Category: Technology and Methods

New technology and ways of working: What it may do – what’s commercial and what’s not

Crash of 2016 and rise of internet of things

As I write this post crude Oil is trading a shade under $30 and Iran is set to re-enter the market. When I was in Kuwait I thought that the ramp-up of Iraqi production would swing the market – I had not counted Shale or Iran. In some ways a price drop was inevitable in a cyclical industry but the effect of this drop is painful for many good friends in Aberdeen and Stavanger – and other oil-centric towns and cities around the world.

What will the up-shot of this price crash be? Perhaps there are lessons from history?

Price crash of 1986

The chart here (from the FT [Link]) – shows the oil price from 1983-88.

What changed after the crash of the mid-eighties? In my view, the most significant change in Upstream came in Exploration. New techniques and rapid advances in computing power reshaped whole departments of geologists, petrophysicists, geophysicists and started the movement towards integrated sub-surface modelling and simulation which we have today. What happened was a rapid reduction in finding costs and increases in certainty (pre-drilling) – leading to tools that provide deep understanding of deposits and accurate ways to manage reservoir dynamics.

This article in Computer World, May 1987 (page 89) [Link] is subtitled “Cost-cutting prompts Sohio to centralize and integrate systems” – this is the world I remember joining as PDP-11/34’s were being replaced by VAX 11/785 and Micro-Vax’s and sun microsystems 4/330’s, and if you didn’t know how to configure a Versatech plotter and UNIRAS libraries you weren’t much use. That was the start of, and without any research, I’d estimate that the cost on a job-by-job basis has fallen 90% and enabled far more technical reservoirs to be identified and quantified – leading to access to new territories, new financing mechanisms and new development concepts.

The imperative in this period was reservoir optimisation which quickly came to the fore with all manner of rapidly applied innovations in complex drilling, remote sensing and reservoir simulation. Exploration took a back seat for a while with lots of analysis and “banking” of reserves which were not really developed until the mid-noughties.

Price crash of 2015

So what’s going to happen this time around? Like 30 years ago I see that there will be a rush to take cost-reduction actions now, and there will be a period of reflection where new design patterns and new dominant designs will emerge ready for the next upswing.

Low-cost operational interventions

I think we will see the case for low-cost operational interventions. More temporary fixes for failing plant with minimum workable solutions applied to prolong life until shut-down (either permanent shut-down, or a large overhaul). This will include various forms of integrity management solutions – this might be an interesting year for companies like Wood Group, Intertek, ICR, AIBEL etc.

New design pattern for operations

Rapid cost reduction in the North Sea must now be centred on reducing operations costs. This means increasing the throughput of existing plant and reducing production-loss due to outages. This will mean accurate measurement and control, real-time plant-simulation and low-cost approaches to maintenance. Like we saw consolidation of exploration departments and the emergence of integrated geoscience teams we will see the rise of joint operations teams (concepts that have existed for a while but never fully had their impact). We will also see the rise of computer simulation and integration of data across domains – with predictive scheduling of parts and preparation of work-orders so that crews will be able to prioritise work and maximise the value generated from each shut-in period.

The impact of this will be a reduction in lower skilled workers and an increase in on-shore data-savvy planners. There will need to be more instrumentation and remote sensing, data communication and integrated dash-boarding of data. Emerging from this will be discovery of key, high-impact monitoring and intervention techniques and dominant designs for way-of-working will emerge. Much of this work will rely on enabling technology which closely resembles “The Internet of Things” [Link] [Link]

Unlike the many previous attempts at “field of the future” and “intelligent operations” – and a hundred other buzz-words – this time there is real imperative to make this change.

New dominant designs for development

After the 1986 price crash lots of back-office work was undertaken in exploration but drilling was at much lower levels for more than a decade. This time it’s going to be field development that takes the pause. According to the FT, WoodMac reports that over $400bln of projects are now delayed or cancelled. [Link]

I’ve talked to a number of operators this year and no-one is worried about designs taking longer. Everyone wants projects to cost less so that they can have a better chance of attaining FID. I predict that the dominant designs emerging from new design patterns and the remote sensing and operations will be incorporated into these designs in an integrated way. Taking asset data streams (and interpretation of them) into the integrity and barrier models from day one. This will lead to substantially lower cost operations.

With the retirement of the old-guard in both operations and development I expect to see younger engineers who embrace new technologies take major decisions. These are engineers that “get” the bigger picture and are frustrated by the pace of change. Their intervention will lead to more computerised monitoring, more adoption of technology like sub-sea processing, differing materials and techniques and wider acceptance of what were – five years ago – things not considered “proven” – or at least, not proven to the satisfaction of the old-guard.

Want to be a consultant?

Introduction

A bit of a topic departure today, rather than write about the Oil and Gas industry I thought I would share some more insights about how I work and why I do it this way – I intend to expand on this topic in future articles. This is quite a long article but there are a lot of points to introduce, so please stick with me. Please let me know what you think either by commenting here or emailing me directly.

So you want to be a consultant, do you?

I have been an independent consultant and an entrepreneur for around 7 years on-and-off and I find that, while  It’s not perfect it works for me.

Many people are curious about what I do, and often will tell me that they are considering becoming an independent consultant. The next question is normally “what’s it like” or “why do you do it?” Most of the people who ask me are disappointed with the position they find themselves in. Many are employees who feel frustrated with their role, some are disillusioned senior staff or partners in consulting firms. Increasingly I get the question from friends in the Oil and Gas industry who feel that their jobs are at risk, or are already seeking new opportunities.

Well the short answer is that a career as an independent consultant is not for everyone. There are some questions that I recommend exploring to see if it’s for you:

  • What’s motivating your research?
  • Is the world of work changing?
  • What is a consultant, really?
  • What skills are needed to be make a living?
  • What will it be like?
  • What does success look like for you?

What’s motivating your research?

If your questions are only from curiosity that’s great – but if you don’t want to become a consultant (or a client) please consider that time is my product. If you are considering becoming one then here is something to consider:

I don’t have a wage, I essentially sell my time. There are 8500 hours in a year. I’ll be asleep for 3000 of them and I’ll spend 1,500, eating, buying groceries, showering, driving places, doing laundry and generally faffing about. That gives me 4000 hours to do things that really matter to me (including work). Traditional consulting firms expect you to account for 2000 billable hours. (They do this because that’s what they have bought this from you in return for a wage).

So if it’s just curiosity that makes you ask about consulting then perhaps we’re wasting time that we could do something more interesting together with instead – like go for a cycle, cook dinner or swap stories.

If, however, you’re seriously interested in this and we enjoy each other’s company then I am delighted spend time with you.

My first advice is – that if you are considering independent consulting as a “stop-gap” until something else comes along – you’d be better looking for a contract position (see later) and spend time tracking down what you really want instead. Consulting is hard and time consuming. It is a profession and requires dedication and a willingness to hone your craft. Don’t start unless you really want to make it work.

Is the world of work changing?

Well of course it is. It always changes. When was the last time you saw a typing pool or an elevator operator. Perhaps this time it really is fundamentally different. I don’t know.

There’s this phenomenon called confirmation bias. This refers to our tendency to instinctively seek out information that supports our view of the world rather than challenge it. You will have experienced comments like “It’s not only me that thinks this – look so does [fill in name of authority figure here]”. So while risking confirmation bias, here are number of articles that I’ve read, most recently in the Economist, exploring how the world of work and how the idea of a company may be changing. Lynda Gratton writes a lot about this and so does Charles Handy and Rob Goffee. My favourite book of the last couple of years “The Second Machine Age” has some views on this too.

But there is a counter argument – if you are building and operating large capital assets then a freelance model is unlikely to work. For some people the psychological strain (not to mention the difficulty in getting a mortgage these days) means they’d rather be an employee. Some people really want someone else to order their day for them. Too much choice in what to do in a day can be overwhelming just as too much choice in a super market can be. Joining a company can (if it is a well-run one) be a way to minimise the decisions needed. Limiting them to just the ones that matter for a role adds clarity. Often an employee can go home at 5 O’Clock. Top that off with an argument around public participation in stock markets that really require a joint enterprise to function, then I think we’re seeing a rise of alternatives not a wholesale destruction of the traditional company and place of work.

In short then – there will be plenty of “jobs” available if you want one, and you can convince someone to choose you to do it. You don’t have to be independent – but, if you choose to be – things have never been better. I am also often approached by organisations claiming that they are “Disrupting the consulting model” and would like me to be part of their new model, in a networked mode I have nothing against this but I don’t go exclusive and certainly am not willing to sell my time as an employee of one.

What is a consultant really?

In my simple view of the world (short of winning the lottery) there are only three ways to make an income. I don’t know about you, but I need an income, so here are the methods I know of.

  1. Own shares in a business or other income producing asset
  2. Lend money to someone who then pays you back with interest
  3. Sell your endeavours by becoming:
    1. an employee;
    2. a contractor;
    3. a freelancer; or
    4. a consultant

I’m only going to deal with 3.

Employees’ time is sold by contract by their employer. Employees do as they are told and the fruits of their labour are owned by their employer. Often banned from working for other people, they can be expected to be loyal to their employer. They may have security of tenure for the length of their notice period and there are laws that stipulate fairness in their treatment.

Contractors are more convenient employees. Hired on a fixed-period basis, usually to fill a temporary gap or provide additional short-term labour. Staffing agencies help broker deals and some consulting companies will hire in temporary contract workers as a way to deliver projects that require additional resources. Tend to work for only one customer at a time. Responsible for making own arrangements and sorting out the interface with the government. Contractors normally assigned specific work to undertake and will have some relationship to line management.

Freelancers undertake specialist work in which they are experts. Tend to deliver a specific piece of work and under their own direction, often building on their prior work. Ownership of output is negotiable, tend to work for more than one client at any one time. Tend not to work under the management control from their clients.

An independent consultant never takes a line-role, and does not perform tasks that should be taken care of within the line. Work is more complex and consists of being paid for opinions, advice and influence. Results through influence (internal and external) and not control. Success comes from coaching an organisation to perform better by itself after you are gone. Work is transitory and comes to a natural conclusion once you are successful –don’t get too attached to a client or expect to stay. It’s worth noting that an independent consultant is not an employee of a firm – in this case income of the firm may be generated from consulting-like activities but he “consultant’s” income won’ be.

What skills are needed to make a living?

Consultants need to achieve results through influence. That means you need to build opportunities and develop the skills to add value for your client.

Creating opportunity relies on building a powerful network, the ability to identify opportunities to help and the wherewithal to generate an invitation to help on a commercial basis.

Influencing relies on persuasion, establishing trust and the ability to work outside normal line management constraints.

In addition to client-facings skills there is an important set of internally focussed skills which relate to structuring your work, maintaining motivation, developing new skills and coping with the psychological pressure of the independent consultant life-style.

I find that the most important action for me is to spend my time with people who make a positive difference. People who create time for me, and people who energise me. This relies on a skill of knowing who these people are and the inner strength to maintain discipline in who I choose to spend time with.

What will it be like?

In short it will be a roller-coaster. The greatest highs and the greatest lows of your working life can be found in this approach. What successful consultants find is that – though they cannot control many of the circumstances in which they operate – they can influence them and they can control their reaction to them. It’s a subtle distinction bear it in mind and it will continue to make more and more sense as your consulting career develops.

What does success look like for you?

This is the most complex of all. Knowing what success is for you – is it to spend more time with your family, to do more cycling (a favourite of mine at the moment), to think deep thoughts, to live in a location you select, choose how much you travel and to where. In short will money make you happy, or will being happy make you money [Link]?

This is complex because as an employee it is a question rarely asked, so you may have little experience answering it. Employees tend to be told what good looks like and rewarded with money, perks or praise when they achieve it (I realise that often the goal-reward structure is misaligned in some companies, but that’s how it should work). As an employee you are, by definition, not meant to consider what time you commit to activities. You are expected to apply your time effectively to the goals of your employer. If you are senior you are expected to spend your time thinking of goals that your employer should consider and then direct others to achieve those that were selected. In none of the normal employee situations is your working identity explicitly tied to your own personal goals.

One exercise I undertake with people who are considering a change is to point them to the definition of wealth proffered by Buckminster Fuller, and then ask them what they would do if money were not a constraint. Start from there and define your own definition of success – until you have it you can’t value anything and therefore you can’t price your work in a meaningful way.

Cross-company integrated planning

A while back I was talking to the CEO of a North Sea operator. He was telling me a tale of one of his assets – it had been off-line for a large proportion of the last year. He was beyond annoyed and had become “resigned” to the situation.

At first the he was off-line because the gas it imported from a nearby platform to power his water injectors was not available due to that operator’s maintenance schedule. Almost as soon as this came on-line his export route into CATS was suspended – again due to maintenance. (Here’s another example of an operator affected by CATS maintenance [Link]). Well blow-me if – when that came on-line – he didn’t face a gas-turbine maintenance problem on his own platform.

This interlinking of assets and reliance on others’ actions is becoming more common – for example here is what Enquest say about the Heather installation: “The Heather installation is designed to accept production fluids from Heather field and Broom field via subsea tieback. The production fluids are processed and separated into oil, gas and water. The processed oil is exported to the Sullom Voe Terminal via Ninian Central platform, while the gas is routed through compression trains for lift gas purpose.” [Link]

For years operators have battled to schedule maintenance on their own platforms so that work can be conducted in the most economic sequence. They aim to maximise capacity, up-time and utilisation. In this new interconnected world of small fields and infrastructure operating beyond its design life, companies must take into account the maintenance schedules of others.

One way is to be ready to work when the unexpected windows occur – that’s true even when you are a lone operator – but planned maintenance is a different matter.

Bob Spence, founder of Capital Project Partners, and member of the Bestem Network says that among the things he would consider are to: establish a common vocabulary across the supply chains of all operators; develop common definitions of how plans are communicated and progress measured and reported; find ways to deliver real-time reporting; and use predictive analytics to generate insight.

Lars Sandbakk, a leading light at Safran Software Solutions and expert in project planning tells me that from a technology perspective the issue boils down to: different software and their embedded methods; different project management philosophies; different terminology; and the lack of sensible data that can be easily exchanged without exposing more about your operation than you want.

He tells me that there is a cross-company initiative called ILAP (Integrated Lifecycle Asset Planning Standard) is being worked on and has been submitted as an ISO Standard.

Of course, while information and technology may be part of the solution, to make this work will require changes to commercial agreements and changes in the ways people actually work. These things are difficult to achieve and, without properly aligned incentives or new regulation and enforcement they are unlikely to take hold.

Can we get the last drop?

North Sea Oil and Gas is the property of the people from the countries that surround it – UK, Norway, Denmark, Holland, Germany. As a citizen of the UK I don’t want any more of my country’s wealth to be transferred to the citizens of other countries than is necessary. I think that this means extracting every last drop from this resource that we economically can.

There seems to be a number of issues that will stop this from happening. I hear many reasons that might account for it including:

  • High cost of production in the basin;
  • Inability for companies to co-operate on problem solving;
  • Individual companies optimising for their goals;
  • Lack of access to shared infrastructure;
  • Environmental impact; and
  • Decommissioning liabilities

I sense that if action is not taken soon, access will be lost to critical shared infrastructure. Should we get the last drops out of the North Sea? What do we need to do to make this happen?