Improving and sustaining the capital efficiency of major oil and gas projects was the focus of the Offshore Leadership Forum 2016, an inaugural event organized by Independent Project Analysis (IPA) and Offshore Magazine on December 6, 2016. Agreeing that “lower oil prices for longer” may in fact be a “lower prices forever” situation, senior exploration & production (E&P) industry leaders said owner companies must engage in serious debate about fundamental changes to how large and small capital assets are developed and executed.
The aim of the Offshore Leadership Forum is to facilitate discussion among project leaders on the state of the E&P Industry and share ideas that can lead to finding actionable data-driven solutions and insights through IPA research. A closed-session breakfast roundtable discussion among 16 executives from nine E&P owner companies opened the event, which took place at the Norris Center in Houston, Texas. Following the roundtable, the event opened to approximately 100 participants with presentations from five offshore oil & gas industry executives. Some of the key topics discussed during the forum are outlined below.
Many oil and gas project executives in attendance called for a bold leadership approach, citing the need for an end to what some described as “arrogant thinking” and the importance of “getting back to basics” with respect to choosing the right projects and implementing asset development Best Practices. With respect to selecting the right projects in a portfolio, owner companies must shift their focus to long-term health rather than short-term gains.
Offshore capital project organizations have the opportunity to help the business make the right investment decisions, forum attendees said. For instance, project organizations can help the business function select the right projects by strengthening work processes and identifying and mitigating risks earlier. Other attendees suggested that exploration teams could spend more time performing well tests. Spending more money and time up front to better understand the reservoir will pay dividends in the long run.
The oil and gas industry is once again a low-margin commodity industry. That was a common theme throughout the Offshore Leadership Forum. As such, executives discussed how owner companies should now focus on cost-of-goods-sold (COGS) in facilities design and developing simple and reliable assets rather than best possible. Inspiration can be drawn from other industries, such as chemicals and mining.
Much can be learned from the chemicals industry, where simple, high quality facilities are frequently designed to run high up-time for about 20 years. In-house expertise is stressed to avoid overreliance on contractors. Echoing the sentiments of the “back to basics” theme, capital project practices in the chemicals industry are simply much better and more consistent than in exploration and production.
Offshore executives can also look to the mining industry for ideas. In terms of implementing new technology, mining is anywhere from 10 to 15 years ahead of oil and gas. Mining sites are consistently run well with few humans on-site; rather they are hundreds of miles away.
Many in attendance agreed that innovative solutions and technology are key to sustainability in this new USD$50/bbl reality, citing the potential cost reduction through new technology advancements.
One executive voiced how the oil and gas industry can learn much from how the medical industry uses technology. Medical personnel use technology to collaborate with one another over long distances to make quick decisions that mean the difference between life and death. The oil and gas industry should treat the well as its patient, and find ways to use technology to view well data in real-time and make informed decisions. Many shared the feeling that industry-wide collaboration involving all stakeholders will be necessary in qualifying new technologies for the future.
An important question arose toward the end of the Offshore Leadership Forum gathering. Who will do all of this innovative and creative work after industry-wide staff cuts in response to the oil price drop? It is fair to assume staff who have been laid off will come back into the fold? The demographic cliff tells us that many will be retiring.
While most executives in attendance addressed the need to embrace the millennial generation, the consensus in the room was that millennials simply do not believe in pursuing careers in the oil and gas industry. One executive asked everyone to “take a look around the room” to further drive home this opinion. The challenge for offshore project executives is to find ways to reach the millennial generation and to make adjustments so the industry is more attractive to them.
The 2016 Offshore Leadership Forum was the first of what IPA and Offshore Magazine expect to become a regular gathering for top oil and gas executives to discuss and share ideas for improved oil and gas decision-making. The next meeting is slated to take place in 2017. Visit Offshore Magazine for more in-depth coverage of the 2016 event:
To learn more about the Offshore Leadership Forum contact Neeraj Nandurdikar, Director, IPA Oil & Gas Practice