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Operational Excellence in Oil and Gas Houston – Post-show Wrap Up

November 5, 2014

It’s been a great week in Houston for the Operational Excellence in Oil and Gas conference. All the sessions were high quality, tons of expertise and real world insights, and the networking and side conversations were fantastic. If you’re involved in O&G operations and missed it, you should definitely plan to make it next year.

Given how valuable I found the show, I wanted to highlight some of the key themes and takeaways that I got from it. So here goes.

Talent

I would say that 80% of the sessions discussed the challenge of talent: acquiring it, retaining it, developing it, managing it, utilizing it. There’s a shortage of resources in key roles and functions; resources are often located in one geo but needed in another; resource needs aren’t level, they’re subject to severe peaks and valleys, making resource allocation challenging…especially when oil prices drop or spike sharply; we struggle to attract the best and the brightest and, once we get them, often drive them away through outdated managerial styles and laggard technology. It’s estimated that 40% of the talent in O&G operations will retire out by 2020. Given all the challenges related to talent, how are we as an industry going to deal with that?

And as prevalent as discussions of talent challenges were, there were absolutely no answers at all. It’s clear that everyone is still struggling to figure out how to solve this one–but we better find answers quickly, given how soon 2020 will be upon us.

Culture

When asked what our key observations were from the event during the closing session, a 30+ year O&G veteran said that even as recently as five years ago, you wouldn’t have heard a peep about the role of corporate culture in operational excellence, whereas this week, practically every session stressed the importance of culture in achieving operational excellence. Folks came at it from different angles and with different methodologies and frameworks for understanding the role of culture, but no one discounted its importance. And the success stories from real world customers like Hess, Shell, FMC, and Oceaneering offered living proof that without cultural change, all the best practices and word class systems count for very little.

Efficiency

From the opening panel to the closing session, it was apparent that O&G lags other manufacturing sectors in terms of efficiency. Vince Cipresso, who is relatively new to O&G but has spent a long career in manufacturing in industries like electronics, office furniture, automotive, and specialty chemicals, shared his perspective that O&G had a long way to go in using efficiency to drive cost savings, growth, or innovation. More often than not, during boom times, O&G simply throws more money and resources at production; in bust times, they give everyone a 15% – 20% haircut to try to salvage their EPS.

And he wasn’t alone: lots of folks pointed to how, in their experience, O&G could learn a lot from other manufacturing industries, like aerospace, automotive, or specialty chemicals. From my perspective, I couldn’t agree more. The firms I’ve worked with all struggle to deliver even the most basic information management capabilities to their employees, e.g., type in a functional location to a search box and get the latest documents relating to it. In fact, none of the 30+ people in my pre-conference workshop said that their organizations provided this capability, which was pretty telling. Without the ability to reliably deliver up to date asset documentation, key business processes related to asset management are less efficient than they could be, from PM/CM, to inspections and TARs, to regulatory information requests.

Boom and bust

This was a ritual complaint at the event–not surprising given the recent dive in oil prices. When times are good, O&G orgs spend money like it’s going out of style and don’t care about getting efficient…we have tons of cash, so let’s not worry about it; when times are bad, they use short-sighted measures to cut costs that damage their ability to recover from the downturn, e.g., cutting off suppliers, cancelling projects, and instituting across the board budget cuts, rather than being strategic about reducing costs through operational excellence, supply chain discipline, etc. And no one blamed O&G orgs for doing this. After all, we all know that analysts are hounding them over the last few weeks for information on how they’re going to continue to drive shareholder value/EPS despite the drop in oil prices…and a long-term strategy of thoughtful improvements to operations is not an answer that plays well on the street!

Blocking and tackling

We heard about a lot of very futuristic, very cool technologies at the show that enable some pretty amazing capabilities, e.g., real-time performance monitoring and modeling across thousands of assets, solutions that enable document management across the entire asset life cycle, from design and construction, to operation and end of life, etc. But, as valuable as all these solutions are (and as I mentioned above),everyone is still struggling to get the bare bones basics right, i.e., give operations access to the right docs at the right time. Period.

This is a huge problem that needs to be addressed. I’ve seen a variety of research out there, but I think it’s safe to say that TARs and PM/CM account for about a third of the downtime experienced at any given asset. Given the mess that asset documentation is in at most O&G orgs, it’s not hard to imagine at least a 5% efficiency gain for TARs and PM/CM if better document management were in place…not to mention the follow on benefits of improved HSE compliance and lower HSE risk.

I went through all this in my workshop and presentation, and there were lots of head nods and amens, so not sure why O&G orgs haven’t solved it. But those that do will reap significant competitive advantage and savings, so I believe it’s just a matter of time…

The final word

Well, that’s my take on the conference. If you were there, chime in and let us all know what you thought of it (and of my take on it). If you weren’t there, feel free to heckle my points above if you see the world differently. Either way–jump in, and let’s get the conversation started!

 

 

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2 Comments leave one →
  1. November 8, 2014 10:37 pm

    I always find your posts very interesting Joe. Thanks for sharing your thoughts. Content management challenges aside, were there any discussions regarding the adaptation of green technologies (wind, solar, EVs, etc.)? Are any O&G organizations investing in green energy or readjusting their corporate strategies to encompass a “greener” business model?

    • November 20, 2014 10:36 pm

      Not really. The focus was on blocking and tackling operational challenges, so not too much discussion of more strategic, futuristic topics.

      And thanks for the kind words, Jolanta. I hope you’re doing well and hope to catch up in person one of these days!

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