The latest crash in oil prices will surely drive home the value of effective supply chains. In that regard, the collective leadership of the UK’s offshore industry has achieved much since the cost-reduction crusades of the late-1990s through early-2000s.
Main contractors have played a key role in this process and, according to Amec’s Alistair McGregor, the supply chain is in “pretty robust condition”, referring as much to his company’s position as to the wider industry.
He suggests that relative cohesion has prevailed despite the temptation for companies to break ranks during the long run of positive oil prices since 2000.
“But a lot of that depends on smart behaviour from our client groups,” says McGregor, wearing his Amec hat.
“At the moment, we have clients that are extremely focused on the real fundamentals of the business … getting out there and extracting oil&gas in as large quantities and as fast as they can. And that’s driving a lot of the more positive behaviours all the way down through the supply chain.
“We are also seeing wealth flowing down through the supply chain as well, which allows us to invest, train and support our people at the same time. Naturally, you would expect that.”
Time and again, it has come to Energy’s attention that, despite the growing sophistication of the supply chain, safety apparently remains an issue.
And if a company in the supply chain wants to go direct to the operator to try to raise an issue because of a perceived lack of main contractor concern, that operator doesn’t want to know.
McGregor sees this issue differently.
“The vast majority in my career to date has been spent with the operator community, and my experience with Amec in the last two years is that there is no difference at all between operators and contractors as to the levels of energy, intellect and effort being placed on safety management.
“A personal observation is that maybe we have reached the point where the tools at our disposal have run their course and maybe there’s an opportunity to go back to some basics and try thinking of what else could we do (with regard to safety).”
So what does that mean?
“We (at Amec) have a programme called Beyond Zero. We’re hoping it will take us past the place where conventional tools and techniques cannot.
“Tackling that last remaining few percentage points of safe delivery is very hard. That requires us to look back at behavioural safety. Safety matters, and it’s our responsibility to have the programmes in place to do that.”
However, safety is also an issue for the management of all firms in a supply chain. A screw-up could land them on the carpet.
Meantime, there seems to be a growing admission that the whole safety culture thing is stagnating.
McGregor points out that the quest for better safety is, by its very nature, never-ending, and with the industry being so phenomenally busy, people make more mistakes.
“We come back down again to fundamentally the amount of wealth in the business and how that wealth travels down the supply chain so people can make those kinds of investments … a bit more margin to invest in training programmes … things of that nature to help all of us crack the safety thing.”
Of course, it can be argued that the industry has had plenty of time to get its supply-chain house pretty well built. But just around the corner is the potential for the credit crunch to wreck so much of what has been achieved, especially if operators start slashing costs again.
“There’s absolutely no doubt that cost will return to the table … and fast … but I think the industry is in a reasonable position to react to those kinds of things,” admits McGregor.
So does that mean the supply chains are sufficiently well built to enable a cohesive response to the pain that may be inflicted over the next couple of years? McGregor believes so and that it is important to think in supply-chain community terms – different supply chains working cohesively to deliver on their respective operator demands.
But one of the important aspects of an effective business culture (safety culture, as well) is an ability for the key messages to get not only from the contractor boardroom into the minds of the bosses of the supply chain, but also to get from the client operating company right through to the shop floor of the supply chain.
Assuming this is happening, might a cost-slashing drive, especially a la mid to late-1990s, alienate the very people client operators are trying to win over.
McGregor reckons this is where having first-class communications throughout the supply chain is essential.
“A lot of that is about personal communications. It’s people who do business, not companies. Every interaction is between people.
“At Amec, one of the things we do is get the buyer and contracting teams out of the office.
“There is a dreadful thing in this business that people sit at desks and suppliers/contractors come to them and they sell them their wares.”
Of course, to an extent, the boot has been on the other foot these past few years, with the supply chain dictating terms to operators rather than the other way around. Rig rates are a prime indicator of how the pendulum has swung.
McGregor: “The whole dynamic of buyer and seller has changed. There has been a transfer of power and influence.
“We most obviously see that in drilling – less so in marine construction/well services – but I think that’s a much more equitable situation. Prior to this, we had almost two decades of a buyer’s market.
“That’s why it is important for us and operator clients to market ourselves and become great customers.
“Look, we have 23,000 people working for Amec worldwide; the reality of life is that our business success resides on the shoulders of over 100,000 people – those who work for our suppliers. That’s why effective supply-chain management is absolutely critical.”