Drawing on Fulcrium's proprietary benchmarking database and metrics established for over 17 years.
Our service is complemented by a range of global primary and secondary research capabilities – utilising multiple, independent sources - enabling rapid additions to benchmarking data in real time.
Internal:Comparing internal processes
Technology:Comparing technology within the same industry and cross-industry
Business:Comparing proprietary financial, operational and value metrics in core value chain and 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
Backed with over 17 years experience, we know how to provide accurate data.
Granular benchmarking framework and parameters
"Best-in-class" benchmark data provision
Initiatives to close gaps and achieve / exceed top-quartile
We will continue to use Fulcrium as a secret intelligence resource: they have never failed to deliver and we value the advantages they bring to our benchmarking initiatives.-
We have no doubts that they use impeccable sources and data collection methods. They have passed every test in terms of reassuring us about the origins and viability of the data-
We regard Fulcrium as offering significant value-add in their market space. They have a deep understanding of Oil & Gas benchmarking activity compared with the generic benchmarking firms.-
Because of our access to real time data, this appeals to companies who want a competitive advantage.
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 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.
Fulcrium has a clear competitive advantage over other 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.
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.
Just forty years ago, the national oil companies (NOCs) controlled less than 10% of the global oil and gas reserves.
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.
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.
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.
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.
Further 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.
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.