Oil & Gas Industries - in crisis or Opportunities for Change?
Posted by APM on 4th Dec 2015
Everybody reading this article will be aware of the fall in oil price. At the time of writing it is around $40 a barrel with the prospect of dropping, even if only for a short while, to as low as $20 a barrel. The best predictions see it rising and stabilising in 2016 at something close to $60 a barrel. This is still below what the industry needs to flourish. Unlike previous slumps in oil price this one is seen as long lasting with the levels unlikely to recover in time to head off necessary industry infrastructure decommissioning work.
As you will see in this article, this challenge provides an opportunity to rethink how projects are managed in the Oil & Gas Industry.
Most people feel the effect of the reduction in oil price in the amount they pay for domestic energy and cheaper diesel and petrol prices at the pumps. The low oil price also reduces the cost of fuel for consumers as well as companies that service consumption, like transport logistics. However there is a downside to the reduction in oil price and that is its impact on the North Sea Oil & Gas Industry and, in particular, the Aberdeen region of Northern Scotland.
Karl Szecowka and I, from APM Benefits Management SIG, attended the ‘Engineering Construction Industry Training Board’ (ECITB) conference on the 17th of November. The theme for conference was ‘Collaboration for Efficiency & Cost Reduction’. ECITB www.ecitb.org.uk/ are clearly attuned to the challenges facing the industry and the conference demonstrated their support for those most affected.
We enjoyed the presentations, spoke with exhibitors and project management professionals, and learned first-hand of the challenges faced by the both industry and the region.
Nick Jones, APM Membership Development Manager, was on hand to provide guidance on what the APM can do to support both the industry and the region. For me, this was a good example of APM HQ and member / volunteers working together to explain how APM can support PM community needs – worthy collaboration in its own right!
The conference provided me with some a number of insights including the imperative and motivation to use the prevailing market circumstances to improve the way that projects are managed. The conference addressed the issues with the current tools and techniques used in the industry, and proposed new ways of working, such as collaboration.
A strong message from the conference was that the industry had to learn to do more with less and become more efficient and effective in project management and delivery. The traditional method of managing supplying chains is seen as anachronistic and untrusting, and a constraint on businesses ability to innovate. There was universal agreement that this must change and that collaborative working, as explained by David Hawkins of the Institute for Collaborative Working (ICW), could help businesses significantly improve the way they operate.
The key approaches that were outlined during the conference that could assist in working in a tighter cost environment include;
- increasing stakeholder collaboration in project delivery
- the role of project management in today’s environment - especially efficiency and effectiveness
- the future of North Sea project managers using a combination of new skills
- step change in culture and behaviours within the industry
In addition, they recognised the need to standardise training, competency and technical specifications and share more company information to help the industry as a whole, and rationalise and improve the way that it works.
As well as addressing difficulties, like the low oil price and correspondingly tighter budgets, the conference also explored opportunities within the sector. One of the main opportunities for the profession related to involvement in decommissioning of the North Sea oil infrastructure. Decommissioning is big business – within 5 years it is set to overtake development projects!
For now the high oil price is a significant challenge in the Oil sector and is really hurting people. For example more than 8,000 individuals have been released from their roles during the month of October alone.
One approach that seemed to be missing from the presentations and workshops was a clear focus on benefits management. Putting the discipline at the heart of organisational thinking and project management would pay dividends. Effective benefits management helps to identify which projects create the most value and yield the best return on investment and, most importantly ensure that they are actually achieved. We see an opportunity to fill this gap!
Karl and I met up with Peter Benton and David Connolly from the Scotland Branch, and agreed that BM SIG would play a central role in their annual conference. The Scottish conference will address many of the topics addressed in the London-based Benefits Summit to be held on 23rd June next year. This provides coverage in the north and south to gain a better insight into Benefits Management.
Karl and I were attracted to this conference because we believe that Benefits Management can prove valuable to organisations faced with the need to make whole sale, transformational change. Benefits Management is the single organisational discipline that provides a clear ‘line of sight’ between organisational strategy and the achievement of the outcomes necessary to realise benefits.
The theme of this conference was collaboration. What BM does is to provide a framework for all stakeholder groups to discuss:
- What the challenges are
- What role each stakeholder plays
- What the strategy should be
- What the change objectives are
- What benefits the changes are intended to realise
- What success looks like
If we consider the UK economic environment in the light of global oil prices there are benefits for some and dis-benefits for others. Largely benefits result from lower fuel costs, passed on to the consumer encouraging growth and reducing costs. The challenge to the Oil and Gas industry is to transform working practice and, as with all public and private sector business, do more with less and do it more efficiently and effectively.
In 2016 the Scottish Conference and the Benefits Management SIG Summit will showcase the ways that Benefits Management provide the necessary support to crisis situations faced by business.
We would be pleased to see you at both events.
Co-Chair Benefits Management SIG