Operational Excellence Delivers Higher Profit Margins To Midstream Companies

Midstream energy companies operate in a highly regulated environment and - regardless of marketplace conditions - face razor-thin profit margins from three revenue sources - transportation, trading and storage. A small mistake, oversight or bad judgment in any of these areas can cause significant revenue loss.

Midstream executives must balance creating more efficient energy solutions with fostering a profitable environment that encourages investment. They face dramatic fluctuations in their business: seasons, price swings and other market factors that determine the quantity of crude oil, natural gas, and oil and gas derivatives needed and the fluctuating demand for these different hydrocarbon commodities. Added to this is the pressure to control prices while delivering superior products and doing more with less.

To be successful, midstream companies must strive for operational excellence in each process, department and organization. This is not an easy task. It requires individual dedication, evolving knowledge, a shared vision and a fierce commitment to being the best at what is necessary to achieve industry leadership.

The midstream business faces four key operational issues: 1) numerous threats to margins, 2) challenges of cost control, 3) the effects of mergers and acquisitions, and 4) implications of a changing workforce. Facing such an array of issues, midstream operators may wonder where to begin.

Here are five suggestions on what midstream companies can focus to remain successful during the current market downturn: