Supplier Selection Based on Price Does Not Always Yield the Best Outcome

Selecting an oilfield services supplier primarily based on price alone does not necessarily result in the best outcome.

Kimberlite Oilfield Research recently published the 2018 Subsea Equipment and Services report based on interviews with 102 subsea engineers and managers representing 46 unique operating companies managing a total of 4,563 subsea wells worldwide.

While operators report a strategic intent to reduce the finding & development cost for subsea developments to $40 per barrel or lower, the subsea operators worldwide are experiencing a range of outcomes for their subsea developments.

Subsea oil & gas operators worldwide report that an average oil price of approximately $57 per barrel is required to justify investment for subsea developments. The responses ranged from as low as $35 per barrel of oil to as high as $80 per barrel of oil reflecting the variance in levels of efficiency and optimization being experienced among the subsea operators worldwide.

Operators able to justify subsea developments at lower oil prices are the most effective in being able to differentiate between supplier’s offerings and value delivered. Operators who need higher oil prices to justify subsea developments are less effective in being able to differentiate between supplier’s offerings and rely more heavily on price and availability to drive supplier selection.