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Fulcrium was commissioned by the in-house specialist division that provides exploration and production technology (EPT) services to all the business units globally of a Supermajor.
The brief was to undertake a wide-ranging benchmarking engagement comparing the strategy, systems, processes, organisation, human resources, charging structures, commercial and technical strengths of the EPT division with those of peers at IOCs, NOCs and service companies.
Part of the brief was to provide tangible evidence of what constituted a world class EPT organisation and how such insights could translate into Capex and Opex value. Fulcrium was also required to provide evidence of the resources needed to fund a centralised EPT facility to ensure full capabilities to support global field operations.
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There is no doubt that Fulcrium provides significant value-add in benchmarking. No generic benchmarking firm that we encountered can match it for methodology or, more importantly, for domain specificity in the upstream oil and gas technology industry. Their in-depth knowledge was a key factor in them being able to deliver a granular, multi-geography benchmarking engagement of considerable scale in a very tight timescale.
This global supermajor operating under unstable conditions in an African nation appointed Fulcrium to benchmark the upstream oil and gas business processes and practices against its comprehensive exploration and production database for the region.
Fulcrium also identified opportunities for remodelling the organisation for optimum exploration, appraisal, development and production performance.
Fulcrium generated numerous entrepreneurial solutions to the challenges of working within this developing nation.
They identified 17 credible key opportunities for us to pursue across the entire scope of the project (exploration and appraisal, development and production; drilling and completions; production operations’ readiness; organisational effectiveness and efficiency; and supply chain).
They had a controlled entrepreneurial approach to corporate and business unit issues and provided us with pragmatic solutions focused on making opportunities come to life.
This global supermajor used Fulcrium’s benchmarking services to provide unprecedented insights into service companies.
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Fulcrium gives an independent view of each service firm, using a very wide range of sources, making them from our point of view a highly valuable secret intelligence resource.
They also understand - from having worked in them - how service companies and technology firms operate in terms of structuring and extending engagements, setting fee levels and building strong relationships, so another benefit to us is the fact they are effectively “poachers turned gamekeepers”.
That is, they now act as buyers’ advocates - helping us to get the very best out of our service company suppliers.
QatarEnergy, the integrated state owned petroleum company of Qatar, is the custodian of Qatar’s oil and gas reserves, both onshore and offshore. Its principal activities include exploration, production, sale of crude oil, natural gas and gas liquids, refined products, synthetic fuels, petrochemicals, fuel additives and liquefied natural gas (LNG).
As of 2020 QatarEnergy was the third largest oil company in the world by oil and gas reserves and revenues from oil and natural gas combined amounted to over 60% of the country’s GDP.
The State of Qatar is an 11,586 sq. km peninsula bordering the Persian Gulf and Saudi Arabia, with a population just below 2.75 million. The country has the world’s highest per capita income level, and enviable levels of state spending on public entitlements.
Vast crude oil and natural gas reserves (of 25.24 billion bbl and 24.07 trillion cu m respectively as of 1st January 2018) are its main revenue source, making the country highly vulnerable to global oil market fluctuations. This became evident during the exceptional volatility in crude oil prices between the peaks of 2011 to 2013, and the sharp fall in 2015.
Nationally, the Qatari government – in common with countries across the Middle East – was faced with an urgent need for fiscal tightening to reduce the budget deficit (not a simple matter given Qatar’s obligation to deliver the 2022 World Cup).
The result was widespread redundancies in central government, public administrations and state-owned enterprises including QatarEnergy.
Appreciating that the years of double-digit economic growth may be over, the Qatari government aims to reduce economic reliance on oil and natural gas. It has significantly diversified into non-oil sectors (notably manufacturing, construction, financial services, tourism and leisure) which now account for just over half of GDP.
Fulcrium’s upstream oil and gas benchmarking training engagement arose directly from these volatile market conditions. For the first time in generations, QatarEnergy was experiencing austerity. By deploying international strategic consultancy firms, it had cut overheads and headcount (30% of upstream staff including senior management) and made a number of process efficiencies. In common with the other top international petroleum companies, it had continued to purchase consortium-provider template benchmarking reports, but it was increasingly obvious that these did not provide the means to translate data into measurable value.
Invitations were issued to a number of international strategy consultancies, to consortium benchmarking providers, to oil and gas industry specialist training course providers, – and to Fulcrium.
It was clear from the start of the process that the highly sophisticated and astute senior team at QatarEnergy were looking for an entirely new approach. They had moved well beyond needing incremental improvements in efficiency and cost reduction. And they certainly did not want training to be an end in itself. They had already established an Upstream Benchmarking Centre of Excellence, but wanted to ensure that this translated to identifying value.
They therefore wanted a methodology that would equip their own staff and the staff of their joint venture partners to build benchmarking excellence into every aspect of the business. They explicitly wanted to acquire – and subsequently implement – the levers that would drive exceptional value and create value excellence.
Following the awarding of the engagement, Fulcrium spent four weeks developing a customised training programme.
The requirements were for an in-depth, granular course for one hundred delegates from QatarEnergy; and for higher-level methodology insights for one hundred delegates from joint venture partners QatarGas, ExxonMobil, Shell, BP, Chevron, Total, GE Oil & Gas, and ConocoPhillips. This was delivered over four days in Doha.
Delegates were from many ethnicities and both genders, and were drawn from across the businesses including: drilling and completions, reservoirs and wells, maintenance and reliability, subsea losses, geology/seismic, projects and engineering, operations, logistics, assets, finance, legal, HSSE, and Technology.
Although its primary focus was on Upstream Benchmarking, the programme also drew in other aspects of Fulcrium’s total benchmarking services, including Performance Benchmarking for Value Excellence.
QatarEnergy delegates were amongst the most enthusiastic, bright and professional people to whom Fulcrium has ever delivered training. The company overall was immensely impressive and progressive, clearly committed to radical improvements in its culture and performance to fully equip it for the 21st Century. It certainly lives up to its reputation as the “jewel of Qatar”.
Since the programme was delivered the company has developed its own benchmarking methodologies, and QatarEnergy is more than happy with what the training course empowered:
Fulcrium’s training achieved all its objectives. First and foremost, we wanted to learn the best upstream benchmarking methodology in the world. We are committed to our human capital and wanted comprehensive benchmarking up skilling for our in-house and joint venture partners’ staff.
Through the training course, delegates were able to identify, evaluate and select the most appropriate data sources for benchmarking, and then create a performance framework on which to base our own upstream benchmarking capabilities.
Fulcrium gave us totally independent principles from its own external perspective, untainted by vested interests – exactly what we wanted. We don’t just talk about or pay lip service to value excellence: it is intrinsic to everything we are and what we aim to be. If we are to achieve our vision of becoming “one of the best national oil companies in the world, with roots in Qatar and a strong international presence,” it will be because we partner with exceptional companies like Fulcrium.
If you want expert customised benchmarking skills training that leads to breakthrough performance improvements and value excellence, contact us today.
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The five largest, non state-owned energy companies worldwide (ExxonMobil, BP, Royal Dutch Shell, Chevron and Total) are termed supermajors and hold about 3 per cent of global hydrocarbon reserves. They were created from the late 1990s to hedge against oil price volatility, achieve economies of scale and reinvest cash reserves. While the supermajors got bigger, so did the challenges they face, with implications for their survival.
The good news is that scale is an advantage when exploring for hydrocarbon resources in the most inhospitable and inaccessible parts of the world, in developing technology, in undertaking mega-projects.
The bad news is that “diseconomies” were inherited with consolidation. These include issues of corporate governance, and trying to manage merged behemoths; the reduced accuracy of information flow; slower decision-making; greater responsibility for the safety of staff, contractors and for the environment; and increased emphasis on performance management.
The supermajors are now going to have to up their game to avoid being relegated to lower-value service providers – or eventually face extinction.
“Winning” is often defined as gaining access to and exploring the largest hydrocarbon basins, replacing the produced reserves, successfully developing mega-projects, optimising production, and managing reservoir decline. In addition, decommissioning mature fields, health, safety and the environment have become more important. “Winning” is also defined as being able to strike partnerships with host governments, national oil companies (NOCs), other international oil companies (IOCs), and contractors.
The supermajors are positioning themselves to win by renewing their strategies for corporate governance, organisation, technology, projects, engineering and contracting.
ExxonMobil, for example, is known for its centralised management, while some supermajors give greater autonomy to business units. Both models can work, but the decentralised approach will need robust delegation and accountabilities, otherwise there is a risk the corporate centre, business units and the functions will end up tripping over each other.
BP has embarked upon an aggressive simplification programme. Shell’s corporate mantra over the last few years has been ESSA – eliminate, simplify, standardise, automate.
As part of the simplification drive, every division, function and business unit will need to become a focused contributor to the business. Functions in particular, such as technology, procurement/supply chain, finance, human resources and legal must be organised and managed to world-class standards.
Technology is critically important, but the supermajors do not have exclusive influence over it. The value they add is in screening it in the marketplace, R&D and testing.
Having outsourced some core skills and competencies, the supermajors have become “super contractors” and “super project managers”, bringing together partners, managing and integrating huge programmes and disciplines. In effect, they are managing budgets, risk, delivery, health and safety, quality, timescales and pushing technical limits.
Whether or not they are relegated to becoming low-margin service contractors, they will still need to foster a service mindset. This means becoming agile, responsive and competitive in order to be selected as partners of choice by NOCs and host governments.
The oil-producer cartel Opec and the NOCs are growing sophisticated. They, too, are hiring the best technology and brains in the industry. The supermajors will be obliged to offer propositions that are a lot more compelling when compared to near competitors – pure service companies such as Schlumberger or Halliburton.
When all is said and done, one question remains: are the supermajors just too sluggish to leverage their scale profitably?
Raju Patel is chief executive of Fulcrium (a London-based global benchmarking specialist).
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