Oil companies are enjoying a good streak - as far as the outside world is concerned. Profits are up. New technologies enable drilling and production in deeper waters further offshore than ever before. Demand continues to grow in developed and emerging economies alike. The prospects for ongoing prosperity look good.
Talk to an oil company manager and you'll hear a slightly different story, however. Managers are under unprecedented pressure on several fronts. They've never worked so hard. They've been trained and promoted on the basis of achieving functional and technical excellence - and now they're being asked to deliver on a very different agenda.
For one thing, stock market expectations seem to get higher every quarter. However successfully companies have cut costs, the improvements are taken as a given. What the markets want to see is the organic growth that oil companies promised and have yet to deliver.
The organic growth strategies published are sound, but imple-menting them has presented significant challenges. Organic growth calls for cross-functional working, sharing of best practices and other forms of knowledge, and empowering individuals to interpret the strategy and make sense of it in their day-to-day work. It calls for leaders who can inspire teams, not managers who merely control operations.
The problem is not just a shortage of the appropriate skills - it's also a shortage of managers. In the 1990s, the oil industry lost a whole generation of recruits who spurned its old-fashioned, environmentally questionable image in favor of careers in the more dynamic media and high-technology sectors. Now, when those recruits could have had the knowledge and experience to grapple with the demands being put on its players, they're carving a path elsewhere.
The managers who are in position now face a growing volume of increasingly complex data. From this, they have to extract manage-ment information that will enable them to make daily, weekly, and monthly decisions that will help to bring their projects in on time and to budget. Huge information technology investments have been made by oil companies in recent years, ostensibly to deliver performance improvements worth billions of pounds across their businesses. The current reality is that managers have more data and more issues to deal with, in less time than before.
Emerging trends
The consultant's role is changing as companies focus on doing three things in new ways: managing knowledge, managing teams, and managing contracts. In the past, consultants were hired mainly for their knowledge of the industry. Organic growth in drilling and production still depends on sharing knowledge and applying best practices. However, the traditional approach to this - compiling information about best practices in other companies, and compiling spreadsheets of data about the results your own company is achieving - fails on two counts:
- Knowing about the best practices in other companies is not the same as understanding how to apply them in your own company on a day-to-day basis.
- Historic performance data fails to link what the people in your company do best from day-to-day with the results they achieve. Typically, the information in the spreadsheets is up to 90 days old, so even if you could see what to do to improve performance, the window of opportunity to do so is long closed.
The new role for consultants is in managing outcomes, and managing teams of people to use their own skills and knowledge to achieve those outcomes. The key is to build practical knowledge among people so they can physically deliver results. Theoretical surveys of best practice are too difficult to implement, and tend to have a functional focus that is counterproductive in the multidisciplinary world of today's offshore project.
In managing outcomes, consultants should not be required or encouraged to try and develop a solution that is 99% correct. Rather, they should create one that is 65% complete, and iteratively work out the rest with the team as the implementation progresses.
Managing outcomes requires a new approach to information. Managers need real-time data that enables them to make predictions and decisions, not just performance data that is 90 days old. Emerging technologies such as smart wells are starting to make it possible to do things like steering a drill bit in Venezuela remotely from London. Managers will need this kind of capability across their spectrum of responsibilities to deliver the required growth.
Another example is loss management. In the North Sea, daily production losses can amount to 3-5%, roughly equal to the organic growth targets typically published. Because there is no connection between the hourly data that operators receive, and the monthly or quarterly data that managers receive, there can be no concerted action to identify why these losses occur, and how to prevent them. Identifying and building interfaces between data sets, between shifts, between contractors, and between levels in the organization becomes important. New approaches to measuring contractors can add to the improvements achieved. Today's performance-based contracts tend to deliver the performance contracted, but no information on important issues like where and how better results could have been achieved, how maintenance affects operations, and so on.
This kind of information is a natural requirement for a company managing outcomes, rather than activities. And this focus creates a different perspective on training as well. Where people in the offshore industry have been trained to "do" activities related to drilling and producing, now they need to be trained to deliver results through those activities.
The oil industry has spent time developing visions and strategies for the future, and the time has come to deliver on these. Winners in the race to bridge the gap between intention and implementation will be those who build interfaces, focus on outcomes, and inspire teams of empowered individuals.
Sean Tipping
Celerant Consulting
Richmond, Surrey, UK
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