I wasn’t going to write about the North Sea in this month’s eye. Rather, I was contemplating having a go at offshore wind, in large part because of the manner in which the UK’s unquestionably leading offshore presence in terms of turbines planted out there in UK territorial waters has been achieved.
This is an industry where practically all of the capital spending has been overseas and, even in operational terms, there is huge reliance on foreign companies, even if thousands of UK jobs have been created.
And it is an industry where the oil & gas supply chain has been very poor at capitalising on opportunities, despite at least a dozen years of exhortation by organisations like Aberdeen Renewable Energy Group to get involved and create new business streams for the future.
But then accountancy major PwC published a report on the state of the UK offshore oil & gas industry. At first I ignored it as I am routinely showered with market studies of one form or another, many not worth the effort of perusing.
But then I thought twice about this one as the Cross Sector Efficiency Study had been commissioned by the Oil & Gas Industry Council.
While I don’t agree with everything in this 20-pager and which would be a lot less wasteful on resources and cost less if the pretty pix were left out, there are nonetheless harsh truths contained within.
Three pages in particular caught my attention . . . five, six and sixteen.
Five describes what PwC’s cross-industry interviewee considers to be the fundamentals of high-performing organisations. It reads like a page out of an MBA textbook.
Six comprises is a list of “observations in UK oil & gas”. A lot of the content is sobering and many of the observations speak for themselves.
Sixteen is a list of “organisations” that participated, including defence.
Anyone who has been in the North Sea business for more than a decade will surely recognise much of what PwC’s analysts and interviewers came up with, largely a tirade of criticism.
But first to Page 5, and I’m singling out one the fundamentals – organisation and people.
PwC says: “We have no evidence to suggest that there is a single, effective organisation design model for high-performing operations. However, several factors appear to be common among the companies interviewed:
There is an increasing tendency to aggregate all activities under a single operations “leader”.
There is consistency of organisation design with the operations strategy – particularly where activities have been decided as “core” and “non-core”.
Organisation design is “organic” and not static, with a recognition that change is constant.
Leadership exists at all levels in the organisation and people feel engaged and empowered.
There is clear accountability and responsibility, and a major focus on personal development.
So, commonsense rules, OK? People seem to be at the heart of everything and apparently valued. It reads like a textbook of how to manage.
But hang-on, this is zero-hours contracts Britain.
And, in the North Sea, thousands of jobs have been axed in just six months.
Let’s shift to Page 6 where there are some rather interesting nuggets to muse over too and which provide some idea of how others view the North Sea; not particularly favourably, it seems.
Some most certainly reinforce much of what has been said about the North Sea industry via the Wood Review, the Oil & Gas Authority, Oil & Gas UK and in a variety of forums.
Nugget one: “Oil & gas leaders have a less successful track record in building a culture where change is understood and accepted as a prerequisite for success.”
This is really shocking, given the nature of the business . . . extracting natural resources in large quantities, long term in an hostile environment that takes no prisoners when there’s a screw-up.
That said, lest we forget, the North Sea is, broadly, a 50-year success story; it is an industry that has so far come through two massive down cycles, is enduring a third and which came through the global financial crash surprisingly well.
Yes, it made huge mistakes. But over that same period, the British aerospace and defence industries gobbled up vast quantities of public money amid massive contraction; the motor industry all but disintegrated before being reborn in overwhelmingly foreign ownership; and we forget just how successful the likes of BREL (British Rail Engineering Ltd) were in the days of British Rail, which was a far greater success story than the powers that be wish to acknowledge in today’s badly privatised world.
Another PwC nugget: “We do not see the same strategic focus on operations as we see in other industry sectors, and there is little evidence to suggest that operations is being used consistently to help achieve competitive advantage. Despite the need to achieve lower costs in the response to lower oil prices, we have seen clear evidence that oil & gas companies have typically not set up their operations to deliver and sustain this. Their response to delivering cost savings has often been short-term and not structural, with a significant burden placed on the supply base to deliver cost savings to the operator – in a less than collaborative approach.”
I absolutely agree. It is perhaps the most damning indictment of the North Sea listed among the “observations”. I find that to be quite incredible given 23 years of joined-up “we’ve got to get our act together” initiatives since CRINE.
And a third nugget: “Supplier performance management is a specific problem area for oil & gas – contracting models are fairly rudimentary, there is a lack of trust among supply chain participants and poor understanding of factors that drive performance.”
This is quite incredible; and it is to a large degree being perpetrated by some of the largest corporations on the planet. As for the issue of trust; “manning the mistrust” or “man marking” has become significantly worse and not better over the past 20 years, judging from what I am regularly told.
Finally to Page 16. It is too short. Surely significant broader consultation was warranted; especially checking out other extractive (mining) industries.
Etc, etc, etc.
Make of this report what you will; it’s free and readily available.
Recommended for you
