Nearly 100 oil and gas industry executives from owner companies, contractors, and service providers gathered in Houston, Texas, on Tuesday, December 5, 2017, for the second annual Offshore Leadership Forum. Organized by Independent Project Analysis (IPA) and Offshore magazine, the forum provides an intimate setting for industry leaders to share ideas and develop actions to improve the long-term efficiency of major oil and gas developments.
IPA research has long pointed to standardization of asset designs and supply chains as a pathway to achieving a low cost structure for oil and gas projects over the long-term. Very few owner firms have yet to fully embrace this approach, but its prominence in discussions at the inaugural Offshore Leadership Forum in 2016 signaled that industry executives are now more open to exploring how standardization might take shape in their organizations. Building on that dialogue, the 2017 forum featured an early morning standardization-focused workshop held exclusively for owner firm executives. The closed-door roundtable session featured insights from leaders who have successfully implemented standardization programs, enabled detailed discussions on navigating the associated challenges, and provided a foundation for participants to take back to their companies.
Following the workshop, Neeraj Nandurdikar, IPA Director, Exploration and Production, commenced the 2017 Offshore Leadership Forum with a clear message that the approach to projects and investment decision making needs to evolve in the lower for longer oil price environment. In response to the new landscape, oil and gas organizations have focused on optimization efforts to lower costs, but Nandurdikar urged those efforts will likely only yield short-term benefits, and fundamental changes are needed to achieve long-term improvement.
IPA Founder and President Edward Merrow next offered his perspectives on some of the changes executives should now focus on. In addition to standardization and minimizing customization of designs, Merrow cited weaknesses in the supply chain and key owner competency deficiencies as standing in the way of creating low cost projects going forward. He also addressed weak production attainment as the industry’s dark secret. While it is known that the average field only produces 70 percent of its planned plateau,1 what is shocking is that the results are no better 8 to 10 years after startup.2 Merrow pointed out that to improve in this area, owner companies must remove optimism bias from decision making. Merrow left the audience with several key questions to serve as a starting point for where executives should turn their focus:
- Why have standardization and minimum customization eluded the industry for so long?
- Why does the industry systematically exaggerate the producibility of reservoirs?
- Why does the industry build twice the amount of capacity needed?
- What behavior changes are needed to do projects for less for longer?
Additional plenary sessions were led by Stephen Heitzman of Talos Energy, Rick Fowler of LLOG Exploration, Eric Sirgo of Chevron, and Fausto Álvarez Hernández of the National Hydrocarbons Commission of Mexico. All speakers participated in an afternoon panel session fielding questions from the audience. The forum was run under the Chatham House Rule to allow for truly candid discussions. As such, full details of these sessions cannot be provided.
However, Offshore will share an event recap in its February 2018 issue and in the coming months, IPA will publish a series of articles expanding on key oil and gas industry themes that emerged from the forum. The planned article topics include, but are not limited to:
- Weak long-term production attainment
- Focusing transformation efforts where the money is (the state of E&P competencies)
1 Neeraj Nandurdikar and Luke Wallace, Production Attainment: An Estimating and Assurance Problem, UIBC 2010, IPA, November 2010.
2 Shubham Galav and David Roberts, Long-Term Production Performance, UIBC 2017, IPA, November 2017.