The offshore industry needs to move to a more collaborative model

Jan. 16, 2020
The future growth and relevance of the global offshore oil and gas industry is reliant on us to continue to reduce project total expenditure (TOTEX).

The future growth and relevance of the global offshore oil and gas industry is reliant on us to continue to reduce project total expenditure (TOTEX). With the rise of onshore production, particularly in the United States, and clean energy technology, the energy landscape is changing with unstoppable momentum. Therefore, the industry must evolve to remain a competitive option as part of the complete energy mix.

The offshore industry of years gone by allowed us to be selfish. With high margins and operators competing for resources, there was little incentive to collaborate or share. But the market has irrevocably changed, and it is only through collaboration that the biggest challenges of our sector will be overcome. We must recognize that we need a step change in how we collaborate. We will all win if we embrace commonality, share expertise and knowledge, and create a paradigm shift within the paradox of cooperation in a competitive environment.

Despite the fierce competition and single-minded approach of the past, there has been collaboration. Joint industry projects (JIPs) are a beacon of hope that we can collaborate for the advantage of all. However, they tend to focus on solving specific technical challenges, and as such can be formal and contractually sensitive. Our challenge is to find a mechanism to fundamentally change behaviors and a culture of self. JIPs can be long-term projects – we need a nimble and wide-reaching solution to keep pace with the technological change in the world in which we now operate and address systemic cultural issues.

The four main areas of change and challenge facing our industry which can be helped by collaboration are: evolving contracting strategies; efficiency; TOTEX mindset; and digital enablement.

Today, customers often choose to approach installation contractors far earlier in the project life cycle and as such the traditional market of FEED (front-end engineering design) and detailed design has decreased. Where it is in the best interests of the customer and the combined offering is stronger, the opportunity is there for service organizations to establish collaborative partnerships with installation contractors and equipment vendors. While their business models are different, it is possible to co-exist in partnerships by playing to core strengths without being confrontationally competitive in what is already a tight market. Then it’s win-win for operators, service companies, and the supply chain.

Focusing on efficiency is essential to counteract the market forces which are driving engineering costs down. Collaborating internally by delivering more accurately, managing iterations and change more quickly and ultimately accelerating the engineering schedule, lead to greater efficiencies throughout the project lifecycle, ultimately lowering TOTEX costs for the operators.

While accepting some intellectual property exists, in general, organizations are overly protective of their data. Imagine a situation where all performance data is collated on an open source platform for every facility or every piece of equipment, and then experts are invited to help solve bottlenecking issues who would be paid when increased performance was realized? If we don’t share data openly, then we will never realize the true potential of digitalization.

How can we improve collaborative efforts to build the pathway toward solving these biggest challenges? In simple terms, I believe there are five fundamentals required for strong collaboration – a common goal, openness, transparency, sharing, and empowerment.

The common goal for the subsea industry must be three-fold – to stay relevant in the changing energy picture, to grow and be successful, and to build a sustainable and enduring industry. In order to do this, we must open-up and let peers see our knowledge and expertise to share insight and alternatives – a real attitude shift in oil and gas.

Transparency is about building trust with your fellow collaborators. Building integrity as a business means offering up everything you have with no surprises, no fear of exploitation or repercussion.

Encouragingly, there is a growing mindset shift in the oil and gas industry toward more agile methods. We live in a ‘want it now’ culture, so we must empower our people at all levels to be able deliver on that demand; to take action with safety and assurance.

For its part, Wood strives to realize the benefits of collaboration. We aim to do this through both strategic partnerships, such as with IBM for digital products and services, or with Honeywell for delivering connected operations for downstream technology, and through developing more focused relationships, for example, in subsea engineering where we have collaborated with smaller technology companies to develop and deliver advanced visualization systems to our customers.

We recognize that, as an industry, we still need to take significant steps before we can fully operate collaboratively. However, the opportunity for quick wins exists. Look for partners who complement your services, enter into partnerships with a trusting attitude, keep partnering contracts simple, do not be afraid to try and fail, be bold about innovation, and empower others to take the lead. Set people free and you will be amazed what happens.

Matt Kirk, Senior vice president—specialist engineering and consulting, Wood