Shake up and share out
If you’re an oil company executive looking to save money at a time of low oil prices and you’ve already pared your margins down to the bone, cooperation – sharing information with your fellow companies – should make a lot of sense
You can learn from each other’s mistakes. If, say, an oil producer and its main contractor cooperate more closely on design from the earliest stages of a project, this will save money further down the line. Who needs a costly project delay or overhaul, if it can be avoided? Better to avoid the wrangles and take the right decisions now. This is obvious stuff, to the point of banality.
Company executives have grown fond of touting this approach. Most of the majors now have initiatives to promote a more collaborative spirit. ExxonMobil talks of its “one team” approach, designed to improve cooperation between the operator, contractors and sub-contractors. Others, including GE Oil & Gas, are pioneering cloud-based “industrial internet” systems for the sector – a way to analyse data from different companies and projects to improve performance.
There are even signs that collaboration could be on the cards in the geopolitical arena – not a hotbed of cooperation of late. Russia and Saudi Arabia have agreed a preliminary deal to freeze production. For an industry craving price relief, it’s a welcome piece of cooperation, if it actually materialises.
But at the grassroots level of the oil business, cooperation with peers is still a concept that is more easily talked up than actually done. “Everybody talks about collaboration – reducing costs together – and that’s a very nice concept at the highest levels of companies. But it just doesn’t happen at the lower levels, because people are used to working in certain ways,” says Thierry Pilenko, chief executive of French oilfield services provider Technip.
The main problem is that oil is a conservative and intensely competitive industry. Sharing doesn’t come easy. Developers still approach their contractors too late in the day, says Pilenko, when project blueprints are already set.
If information-sharing between project developers and their contractors is still lacking, what hope is there for it between rival developers or contractors?
Often, companies devise different solutions for the same engineering problems. Sharing information and standardising approaches would save costs. But that can be anathema to engineers and geo-scientists used to endless funding to find their own solutions. Even in an era of big data, the gut instinct of oil companies and their contractors is still to hang on to their own information.
History for the making
The industry has been here before. In the 1980s, similar ideas about greater cooperation were generally met with a blunt “no thanks”. Firms withdrew into their own shells and waited for oil prices to go up again, which they did. It was painful, but eventually business got back to usual.
This time, pulling in your horns and hoping for the best may not be the most sensible course of action. A change of mind-set is needed – and not just regarding a greater openness to cooperation with peers.
Engineers are used to dealing with engineers, cut from something like the same cloth. But partners these days are just as likely to come from the world of data analytics. That can pitch technology experts and executives with 30 years in the oil business against teenage sandals-wearing students barely out of school – but who, nevertheless, may well hold the answers to the industry’s problems. Welcome to the 21st Century.
“They don’t have any real concept of oil versus beer distributing and marketing or any other particular industry,” Michael Utsler, chief operations officer of Woodside Petroleum, said at the recent GE Oil & Gas annual meeting in Florence. He was recalling an encounter with a pair of algorithm experts, aged 19 and 21 years old. But with the future of the oil industry quite possibly lying in their hands, he needed to think: “How do I find more of you each and every day – and how do I talk to you?”
Oil prices might recover. Business might get back to usual. But those are big assumptions. If they don’t come true, companies will need to rethink their working methods. The challenge will be the one outlined by Thierry Pilenko – to translate the fine words of top executives into a company-wide ethos, where help is sought from the most valuable source, whether it be inside or outside the organisation.
It’s about time the industry dragged itself into the new century, shed its old-school biases and embraced the change that is everywhere around them. Desperate times call for desperate measures – and that means accepting help wherever it is found, be it among Macbook-owning, big-data-crunching café dwellers or by pooling information. The rest of the economy is doing this. It’s time for oil and gas to join in too.