Expanding these offerings can give companies new revenue opportunities
by Mike Pemberton
December 13, 2015

Aftermarket services have long been a strategic offering for pump manufactures and their distributors. They are also the primary offering of some independent suppliers of mechanical services and parts duplicators. These traditional services typically enable profitable growth through selling replacement parts, reengineering obsolete parts and performing mechanical pump repairs and rebuilds, in addition to working on other types of rotating equipment.

In recent years, some aftermarket suppliers have expanded their offerings to include a range of information technology tools, such as intelligent variable speed drives (VSDs) and remote vibration/temperature monitors. Also, within these new offerings, some suppliers provide value-added services that encompass pumping system assessments to identify energy-efficiency opportunities along with pumping system root-cause failure analysis.

These knowledge-based services, in contrast to traditional mechanical services, are valuable growth areas because of their potential for increased levels of customer satisfaction. Providing knowledge services that support efficient operation, increased mean time between repairs (MTBR) and facility uptime collectively contribute to profitability.

The Aftermarket in Oil & Gas

The growth of remote monitoring and value-added services is especially timely for the upstream pumping market as oil prices have plummeted to levels that are less than half of those from before mid-2014. Before prices dropped, the revenues from production more than exceeded capital and operating costs, providing a healthy profit margin. Today, after more than a year at the new price levels, the North American drilling rig count has dropped precipitously—a 41 percent decline over the last 12 months, according to Baker Hughes.

As a result of today's realities, companies are exploring numerous avenues to maximize efficiencies and reduce operating costs. As in the past, when these companies are faced with new constraints, automation advances can provide new methods of increasing productivity.

While wireless monitoring and remote control are not new to wellsites, these capabilities have received a recent boost through the growing adoption of the Industrial Internet of Things (IIoT) and predictive analytics (PA) software tools.

These technologies can lower the cost threshold for expanding asset management and implementing true predictive maintenance strategies. By using real-time asset monitoring that enables predictive algorithms, operators can know when an asset is going to fail and determine if it will create a process bottleneck that could impact production.

With this information in hand, whether assimilated on-site or remotely, wellsite operators can mitigate failures and debottleneck processes to maintain or increase throughput.

The large volumes of sensor data available from wellsite equipment can be assimilated and statistically analyzed. Clean data in predictive models can identify patterns that predict equipment failure or point to production bottlenecks. Through wireless transmission and cloud computing, true predictive maintenance can become a reality.

Today, it is possible for drilling sites to monitor equipment and processes in real-time, then notify operators before problems arise that impact production.

Both process control and asset management are seamlessly integrated into one management system to provide a holistic view of wellsite operation.

This new reality will not only reduce downtime and lower maintenance cost, but also improve process control and worker safety.

Technology Limitations

Despite expanded capabilities in recent years, many aftermarket service offerings have limited capacity to provide information technology and value-added services, such as automation system integration and rotating equipment energy assessment services. Predominately, the aftermarket is driven by price, quality, delivery and proximity to service centers for parts and repairs. While this has been the industry norm in the past, the providers of aftermarket and remanufacturing services to heavy industry are faced with growing competitive pressures that challenge their traditional business model. With little to no growth in the upstream pumping market now and in the immediate future, local and global competitors need to consider broadening their service offerings to encompass these rapidly emerging value-added capabilities.

Wellsites need more than the traditional approach to ensure their operation receives timely mechanical parts, repairs and services. Offering new aftermarket services that reduce the need for parts and repairs may seem counterintuitive, but they will actually stimulate new service growth to refurbish and upgrade equipment. What may seem to some to be a zero-sum exchange can actually become a quid pro quo with both parties achieving common goals that support their financial health.

Changing Company Focus

Certainly, there may be seemingly insurmountable challenges to implementing aftermarket strategies that go against the grain of conventional practice. Product-centered companies will have to adapt to provide value-added services—a transition that is not simple. There are gaps in service capabilities that have to be addressed, and the technology and methodologies required may be outside of existing capabilities. Also, a range of decisions have to be made around how to adapt: Do nothing, hire the needed talent, or acquire and merge the necessary capabilities.

Aftermarket service has been a reactive internal culture acting only when a customer has an immediate need. In the future, the service provider will need to be more proactive by working with the customer in a more consultative fashion. The upfront time and effort does not fit the traditional metrics used to measure service performance, such as those based on assigned monthly quotas. Furthermore, the skill sets required to be consultative may not exist within the organization. Nevertheless, future success of both the service provider and end user will be largely dependent on their ability to navigate this new landscape.

The advent of low-cost wireless sensors that are self-powering, coupled with big data analytics, cloud computing and mobile technologies, will inevitably change the nature of reliability and maintenance from being predominately reactive to proactively managing process assets and equipment to ensure maximum uptime, throughput, quality and safety. Maintenance costs will be drastically reduced by eliminating unplanned downtime and replacing parts on a schedule, whether needed or not, based strictly on preventive maintenance practices.

For years, digital technologies have increased information flow and provided an integrated view of production. But these tools are bridging the mind with the machine to show in real time the health of the production equipment and not only when it is going fail, but when to issue a work order for repair. While these new capabilities will provide challenges in terms of how to manage the technology and adapt current business models, these advances allow the industry to adapt to new cost constraints. As energy and environmental constraints continue to mount and the need for low-cost production remains a reality, automation advances will play a pivotal role. New services offer new solutions, allowing stakeholders in the aftermarket to find a path forward.

In the future, the service provider will need to be more proactive by working with the customer in a more consultative fashion.