Driving operational performance in oil and gas

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E x e cu t i v e s u m m ary
T he o i l an d g as i n d u s t ry i s cu rre n t l y f aci n g a cri s i s t hat t hre at e n s e v e n t he m o s t s t ab l e o f o rg an i z at i o n s .
I n cre as e d s u p p l y an d d e cre as i n g d e m an d g ro w t h d e rai l e d an e x t e n d e d p e ri o d o f hi g h p ri ce s an d t he i n d u s t ry
i s n o w f aci n g w hat ap p e ars t o b e an e x t e n d e d p e ri o d o f l o w o i l p ri ce . T o f u rt he r co m p l i cat e m at t e rs , t he n e w
price reality comes on the heels of diminished returns despite high prices. Over the past five years, upstream
operators have seen a steady decline in efficiency (the barrel of oil equivalent per day, per capital dollar) and
asset reliability while experiencing increases in finding and lifting costs.
A s t he e ra o f “ e as y o i l ” p as s e s , o p e rat o rs are f ace d w i t h i n cre as i n g l y e x p e n s i v e g l o b al e x p l o rat i o n an d
development in harsher, remote and complex basins. These factors have been eroding profits, though price
stability (of more than US$100 per barrel) prior to December 2014 masked the full effect of these increases.
T he o i l an d g as i n d u s t ry has e x p e ri e n ce d n u m e ro u s b o o m an d b u s t cy cl e s , rare l y re act i n g i n a s t e ad f as t w ay
t o e i t he r hi g hs o r l o w s . I n p e ri o d s o f p ro s p e ri t y , o rg an i z at i o n s s p e n d b i g m o n e y f o r n e w as s e t s , hi re m an y
employees (often at an inflated rate) and push for growth, often at the expense of current asset performance.
During downturns, organizations make drastic cuts to survive, eradicating projects, slashing headcount and
d e f e rri n g i m p o rt an t i n v e s t m e n t s i n o rd e r t o m i n i m i z e co s t s , ag ai n o f t e n at t he l o n g - t e rm e x p e n s e o f as s e t
p e rf o rm an ce .
T hi s e x p an d - an d - co n t ract m o d e l cre at e s g re at i n s t ab i l i t y i n t he i n d u s t ry , w i t hi n i n d i v i d u al o rg an i z at i o n s
an d at o n - s i t e o p e rat i o n s . O n l y w he n o p e rat o rs d e ci d e t o b u i l d l o n g - t e rm s t ab i l i t y an d s u s t ai n ab i l i t y i n t o
their operational strategies will they be equipped to weather the downturns and capitalize on upswings in a
measured and profitable way. This stability is best achieved through operational excellence programs focused
o n co n t i n u e d , m e as u re d i m p ro v e m e n t t hat s y s t e m at i cal l y ad d re s s e s re cu rre n t b u s i n e s s i s s u e s .
Operational excellence is not a new concept, but current conditions create a unique opportunity for the
i n d u s t ry t o re al i z e i t s f u l l p ro m i s e . E x t e rn al e co n o m i c f act o rs are p u t t i n g p re s s u re o n t he i n d u s t ry t o b e m o re
efficient and cost effective without giving any ground on HSEQ. And, advances in digital technologies offer
new tools and techniques to capture and leverage information to streamline operations while increasing
p ro d u ct i o n . F i n al l y , an d w hat m ay b e t he m o s t i m p o rt an t f act o r i n cre at i n g s u s t ai n e d chan g e , i s t he ri s e o f
younger workers committed to serving a broader purpose through work beyond simple economics and their
i m p act o n o rg an i z at i o n al cu l t u re . I t i s t hat p u rp o s e t hat w i l l d ri v e t ru e t ran s f o rm at i o n an d b ri n g s t ab i l i t y an d
carry sustained benefits of operational excellence through both boom and bust.
O p e r a t i o n a l e x c i s e lan l e e nl e cm
ee n t o f o rg an i z at i o n al
l e ad e rs hi p t hat s t re s s e s ho w a v ari e t y o f p ri n ci p l e s ,
s y s t e m s an d t o o l s can b e ap p l i e d t o w ard t he
sustainable improvement of key performance metrics.
Driving operational performance in oil and gas |