Collaboration blog 25 April

Collaboration is a buzzword in the North Sea these days. At a time when the industry is striving to restore competitiveness, improve efficiency and bring down costs it has seldom been more important. Oil and Gas UK’s most recent Activity Survey found that operating costs have dropped from around $30 per boe to $17 since 2014, but measures still need to go further.

Scratch the surface though, and you quickly realise that there’s little clarity over what collaboration actually means. That lack of understanding was one of the main drivers behind our report: Making the most of the UKCS: Collaborating for success. Surveying the UK Continental Shelf’s (UKCS) operators and supply chain companies, respondents told us that they collaborate to a high degree with their suppliers and customers in initiatives mainly aimed at cutting costs.

What’s more, the majority believed collaboration is crucial to their company’s future success. Our inaugural Collaboration Index, which saw participants confidentially rate their customers/suppliers, returned an industry-wide figure of 6.1 out of 10: a positive result, albeit with room for improvement. 

So far, so good; but while it was considered important by many of our survey participants, the majority weren’t satisfied with the quality of collaboration to date. That suggests many of these companies are missing out on the opportunity to cut down on their costs – a particularly pertinent challenge in the current climate of low oil prices.

Why is this happening? Well our findings bring me back to the original question: what does collaboration mean? We deliberately didn’t define the concept, letting operators and the supply chain tell us what it meant to them.

Crucially, this showed that they see it quite differently and, as a result, their incentives and expectations are misaligned. While operators come to a meeting looking to reduce cost and transfer some risk, they often feel like they are “being sold to” and presented with solutions that lacked relevance to the problems at hand. When this happened, both parties would leave a meeting frustrated and dissatisfied, with the supply chain concluding that operators weren’t open to new ideas.

Culture is part of this problem. Some companies blamed aggressive or adversarial commercial behaviours and a culture of neither listening nor communicating. Others pointed to a lack of trust and misperception. The supply chain, in particular, felt that operators thought they were being overcharged and suppliers had better margins than was actually the case.  

This is limiting meaningful collaboration to a small number of people with trusted relationships – “heroes” as we call them – who actively look for opportunities to work with customers and suppliers and share the benefits.

Clearly then, collaborating can be difficult: many companies have tried and failed, leaving only the heroes to drive it forward. But in our experience, when it is done effectively, it has four main components.

Firstly, it requires strong support from the top. Leadership must drive change. This includes empowering the workforce to work differently, challenging organisational structures and the status quo, and communicating with clarity and consistency.

Once leadership is in place, action needs to follow. But this can only be done properly when it is focused, purposeful and has specific goals. Companies should pick a small number of projects, where collaboration can have a disproportionate effect on their business performance, and work on them with passion and willingness to show the way.

Next, the partners need to align structures, teams and processes around that goal. Ensure that organisational and process changes are well understood and addressed before starting, while picking the right team is another very important step.

Finally, effective collaboration must demonstrate results. These are measured, acknowledged by all of the parties involved and improved upon. Only then will everyone be committed to repeating the process and embedding collaborative working in their companies.

Whatever collaboration means to the industry, we now have a solid grasp of how to make it more effective. There are opportunities available to improve the quality and frequency of collaboration, and the benefits could be realised by everyone involved.

Recent projects which demonstrate this include cost savings of 40-50%, found by transforming drilling in ‘late-life’ fields, and 30-50% through changing the Engineering Procurement and Construction model. Integrating supply chains could also deliver cost savings in the range of 20-40% by improving wrench time.

As the challenges facing oil and gas companies continue to take their toll, there has seldom been a better time for the industry to coalesce. Now that we understand more about what collaboration means, it’s time to put the concept into practice.

You may also be interested in:
Securing the future of the North Sea – collaboration could be the key
Why culture, collaboration and communication are crucial to the UKCS
The Deloitte business health check – is your working capital working for you?
Making the most of UKCS: Collaborating for success

 

Geoff Gibbons pic

Geoff Gibbons - Partner, Oil and Gas operations

Geoff is a Consulting Partner, focusing on oil and gas operations. He specialises in efficient and effective operations through continuous improvement and analytics. He has recently been involved in the restart of a key UKCS asset and the development of late life operating models. Geoff has worked in 30+ businesses deploying Lean-based change programmes in Europe and the US. He holds a degree in Economics, and a Diploma in Advanced Strategy.

 

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