A Case for Contract Engineering in Upstream Oil and Gas


The oil and gas industry undertook a significant transformation over the past two years during a substantial historical recession. However, as always, the oil and gas industry has responded with a shift of focus from traditional methodologies to the latest version of the industrial revolution, “Industry 4.0” as it has been termed. The purpose of this shift in fundamental operations is to equip companies with knowledge with which to improve efficiency and profits. Many analysts are solely focused on bringing Industry 4.0 into the oil and gas industry via gathered analytics with emerging technologies such as cloud computing, social business, mobility, big data analytics, and the Internet-of-Things (IoT). Yet, what is being overlooked is the responsibility and ensuing challenge that lies in the implementation of said collected data.

The industry didn’t just make operational transformations over the past few years, but it also experienced a dramatic loss in work force. The application conundrum coupled with the void in talent provides an exceptionally convenient opportunity for the oil and gas sector to transition to a prosperous practice in other industries of engaging Engineering Services Outsource (ESO) providers. Other major industries such as transportation and aerospace and defense have utilized engineering firms for decades to capitalize on the numerous benefits accompanying contract engineering services. Similar to an ESO, an Engineering, Procurement, and Construction (EPC) contractor is commonly used for design and development of processing plants and equipment, however, the upstream segment of the oil and gas industry has not followed suit in reaping the benefits.

Industry wide, outsourcing has become more than a necessity, it provides exclusive benefits direct employment can’t compete. ESO firms can deliver surge capacity and flexibility that matches the unrivaled fluctuation of the price of oil and its ensuing effect on profits and losses statements, and inevitably research and development budgets.Benefits can be realized in time, costs, and quality.


Contract engineering can save time in many different aspects. When utilizing contract engineering companies receive immediate expertise and save time in the hiring process, as well as the associated cost and the risks of recruiting. As such, ESO firms can be utilized to meet the variation in workforce demands during the product development cycle by providing the client with manpower directly proportional to the amount of work. Also, with a specialized team, specific project challenges can be solved more rapidly due to a concentrated focus (i.e. subcontracting the design and analysis of a gear box to a Mechanical Engineering firm).

Cost Efficiency

Regardless of industry, cost efficiency is an important factor for every business decision. When working with ESO firms, costs become better defined due to the reduction in overhead expenses. For example, a contract engineer is paid an hourly rate for the time worked, whereas the cost of a direct employee is multifaceted; with surcharges such as employee payroll tax, workers compensation, paid time off, software, work space, insurance and benefits. For direct employees, all of these expenses must be carried even when the work demand has diminished; however, contract engineers are paid for a short, defined period of time governed by the workload.


ESO firms are generally engaged to deliver a special skill set in a specific area of need. Inherently, adding subject matter experts from an ESO firm provides a higher level of quality due to their expertise and exposure to a wide array of industries and projects. ESO firms are proficient with blending the best practices to develop innovative results. These solutions can vary from ingenious technical designs to executing processes and algorithms which streamline the product development lifecycle.

The oil and gas industry is becoming equipped with important knowledge gathered from the wave of “Industry 4.0” technology. With this knowledge, a greater responsibility to utilize the data for operational and economical improvement is inherent. Employing an Engineering Services Outsource (ESO) firm can deliver cost efficient and high-quality, innovative solutions in a timely manner.

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