ey top view of petrolium refinery worker

Can oil and gas companies future-proof land services?

By investing in new operating models, oil and gas companies can streamline land services, increase competitiveness and enhance their workforce.


In brief
  • Oil and gas must streamline costs, boost efficiency, improve competitiveness and support decarbonization by upgrading land services functions.
  • Investing in technology and adopting new operating models will be critical to progress.
  • Managed services are expected to play a substantial role in both integrating new technologies and maintaining legacy systems in oil and gas.

This article is co-authored by:

  • Jarret Link, Partner, Technology Consulting, Ernst & Young LLP
  • John Schneider, Managing Director, Managed Services, Ernst & Young LLP
  • Michael Perbeck, Senior Manager, Business Consulting, Ernst & Young LLP

Managing and tracking land rights is a critically important function for oil and gas companies, which currently hold leases on millions of acres of public and private land in the US. However, the land services function is also traditionally siloed in the business and often behind other functions in terms of technology, operating model or workforce investments. In fact, many of these oil and gas agreements are still tracked manually via spreadsheets by lease analysts, with only a small percentage digitized and enabled by automated workflows. Moreover, these tasks are often difficult to scale, and thus heavy reliance is placed on a select few with intimate knowledge of the lease itself.

Land services plays a critical role that extends well beyond managing and tracking land rights. Serving as a key link between various upstream operations and finance stakeholders, land services teams are responsible for a range of integral tasks, from managing owner relations to executing division orders. Other tasks include processing payments, handling check returns, and supporting litigation.

As oil and gas prepares for a future with significant investments in new digital and decarbonization technologies, as well as a continued focus on operational costs, productivity and value, companies are increasingly recognizing they need to streamline costs and improve their competitive standing. As a result, many are moving to upgrade land services operations with the latest technology advancements and more agile delivery models. To reap these benefits, oil and gas companies must future-proof their current land services operating model. While inherent talent and skills issues, as well as the added complexity of decarbonization will create challenges, companies can leverage technology, address their workforce model and integrate an agile mindset to achieve future success.

Future-proofing the current operating model

It is not uncommon across the oil and gas value chain to see functions operating in siloes with fragmented and disconnected systems in place – including land services. While the sector is technologically innovative, oil and gas companies generally have not integrated the modern front- to back-office technology capabilities that could enable them to connect and integrate at scale. To address these shortcomings, oil and gas companies should consider a comprehensive transformation of their business model for managing land services.

“Traditionally, land services have been considered more of an operations capability tied to the front office. Revenue and regulatory areas, while tax functions, connected to the controllers are tied to the back office. This model often creates bifurcation and affects how transactions get processed in the back office,” says Jarrett Link, Partner, Technology Consulting at Ernst & Young LLP. “This manifests into issues and challenges like redundancy and inefficiency within daily operations, especially when coupled with the fact that there is an aging workforce and new hires don’t want to carry the load of past processes. We know the value chain can be differentiated and executed differently.”

A key part of this is to engage in a coordinated effort to streamline and upgrade traditional and manual business processes, align key performance indicators (KPIs) across different functional areas and add quantitative or qualitative analytics to evaluate and measure the health and performance of the function. In addition, scaling the operating model to focus on land services capabilities and competency knowledge development will help drive agility in the operating model, as compared to the pure basin-centric models of the past, which are very expensive and redundant in nature.

“We know the value chain can be differentiated and executed differently.”

Identifying new KPIs, for one, will help organizations prioritize and optimize workflows. Organizations that socialize these key metrics are more likely to create greater visibility into the overall goals of the organization, helping them to understand the effectiveness of new processes. Recent market activity in the sector shows that the consolidation trend in oil and gas is expected to continue well into 2024. With changing demand and new integration initiatives to consider, KPIs enable organizations to prioritize requests based on the impact to the bottom line, revealing what capacity an organization has to take on new work, and highlights the advantages of shifting to a performance-based culture and leveraging a strategic partner to step in and support delivery in both a cost effective and measurable way.

 

This approach can be particularly important as oil and gas companies develop new business areas around decarbonized markets for carbon capture, lithium, hydrogen and beyond. The front- and back-office functions for low-carbon business models will be different from those used for traditional oil and gas. They will have different regulatory compliance requirements, contractual arrangements, financing, and market dynamics. Progressing toward a new model, however, also introduces a new set of risks and requires new skill sets and strategies.

 

An experienced managed services provider (MSP) can help oil and gas companies strategically align their legacy systems with modern technologies, improving efficiency, data-driven decision-making, regulatory compliance and overall operational performance. MSPs offer cost-effective solutions and efficient management strategies that help businesses operate successfully in a highly competitive and regulated industry, like oil and gas, and are responsible for the upkeep, development and functionality of their specific department, freeing up significant resources for the contracting company to allow focus on their core competencies and truly do more with less.

 

Turning to technology to build a digital future

 

Oil and gas companies are making significant investments in digital technologies as they seek to better leverage the insights provided by data analytics. While these technologies are becoming more available within land services, the incompletion of their technology integration has proven to be a challenge, and the anticipated return on their digital investments has yet to be realized. Any major transformation will focus on streamlining the multiple applications that have developed over the years, often with redundant functions that need to be retrofitted or retired. An initiative to integrate existing systems will pave the way for automating data origination and to arrive at quantitative or qualitative analytics that can help the organization better evaluate and measure the health and performance of the function.

 

In addition, oil and gas companies generate huge amounts of data, which is often stored in multiple data bases and managed by functional teams that operate in silos and tend to follow disparate data management practices. As a result, employees often spend significant hours finding and validating data manually. While they have become quite adept at these tasks, these outdated processes sometimes slow critical decision-making and lead to project delays. Oil and gas operations are highly complex, large scale and capital intensive. Even small mistakes can cause major disruptions, such as forcing rig schedules to be reworked due to a lack of integration between production and land departments and a lack of clarity on what a company owns and where.

 

The emergence of AI and other new technologies offers tremendous potential for addressing these issues. To drive lasting results, however, oil and gas companies also need to make corresponding investments in human capital and blend them with effective managed services programs. This will deliver the greatest potential for a positive impact on business growth, especially during uncertain economic conditions.

Furthering investments in decarbonization

The energy transition will require both significant new investments in low-carbon energies and continued use of traditional hydrocarbons to meet the expected energy demand of an expanding global economy. New operating models and the introduction of low-carbon businesses underscore the ways oil and gas companies can accelerate the net-zero journeys of their customers. This also places a premium on their efforts to gain a more strategic perspective around their own greenhouse gas (GHG) footprint.

As oil and gas companies commit billions to develop future businesses around carbon capture initiatives, many will rely on carbon injection to achieve carbon reduction goals. Preparing for this new business model will require oil and gas companies to further the transformation of their land services function through a combined effort to integrate new technology with existing legacy systems and structure work processes to be scalable and meet future demands.

Reimagining the workforce to meet new workflows

The land services workforce plays a crucial role in delivering smooth operations. They are tasked with managing and tracking land rights, leases and contracts, and often work directly with property owners and regulatory agencies to negotiate deals, while also making sure that operations comply with existing laws and regulations. They handle critical tasks, such as conducting title searches, preparing leasehold summaries, tracking land ownership changes, monitoring lease expirations and confirming compliance with lease terms. The land services function, and the workforce who powers it, is a critical component to success. In addition, balancing the technical and functional skills of the land services team will also enhance the compliance capabilities of the organization, enabling it to achieve key objectives.

However, these teams are typically staffed by more experienced workers, many of whom will age out of the workforce over the next five to 10 years. Further, land services workers often do not have experience with digital processes. As technological advancements evolve, the land services function will need a workforce skilled in digital tools and platforms that also has the deep industry knowledge to carry out traditional practices.

With many industry executives clearly recognizing that the time is now for upskilling employees across the enterprise, including their land services function, many are also considering the option of working with a managed services provider. This approach will not only help oil and gas companies improve their internal rosters, but also enable them to modernize their operations, develop new decarbonized markets and unlock the key to scalable growth, helping them fully realize the value of their investments in Enterprise Resource Planning (ERP), AI and other new tools. Oil and gas companies that take these steps will be ready to embrace their digital future and build more sustainable operations, significantly enhancing their ability to compete in the future.

Summary

As oil and gas companies make significant investments in digital technologies to streamline legacy processes, they are also taking to steps to help their workforce adapt to modern technologies. This will enable them to better leverage data-driven insights and meet demands for sustainable operations. By partnering with managed services providers, oil and gas companies can strategically align their people and legacy systems with modern technologies, improving efficiency, data-driven decision-making, regulatory compliance and overall operational performance.

About this article

Related articles

4 actions for oil and gas in 2024

Explore the top four trends – from strategic M&A to operational decarbonization – oil and gas companies should focus on in 2024. Learn more.

If energy transition is an evolution, how does oil and gas proceed?

The findings in our annual US E&P Benchmarking Study reveal 3 industry behaviors that could affect the future of oil in the energy transition.