 1.0 million b/d in 2020 and 0.4 million b/d in 2021. EIA forecasts the GOM region will grow by 0.1 million b/d in 2020 to 2.0 million b/d and to remain relatively flat in 2021 because several projects expected to come online in 2021 will not start producing until late in the year and will be offset by declines from other producing fields. Alaska’s crude oil production will remain relatively unchanged at about 0.5 million b/d in 2020 and in 2021.
The Permian region remains the most prolific growth region in the United States. Favorable geology combined with technological improvements have contributed to the Permian region’s high returns on investment and years of remaining oil production growth potential. EIA forecasts that Permian production will average 5.2 million b/d in 2020, an increase of 0.8 million b/d from 2019 production levels. For 2021, the Permian will produce an average of 5.6 million b/d. EIA forecasts that the Bakken region in North Dakota will be the second-largest growth area in 2020 and 2021, growing by about 0.1 million b/d in each year (Figure 2).
EIA expects crude oil prices higher than $60/b in 2021 will contribute to rising crude oil production because producers will be able to fund drilling programs through cash flow and other funding sources, despite a somewhat more restrictive capital market. Financial statements of 46 publically-traded U.S. oil producers reveal that these companies generated sufficient cash from operating activities to fund investment and grow production with WTI prices in the $55/b–$60/b range. The 46 selected companies produced more than 30% of total U.S. liquids production in the third quarter of 2019. The four-quarter moving average free cash flow for these companies ranged between $1.7 billion and $3.5 billion from the fourth quarter of 2017 through the second quarter of 2019. The third quarter of 2019—the latest quarter for which data are available—had less cash from operations than investing activities, but this figure was skewed by the large, one-time acquisition cost of Anadarko Petroleum by Occidental, valued at $55 billion (Figure 3).
Results for these 46 publicly traded companies do not represent all U.S. oil producers because private companies that do not publish financial statements are not included in EIA’s analysis. The Federal Reserve Bank of Dallas Energy Survey sheds some light on the financial position of a broader set of companies. Released quarterly, the bank’s survey asks oil companies about business activity and employment and asks a few special questions that change each quarter. The number of companies that participate varies each quarter, but generally the survey includes about 100 exploration and production companies. In the most recent survey (from the fourth quarter of 2019), 75% of survey respondents said they can cover their capital expenditures through cash flow from operations at a WTI price of less than $60/b. In addition, 40% of survey respondents plan to increase capital expenditures in 2020 compared with 2019, while 24% of respondents expect to spend about the same (Figure 4).
Since about 2017, large, globally integrated oil companies have acquired more acreage in Lower 48 regions, particularly in the Permian. These companies have announced investment plans to make Lower 48 production an increasing portion of their portfolios. These companies can typically fund their investment programs through cash flow from operations and are generally less susceptible to tighter capital markets than smaller oil companies. The financial results of the public companies shown in Figure 3 and the Federal Reserve survey support EIA’s production forecast and suggest that U.S. crude oil production can continue to grow under EIA’s price forecast for 2020 and 2021 because many companies are less dependent on debt or equity to fund investment.
U.S. average regular gasoline and diesel prices decline
The U.S. average regular gasoline retail price fell more than 3 cents from the previous week to $2.54 per gallon on January 20, 29 cents higher than the same time last year. The Midwest price fell over 5 cents to $2.39 per gallon, the Gulf Coast price fell nearly 5 cents to $2.23 per gallon, the Rocky Mountain price fell more than 3 cents to $2.57 per gallon, the East Coast price fell more than 2 cents to $2.50 per gallon, and the West Coast price fell nearly 2 cents to $3.18 per gallon.
The U.S. average diesel fuel price fell nearly 3 cents from the previous week to $3.04 per gallon on January 20, 7 cents higher than a year ago. The Rocky Mountain price fell nearly 6 cents to $3.01 per gallon, the East Coast price fell nearly 4 cents to $3.08 per gallon, the Midwest price declined almost 3 cents to $2.94 per gallon, the West Coast price fell nearly 2 cents to $3.57 per gallon, and the Gulf Coast price dropped more than 1 cent to $2.80 per gallon.
Propane/propylene inventories decline
U.S. propane/propylene stocks decreased by 1.4 million barrels last week to 86.5 million barrels as of January 17, 2020, 17.1 million barrels (24.6%) greater than the five-year (2015-19) average inventory levels for this same time of year. Midwest, East Coast, Gulf Coast, and Rocky Mountain/West Coast inventories decreased by 0.7 million barrels, 0.4 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 6.9% of total propane/propylene inventories.
Residential heating fuel prices decrease
As of January 20, 2020, residential heating oil prices averaged nearly $3.07 per gallon, 3 cents per gallon below last week’s price and 10 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged almost $1.96 per gallon, more than 7 cents per gallon below last week’s price and more than 7 cents per gallon lower than a year ago.
Residential propane prices averaged almost $2.01 per gallon, less than 1 cent per gallon below last week’s price and more than 42 cents per gallon less than a year ago. Wholesale propane prices averaged more than $0.60 per gallon, nearly 4 cents per gallon lower than last week’s price and 20 cents per gallon below last year’s price.