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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.
INEOS founder and Chairman, Sir Jim Ratcliffe discusses:
Fulcrium was appointed by the in-house specialist assurance function accountable for second line process safety and operational risk at a Supermajor.
The brief was to undertake a wide-ranging benchmarking engagement comparing the frontline and second line strategy, systems, processes, organisation, risk, policies, standards, governance and assurance activities of the function 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 process safety and risk assurance organisation and how such insights could translate into transformational value. Fulcrium was also required to provide a roadmap to transform the function.
Following an extensive evaluation of the market for process safety / risk providers, we appointed Fulcrium to conduct benchmarking and assist us with our thinking. No benchmarking firm that we encountered can match it for methodology or, more importantly, for process safety, reliability and risk assurance domain specificity in the upstream and downstream oil and gas industry. Fulcrium brought genuine new and impactful insights which have helped us shape the safety and operational risk function.
BP Vice President – Group Strategy, Dr Dominic Emery talks to Fulcrium about benchmarking-driven performance improvements in:
Paul Beijer – Vice President Strategy, Planning & Assurance at Shell talks to Fulcrium, explaining how Oil & Gas benchmarking is used to make Shell a leader in the industry.
Dere Ogbe – Head of Competitive Intelligence at Shell talks to Fulcrium, explaining how benchmarking is used in a “purpose-driven” way to compare performance in the oil & gas industry.
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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