TotalCare Contracts: Controlling Costs in a Challenging Future

Summary

The natural gas industry is bouncing back. Last year saw what the IEA described as a “historic shock” to the global natural gas market. While demand didn’t drop the 4% initially  feared, it was down 2.5% of 100 Bcm: The biggest fall in history. In 2021, however, it’s now expected to offset that and more: increasing back to about 110Bcm.
 
However, for operators, challenges remain, and the effects of the pandemic may still be felt for some time to come.


 
First, as the IEA notes, not all markets will benefit equally. Mature markets may still struggle: “All regions are not equal when it comes to gas market recovery. Mature markets bore the brunt of demand drop in 2020 while emerging markets will be the main drivers of demand growth in 2021.”
 
Second, the potential for volatility remains–both from potential future flare-ups of the virus and ongoing economic uncertainty following some of the deepest recessions and biggest deficits on record across numerous countries.  As the IEA report states: “The prospects of a prolonged economic impact related to the COVID-19 pandemic heightens uncertainty about the pace and trajectory of growth.”
 
It adds that “the sectoral pillars of growth," from power generation, industry, and residential demand, “are all subject to major uncertainties."
 
Finally, the industry cannot escape its long-term challenges. Focus on these is likely to renew as the crisis subsides. In particular, the sector still faces a rapidly ageing and retiring workforce and skills gaps from responses to historical price crashes. While global labour force median age increased 1.4 years to 39 years old,  the median age of oil and gas workers increased almost three years to 44 years old in the last decade*. Staffing reductions in the midst of the crisis early last year are likely to have added to the problems. 
 

Cost control

In this environment, costs will be critical, as will accessing the skills and expertise to operate safely and efficiently. Servicing with all its facets plays a major role in controlling these.
 
Honeywell’s TotalCare Gas World is the holistic view on Service requirements looking from three different angles to the market.
 

TotalCare Enhanced: Onsite Service

An effective maintenance, validation, and upgrade program impact operating performance in several ways.
A successful maintenance program will ensure the reliability and accuracy of the key equipment. Small errors in meter readings used for custody transfer applications, particularly, quickly add up because they are rarely random; they tend one way. An error of just 0.5% in ultrasonic gas measurement can add up to $1 million in losses over a year.

Second, validation services deliver next to the maintenance of the accuracy, the security of complying to existing regulations. Measurement errors are immediately corrected and headaches with regulations are gone.
 
Finally, continuous upgrades keep the gas equipment always state-of-the-art. In a world where we face 50 Mio. Cyber-attacks per day the security level plays a major role to protect sensitive business data and at the end protect every one’s business.
 
Furthermore, the effective use of third-party maintenance and services provides significant opportunities for improved allocation of resources. Operators can effectively plug skills gaps while reducing headcount.
 

TotalCare Lite: Remote Service

You do not always need an Onsite service. Sometimes a quick and fast response does the job. A premium Hotline support makes daily life easier and provides competent and fast resolutions. A remote service taking care of commissioning, connectivity issues or customized reports can be an alternative in case locations are difficult to reach. Remote services lower OPEX significantly.

A360: Outcome-oriented Service

The A360 idea brings Service to the next level. Now we are not taking any more about traditional Service business thinking, but you get an autonomous driving experience. Customer determined KPIs like availability, are the drivers for the Service business. Payment is tied to delivery against the agreed KPIs. The outstanding benefit: time for the client is freed up to focus on the core business.

The value of certainty

Periodic service contracts are an effective way to set customized service levels and reduce the costs of putting in place the needed efficient, reliable service and maintenance program.
 
Contracts can provide a single solution for all devices, equipment and employees, simplifying and cutting the costs of the servicing program; leverage remote connectivity to identify and remedy issues faster, without the need for site visits in many cases; and ensure and manage timely updates of firmware and software to ensure security and safety. They can help with the management and costs of spare parts.
 

Options vary in terms of both scope and structure

TotalCare covering traditional remote and onsite business, A360 going beyond.
Service contracts don’t just provide opportunities to cut the costs and increase the reliability of programs; they meet the key challenge operators face in the coming years.
 
First, they address the enduring issues of skills gaps and shortages of experienced personnel by providing guaranteed, on-demand access to skilled resources and support.
 
Second, they introduce certainty in an area where there has traditionally been little, and costs can fluctuate wildly. Containing servicing costs in a single, consistent, regular payment gives operators a much greater ability to forecast and plan. In an environment where revenues continue to be at risk of significant volatility, periodic contracts’ real promise is that they offer operators one less thing to worry about.
 
 * Source