Oil & Gas Benchmarking

Fulcrium is the preferred commercial benchmarking partner to some of the world’s largest Oil & Gas companies.  We specialise in commercial Oil & Gas benchmarking using our proprietary frameworks to help clients drive increased efficiencies and breakthrough performance improvement.

We pride ourselves in partnering with and enrolling the most forward thinking and progressive Oil & Gas companies as our clients.  These are the companies whose cultures are designed to build shareholder value consistently and to thrive through the boom and bust Oil & Gas cycles.

For those Oil & Gas companies with progressive and respectful cultures that fearlessly embrace commercial benchmarking insights, Fulcrium is their source of competitive advantage through the regular insights gained from our Commercial Oil & Gas Benchmarking Service.

Over the last 17 years Fulcrium has built-up a powerful proprietary Commercial Oil & Gas Benchmarking Service whereby peer performance can be compared to a granular level across the value chain and functions.  The Commercial Oil & Gas benchmark service enables like for like comparisons using hundreds of proprietary Fulcrium frameworks and metrics for all the important Oil & Gas players across the core value chain plus functions.

Fulcrium’s commercial benchmarking service provides clients with critical hard to find data and insights, and is used by some of the world’s largest Oil & Gas companies to track competitors, and top-quartile efficiency and performance improvement opportunities.

Clients gain competitive advantage from Fulcrium’s comprehensive Commercial Oil & Gas Benchmarking Service as it provides a fast, intuitive way to compare their performance at a granular level with that of competitors.

At Fulcrium, we have been undertaking specialist Oil and Gas commercial benchmarking for global businesses across the entire energy sector value chain for well over 17 years and, in that time, through rigorous client evaluation, have established ourselves as the “preferred commercial benchmarking partner” to some of the world’s largest Oil & Gas companies.

Fulcrium has seen the importance of our specialist commercial benchmarking services grow as companies strive for competitive edge, cost efficiencies and breakthroughs in performance improvement.

We use our proprietary Oil & Gas commercial frameworks to undertake wide-ranging core value chain and functional Oil and Gas benchmarking:

  • Internal: comparing internal processes
  • Technology: comparing technology practices and standards within the same industry and cross-industry
  • Business: comparing financial, operational and value metrics in functions within the same industry and cross-industry
  • Competitive: comparing direct competitors within the same industry
  • Functional: comparing functions from the same and different industries
  • Generic: comparing dissimilar functions that may spark innovation or breakthrough ideas

These insights are then translated into actionable strategies that deliver efficiencies, tangible performance improvement and competitive advantage.

Our expertise in Commercial Oil & Gas benchmarking has been used by numerous global companies.  We couple our benchmarking expertise with a deep understanding of:

  • strategic relationships between nations, suppliers and operators
  • the dynamic industry structure
  • upstream, midstream and downstream value chains
  • business drivers
  • engineering, technology practices and standards
  • interface issues between Capex and Opex
  • Greenfield vs. Brownfield
  • local and global challenges

Our proprietary Oil & Gas benchmarking service, proven tools and frameworks mean that we can undertake complex benchmarking engagements without delay.

We are also greatly respected for our flexible style: we never use formulaic approaches, but rather adapt our methodologies to suit each client’s specific requirements. We also engage from the start of the commercial benchmarking process with all those with a stake in the outcomes, greatly improving the implementation of any change management process.

If you want expert commercial Oil & Gas benchmarking that leads to cost efficiencies and breakthrough performance improvements then contact us today. For more information on our commercial benchmarking capabilities and services see our case studies.

Don’t just take our word for it. Here is what one of our clients says about us:

Fulcrium is not just a commercial benchmarking firm. They have proven skills that could translate the benchmarking data and results into high-level advice on strategy and change management. That meant they were able to challenge some of our preconceived ideas on how we should go about business improvement, plus give us a realistic and implementable plan. They recognised that our culture would not permit transformational change and tailored their advice accordingly. That pragmatic and perceptive approach was much appreciated by us.

Fulcrium has a clear competitive advantage over other commercial oil and gas benchmarking providers and tick all the boxes as far as we are concerned: sensitivity to our needs; detailed oil & gas industry, and technology knowledge; strategic and change management expertise; robust and very sophisticated benchmarking methodology; an ethical approach to data collection and dissemination; insight leading to realistic and actionable advice; and access at any time to an executive director who could explain and defend the results of the benchmarking exercise. It all adds up to significant value-add as far as we are concerned and as a result of the collaboration with Fulcrium we are far better positioned to identify, assess and capture the highest quality opportunities in our industry at this time of profound change.

Upstream Technology

Couple our Oil & Gas industry knowledge with best-in-class core value chain and functional expertise in areas such as operations, engineering, technology, commercial, procurement and supply chain management, benchmarking and performance improvement and you have an outstanding advisory partner who can provide customised Oil & Gas benchmarking solutions to the industry’s growing challenges.

Shifting Sands For The IOCs

Just forty years ago, the national oil companies (NOCs) controlled less than 10% of the global oil and gas reserves.

Oil Production and Processing
Most oil-producing wells are free-flowing. Once the oil is extracted, it is piped to a gas-oil separation plant (GOSP) where water and the majority of dissolved gases are extracted. The remaining oil is then sent to a Stabilisation Facility, for final gas separation and removal of hydrogen sulphide. The extracted gas is sent to Gas Operations Facilities for additional processing, while the water is injected back into the ground. This oil is now dry (no water), sweet (no hydrogen sulphide) and stabilised (no gas), and can be refined or exported.

Now they control more than 90% – giving them the dominant hand in attracting capital, technology and human resources across the value chain from deepwater reserves to refineries.  On the back of the NOC’s growth, the oilfield service companies (OSCs) are flourishing, expanding and integrating their services and investing in technologies to facilitate surface- and sub-surface based operations.

Tight oil (also known as shale oil or Light Tight Oil, abbreviated LTO) is oil found in relatively impermeable reservoir rock. Production of light tight oil comes from very low permeability rock that must be stimulated using hydraulic fracturing to create sufficient permeability to allow the mature oil and/or natural gas liquids to flow at economic rates.

Now that the supremacy of the integrated oil companies (IOCs) is behind us, they face almost constantly shifting sands. New dominant players, new competitors, new combinations of partners – all need evaluating and responding to. Increasing operating costs, more onerous regulations, restricted access to capital, exploration challenges, skills shortages, the opportunities and threats posed by unconventionals (c.f. Fulcrium Canadian Oil Sands Benchmarking and US Permian, Eagle Ford, Bakken, Niobrara shale basins Light Tight Oil – LTO Benchmarking), and environmental risks – all require a cohesive strategy if they are not to stifle growth.

U.S. production of light tight oil (LTO) has increased significantly since 2010, driven by technological improvements that have reduced drilling costs and improved drilling efficiency in major shale plays such as the Bakken, Eagle Ford, and the Permian Basin. Production from light tight oil plays surpassed 50% of total U.S. oil production in 2015 when light tight oil production reached 4.9 million per day (b/d). Tight oil production and overall U.S. oil production are expected to increase through around 2030 in the US Energy Information Administration Reference case.
Production in Texas, the largest oil-producing state, is driven by two major oil-producing regions, the Permian and the Eagle Ford. As defined in EIA’s Drilling Productivity Report, the Permian region makes up a large geographic area with producing zones each more than 1,000 feet thick and with multiple stacked plays. Because of its large geographic size, the Permian offers a lot of potential for testing and drilling, and the multiple stacked plays allow producers to continue to drill both vertical wells and hydraulically fractured horizontal wells.
“Shale oil”, or the more accurate term “Tight oil”, is often used to refer to rock formations that contain oil and that sometimes might actually be shale. The defining characteristic is that the rock is not sufficiently porose or permeable to allow oil to flow out if all you do is drill a hole into the formation. However, by fracing, if you create fissures in the rock by injecting water (along with sand and some chemicals to facilitate the process) at high pressure along horizontal pipes through the formation, oil can seep back through the cracks and be extracted.

There is no better example of the impact of sudden transformation on an industry than light tight oil and shale gas in the USA. No-one envisaged even five years ago that the country would be able to leverage horizontal drilling and hydraulic fracturing to exploit reserves that, by current estimates from the US Energy Information Administration, amount to 862,000bn cu ft.

It is the Permian that has been the strongest of the US shale oil regions in terms of crude production.

From peak levels in the first half of 2015, output in the Eagle Ford shale of south Texas has declined 29 per cent, according to the EIA, while in the Bakken formation of North Dakota it is down 17 per cent.

By contrast in the Permian, production is at record highs, up 19 per cent in the past year alone. This boom has been matched by steep rises in the share prices of some of the companies that focus on the Permian.

Gas from shale now accounts for over 30% of US natural gas production (and will rise to c. 47% by 2035) and has depressed domestic gas prices so profoundly that LNG projects have been rendered uneconomic.

Refining Operations
Crude oil is a highly variable mixture of heavy and light hydrocarbons that need to be separated in a refinery to turn them into usable products. Three major types of operation are performed to refine the oil into finished products: separation, conversion and treating:
Step 1 – Separation: The first is atmospheric distillation at 350 to 400°C. The crude oil vapours rise inside the column, while the heaviest molecules remain at the bottom. The heavy residues are distilled again in another column.
Step 2 – Conversion: After separation, the next step is conversion at a temperature of 500°C. Processes include catalytic cracking and hydrocracking, which “crack” the molecules that are still too heavy, producing gas, gasoline and diesel.
Step 3 – Treating: Then molecules that are corrosive or cause air pollution, such as sulphur, are removed.

Alberta’s oil sands are the third-largest proven crude oil reserves in the world, next to Saudi Arabia and Venezuela.

This has left supermajors such as ExxonMobil sitting on an estate of billion dollar LNG terminals that will probably never recoup their investment. However, as the shale gas, especially from the Marcellus Shale, have tested up to 16% ethane content (making it a low priced feedstock for ethylene synthesis) this has resulted in a boom in new ethylene plants.

“People just don’t seem to realise how big the Permian is. It will eventually pass the Ghawar field in Saudi Arabia, and that is the biggest in the world” – Scott Sheffield, founder of Pioneer Natural Resources and acclaimed ‘King of the Permian’.

Despite environmental problems, not least methane contamination, it is projected that shale exploitation will continue apace in the USA and Canada. Exporting it to Europe from c. 2015 should help prevent Russia and Persian Gulf countries from dictating higher prices for their own gas exports to the region.

Unsurprisingly, China is pushing ahead with shale gas to replace its reliance on coal. In November 2009, Barack Obama agreed to share US gas-shale technology with China, and to promote US investment in Chinese shale-gas development.  A White Paper on energy development released in October 2016 by China’s government calls for a ramping up of the industry and pumping 6.5 billion cubic meters of natural gas from underground shale formations by 2018.

The IOCs are already lining up. Royal Dutch Shell has shale gas agreements with three major Chinese oil companies, and ExxonMobil, BP, Chevron, and Total are also working to form shale gas partnerships with Chinese oil and gas companies.

The political landscape is shaping whether other regions are able to exploit shale gas as aggressively as the North Americans and Chinese. There are vast reserves in South America; Royal Dutch Shell is using hydraulic fracturing in the Karoo region of the South African Western and Northern Cape provinces; India and the US are collaborating on identifying and exploiting shale gas resources; but Europe presents a mixed picture and, according to a 2016 report from the European Commission (https://ec.europa.eu/jrc/enOil & Gas/publication/eur-scientific-and-technical-research-reports/unconventional-gas-and-oil-resources-future-energy-markets-modelling-analysis-economic), shale gas production will not make Europe self-sufficient in natural gas. Poland has Europe’s largest reserves and companies including ExxonMobil, Chevron, ConocoPhillips, Talisman Energy, BNK Petroleum, and Marathon Oil are actively drilling. Ukraine has Europe’s third largest shale gas reserves, and Royal Dutch Shell and Chevron will start commercial gas production in 2017.

Oil & GasFurther down the line, it may be possible to leverage shale technologies to unlock oil – potentially producing another seismic shift in the industry.

Old business models and strategies will no longer serve in this new landscape, creating an urgent need for recognition of the power shifts, and comprehensive managed change.

The IOCs, including the five supermajors (ExxonMobil, BP, Royal Dutch Shell, Chevron and Total) are responding by increasingly operating at the margins – focusing on challenging environments including deep waters, pre-salt, shale formations, oil sands and tundra. The risks are not just concerned with health and safety, and environmental sensitivities: many of these reserves are located in regions that are politically and environmentally sensitive. It remains to be seen what impact the Arab Spring will have long-term on the political and economic landscape of the Middle East and North African region – certainly, there may be increased restrictions on the IOCs from both national governments and the NOCs.

Gas Turbine-Powered Cogeneration also known as Combined Heat & Power (CHP), is the production of electricity and heat from a single fuel source. Powered by a gas turbine, a gas cogeneration plant efficiently captures heat which would otherwise be lost during the production of electricity and converts it into useful thermal energy.
A gas cogeneration plant is both flexible and reliable and because of its efficient use of energy, industrial-scale cogeneration is more economical and environmentally attractive than conventional fossil fuel power plants.

With the global economic outlook continuing to look uncertain, it is imperative to focus on bottom-line improvements and to control spending – and yet exploration requires ever-greater investment and the additional costs of this have had a profound impact on profitability. Average operating profit margins for the supermajors fell from 15% in 2006 to below 8% in the year from late 2015 to early 2016.

Yet there is no alternative to increased expenditure. Royal Dutch Shell is one supermajor that has made a commitment to long-term investment with a diversified portfolio: liquefied natural gas (LNG) in Australia, conventional oil in the North Sea, Gulf of Mexico deep water, and tight gas in North America. ExxonMobil, too, holds about 50% of its reserves in heavy oil, deepwater, and unconventional oil.

It is likely that the NOCs will gradually enter into fewer production-sharing agreements with other companies, making it even more critical that the IOCs can carve out defensible niches. With global energy demand in 2040 predicted to be some 30% higher than in 2016 (according to ExxonMobil), they need to determine their role and implement strategies that align shareholder expectations with corporate capabilities, performance and market conditions.

Just some of the Oil & Gas benchmarking questions they need to answer are:

  • whether or not to relinquish shared resource ownership and adopt a contractor-operator service model
  • how to unlock value from mature assets and to optimise the overall performance of their entire asset portfolio
  • how to reduce energy intensity and improve energy efficiency at every stage of the oil & gas value chain
  • how Permian shale and Canadian oil sands plays can compete in a sustained ultra low oil price environment and with stringent greenhouse gas (GHG) emissions regulatory limits
  • how to respond to new policy frameworks and regulation in a post-Macondo Well-Deepwater Horizon world
  • how to achieve a 360-degree view of operations to aid strategic and operational decision-making
  • the degree to which they collaborate with the NOCs on production-sharing
  • which NOCs will become true strategic partners (resource-rich ones such as Saudi Aramco, Qatar Petroleum, ADNOC, PDO, Petrotrin, SEPOC, Sonatrach, Sonangol, KazMunaigas, Gazprom and Rosneft or resource-poor ones such as Petronas, Petrobras, ONGC, GAIL , Petro SA, and Statoil Hydro)
  • which geographies offer the most long-term potential, and how to build partnerships with host governments
  • what relationships to foster with ambitious OSCs such as Halliburton, Schlumberger and Transocean, what governance to put in place for partnerships, and how to ensure accountability in joint operations (post-Deepwater Horizon)
  • where and when to invest in unconventionals (low-margin, high capital-intensive plays)
  • how to expand their total field management services and leverage their world-class project management competences
  • how to retain a technological lead in areas such as subsalt imaging, sand screens, non-seismic geophysical exploration, and solvent-assisted steam-assisted gravity drainage (SA-SAGD)
  • which merger, acquisition and divestment opportunities to exploit to create infrastructure synergies and economies of scale, increase operating efficiencies, and unlock value
  • how to centralise operations underpinned by best practices (the successful ExxonMobil model) or, if decentralisation is preferred, how to ensure corporate-wide accountability and delegation
  • how to simplify the organisation and ensure that every division, business unit and function (from Procurement to Technology) serves the wider goals of the business
  • how to improve operational efficiencies and reduce costs while protecting revenues and margins and funding increasingly expensive exploration
  • how to integrate strategy and risk management as the primary driver to steer business planning, budgeting and asset portfolio management

No one knows which of the IOCs will emerge as relevant players. The losers will be relegated to low-margin service contractors, while the winners will be super-contractors, or super-project managers, operating alongside the NOCs and major OSCs to exploit the traditional and new hydrocarbon assets wherever they are found. The IOCs still have scale on their side, but they need to become more agile and competitive.

To be successful, the IOCs must constantly review, evaluate and benchmark the performance of their strategies. Only then can they hope to optimise performance of their asset portfolios over the short, medium and long-term.

At Fulcrium, we have the expertise and track record to assist in evaluating, anticipating and overcoming the new demands faced by the Oil & Gas sector.

Oil & GasWe understand, in depth, the multiple challenges facing the industry: global warming and resource scarcity; environmental and legislative pressures; structural changes; and the intensified competition from renewables, coal and gas (including LNG, GTL and shale), and from suppliers and business partners.

Couple our industry knowledge with best-in-class functional knowledge in areas such as operations, engineering, technical, commercial, procurement and supply chain management, benchmarking and performance improvement and you have an outstanding advisory partner who can provide customised Oil & Gas benchmarking solutions to the industry’s growing challenges.