A fresh approach to implement offshore technology innovation
It begins with a next generation management model, and all stakeholders have a role to play.
Recent, unprecedented market turmoil seriously curtailed the flow of capital to many global, world-class offshore developments. Yet it has had considerably less impact on the pace of technology innovation than we have seen over the past decade. Even as players jockey for advantaged positions, shifting into and out of the major offshore markets from the Barents Sea to Brazil, a steady flow of “one-off” technology breakthroughs – subsea processing, composite materials, and fiber optic-based downhole sensing to name a few – has enhanced deep shelf, deepwater, and ultra deepwater development.
Yet the industry as a whole has been slow to replicate, standardize, and scale these innovations to minimize waste and to maximize returns. Distorted perceptions of competitive and commercial threats cause innovators to hoard, protect, and complicate their technical designs, data, and resources. This, in turn, forces suppliers and governments to replicate and to tweak marginally proven innovations to reduce the intended cost benefits and, worse yet, weaken the technological scaffolding atop which the next wave of innovation – needed to crack the next set of problems – will sit.
The pace of innovation likely will continue through the next decade as industry chases the next exploration milestones in pre-salt, heavy oil, ultra deep gas, and other unconventional sources. But it will take place in an environment of unprecedented market dynamics – peak OECD energy supply, growing emerging market demand, a global carbon agenda backed by regulation, and highly competitive access to resources.
These shifting dynamics will strain current management models. Management will no doubt spend more time on regulatory and government oversight just to maintain existing licenses to operate, and otherwise respond to these shifting market dynamics. But in this new, increasingly complex market environment, success will accrue to those who also focus keenly on areas of true differentiation, manage by exception to drive faster, higher-quality decisions, and to standardize wherever it makes sense to simplify those decisions.
Against this backdrop, our industry faces more pressure than ever to innovate in cost effective, sustainable ways. What the industry needs – what operators, capital providers, equipment suppliers, academia, and governments must jointly marshal – is a fresh management approach that challenges conventional operating practices, welcomes input from different voices, courts strange bedfellows with shared interests, and goes outside the industry for models to replicate.
To accomplish those goals management needs to start with a new, next generation model – a new normal. For starters, bring technologists and R&D leaders together in the board room with accountants, engineers, and management. The specialized knowledge they bring to the table best positions them to surface and distinguish the blocking-and-tackling technologies from the game changers—the unique and proprietary developments that will truly distinguish their companies in the marketplace.
The new model also needs to encourage collaboration among a new generation of engineers who have grown up on the Internet and are comfortable using all types of collaboration tools and interpersonal connections. The model needs to help this group share knowledge and make decisions involving those employees predisposed to the traditional models and hierarchies of analysis and decision-making. And it must encourage more experienced engineers to rethink ineffective, corporate-driven, top-down processes while convincing younger engineers of the merits of formal structures to minimize risk.
As an industry, perhaps our single biggest challenge is how to build a new multi-dimensional engagement model. We need to form a broad, cohesive industry delegation that unifies operators, suppliers, academia, and government, and rallies around our common challenges – rationalizing and standardizing technology innovation chief among them. The model needs to include more integrated management processes and systems across our boundaries.
Subsea metallurgy requirements aptly illustrate our industry’s current shortcomings. Today each operator (even divisions within an operator) develops a unique set of design requirements, typically based on a one time need, although the need is often identical across a particular basin such as the deepwater Gulf of Mexico. One operator’s requirements are only marginally different from the next, yet upstream suppliers must adapt their manufacturing processes and specs for each and every operator, driving up, and passing on, their total costs. What’s missing is an industry model that promotes discussion on ways to optimize those baseline commodities that are commonly used by all. In the case of metallurgy in particular, the desired outcome of those discussions might be common standards for design integrity and performance, common requirements definition across operators and regions, and supplier guidelines on costs.
Other industries provide useful models for scaling highly engineered innovation to drive down total costs while stimulating the next round of innovation. Smartphones today are “standardizing” around three major operating systems which allows manufacturers and operators to focus on improving the user experience. Similarly, the automotive industry designs and innovates off standard platforms such as chassis, frames, and electrical components while complying with regulatory standards and addressing more nuanced customer needs with models and brands at different price points.
Glenn Klimchuck, Partner
Pedro Caruso, Principal
Nate Clark, Principal
Booz & Co.
This page reflects viewpoints on the political, economic, cultural, technological, and environmental issues that shape the future of the petroleum industry. Offshore Magazine invites you to share your thoughts. Email your Beyond the Horizon manuscript to Eldon Ball at[email protected].