AIChE: Agility Reigns in Down Market
Tuesday, April 12, 2016 @ 03:04 PM gHale
By Gregory Hale
Everything is solid when everyone is working in prosperous times, but things change dramatically when the economy turns.
“We are now in one of those periods of volatility. In 2008-2009, rig counts and shale gas started to increase. Life was good. Energy companies were doing great. Things were going in a great direction. Jobs were created,” said Larry Ryan, business president at Dow Energy and Water Solutions, during the 2016 AIChE Spring Meeting’s Fuels and Petrochemicals Division keynote address Monday entitled, “Driving Innovation and Managing Risk in an Unsure World” in Houston, Texas.
“Then the end of 2014 hit. For such a big industry, it can change very quickly. Rig counts are down and clearly the market is down,” he said. “We need to look at the big picture. With increased population, we will need more energy, water and food. When you look at the long term trends, especially at the macro level, we are going to need more stuff. Energy growth requires innovation. The easy stuff has been taken and that requires more innovative ways to get more resources out of the ground.”
Knowing the outlook for the chemical and oil and gas markets is great, but Ryan talked about the long-term market drivers, such as:
• Resource scarcity
• Production enhancement
• Operational efficiency
• Asset integrity
• Tighter environmental standards
Being able to change due to market conditions can be a tricky endeavor unless you have a good handle on all the changing dynamics.
“The way people buy today is different than it was five years ago and will be different in the future,” Ryan said.
The good news, he said, was mid- to long-term projections look favorable because there will be population growth and energy needs will continue to increase.
For the short- to mid-term, things are a bit more complicated and difficult as more companies are risk averse and the market is volatile.
“Energy is a long-term growth market, but no one knows how long the short term pressures will last.”
That all means innovation to help the company grow and get projects off the ground remains paramount, he said.
General keys to innovation:
• Project assessment
• Long term proposition
• Value chain position with customer and market pull
• Constant revalidation
• Relative speed is critical for success
However, today’s reality means:
• Limited resources
• Decreased affordability
• High risk averse
• Internal distractions
• Focus on short term returns
• What can we do?
• Stop all the “nice to haves”
• Stay agile in the ability to shift from long term to short term projects
• Keep prioritized long term projects going
“You really have to do your homework upfront,” Ryan said. “I have found over the years, once a program starts, it does not stop.”
To ensure a project succeeds, though, you want to cut out as much risk as possible, so that could mean bringing in an unbiased view to look over technical feasibility of the project. Plus, Ryan added, you need to implement a realistic implementation timeline. “You either have to move and pivot your solution or you have to stop.”
The most important aspect to any project is speed, Ryan said.
“Speed is the most critical element to innovation. Responsiveness and fast development demonstrate value,” he said.