21st Century model

Gone are the days of “that’s how we’ve always done it” management. For today’s national oil companies and their international partners in the Gulf, change is the only constant. Oil and gas companies are continually striving to reinvent themselves to meet the challenges of finding and accessing new reserves, optimising mature reservoirs, and answering global demands for energy. Significant skill shortages are further compounding these difficulties.

In 2004, Schlumberger Business Consulting (SBC) was established under the sponsorship of group chairman and CEO Andrew Gould to help oil and gas companies realise dramatic performance improvements and sustained growth.

Oil & Gas Middle East met Antoine Rostand, the global managing director of SBC to discuss the firm’s fresh start in the Middle East for 2010. The company has established a brand new regional office, (in addition to its Kuwait City entity), in Abu Dhabi, which will be staffed by two vice presidents and ten consultants. “The Gulf is obviously an extremely interesting part of the world. SBC is a combination of management consultancy skills and E&P knowledge which is very well aligned with the needs of the region’s national oil companies which have to develop their capabilities and import best practices,” explains Rostand.

“What is interesting about SBC in the Middle East is that we are the only consultancy firm with both operational and strategic insight to be able to impact the oil and gas business. It’s a very technical business, so the deep understanding of the upstream industry is a real advantage in that regard.”

Helping oil and gas companies face the energy challenges of the 21st century has been the firm’s remit since its inception, and Rostand says the issues that global E&P businesses are facing today mark a step change for energy companies, coupled with an urgency which cannot be understated.

“We need to provide cheap energy to the world, especially the five billion people who lack adequate energy at this point in time. This challenge is compounded by the fact that we have to reduce the carbon footprint of the hydrocarbon based industry which is a very complex problem indeed.”

In this context, SBC is focused on oil and gas part of the energy equation, which represents about two thirds of the primary energy needs of the world. The oil and gas business is facing a complex array of challenges. There are new frontiers, new technologies, new entrants to the market, and critically, a lack of people.

“New Frontiers is quite a different concept in the Middle East compared to, say, the North American market because of the abundance of natural resources in the region. Tight gas is perhaps a good example of what would be a New Frontier in the Middle East environment.”

Rostand says that it is almost impossible to characterise a typical project for the SBC client list, which reads like a Who’s Who of Big Oil.

“In the last six years we have done more than 600 projects, for more than 40 clients in over 30 countries. There is a huge scope and diversity in what we do.”

Around 20% of SBC’s deployments are strategic in nature, for example consulting a company on the best entry strategy for doing business in a new domain, such as Brazil, or Saudi Arabia. The business is currently dominated by people development issues. “Around 40% of our work is helping oil companies develop their in house skill sets, such as petrophysicists, or geologists. We do a lot of work in speeding up the capability development within teams.”

The remaining slice of SBC’s activities is operational in nature, overcoming technical issues or improving production rates.

One operational issue which has come to dominate the SBC pipeline is how to optimise a business in an era of centralisation vs localisation. “For a lot of clients, the major issue is to explore what aspects of the business should be run locally or by regional affiliates, versus what should be dealt with centrally. It used to be the case that companies chose either a very localised or a centralised model, but thanks to the evolution of communication technology, we now see ways of developing that choice,” says Rostand.

The demand slump and drying up of international credit lines has changed the focus for many oil companies. “With the financial crisis we have moved from a very bullish view where most of our work was growth orientated, with a big focus on recruiting more people and developing organisations for growth. Recently, however, it has certainly become much more about efficiency.”

Slacking off on recruitment now is likely to cause serious operational problems when demand kicks into overdrive again. Rostand says the SBC line is that firms simply must keep recruiting.

“A whole framework has been developed from the universities up to handle the flow of people needed by the oil and gas industry. We absolutely need to keep recruiting to ensure the industry has the lifeblood to tackle the challenges that are going to emerge in the next 20 or 30 years.”

Efficiency drive

According to Rostand, the greatest gains for oil companies in the next five years are likely to come from changing working practices. “During the last five years we had a boom, and during periods of frantic activity people don’t focus on optimising their supply chains, or the way companies do business. Cost tends to become less of an issue when the priority is to get as much oil as possible out of the ground.”

Now the focus has shifted to optimising operations, logistics and inventory and the NOCs are in a position to make real organisational improvements by employing best practice techniques.

“Of course, the strategic imperative of a national oil company is different to private or public oil companies. They have immense resource wealth, but their mission now is to continue to increase their capabilities. They have done a lot in recent years, but in developing the tougher resources such as tight or sour gas they must gear their strategy around doing this by themselves,” says Rostand.

“The NOCs have already become the largest producers, so the emphasis must be on continuing that momentum and taking the new challenges head on and tackling them,” he concludes.