The Rapid Response Institute

Category: Economic Development

  • Tumultuous Decade: What’s Next for Oil & Gas?

    Tumultuous Decade: What’s Next for Oil & Gas?

    April 20, 2020 marks the tenth anniversary of one of the most horrific incidents in the upstream oil and gas sector—Deepwater Horizon.  In addition to the tragic loss of eleven lives, the sector forever changed.  Immediate restructuring of federal oversight resulted in the establishment of the Bureau of Safety and Environmental Enforcement (BSEE) and their subsequent Safety Culture Policy.

    The industry changed too.  One of the first efforts following Macondo was the formation of the Marine Well Containment Company.  Its mission is to rapidly respond to Deepwater incidents in the Gulf of Mexico.  Subsequent organizations are also positioned around the world.

    Moreover, the industry embraced Safety Culture and continues to improve based upon Systemic Safety Cultures across organizational ecosystems.  These processes are incorporated into Operations Management Systems that incorporate SEMS as part of Operational Excellence Initiatives.

    In 2014, the sector faced another slap in the face with the collapse of oil prices, yet again.  Now it is the double whammy of the Covid-19 pandemic coupled with the price war between Russia and Saudi Arabia.

    Darkest Before the Dawn

    Each time the industry is forced to retrench, it follows a predictable pattern.  Reduction in force (layoffs), corporate restructuring and turning to technology are among the most common steps.

    This chart from the Federal Reserve Bank of St. Louis shows the employment levels for the upstream sector since the early 1970s.  One can make the case that the level of employment in the sector is flat at best.  One likely cause is automation and the extensive use of information technology to manage the business.

    Note: This chart is current as of March 2020

    In 1970, the US population was a little more than 205 million.  Now it tops 330 million.  This supports a hypothesis that the per capita employment by the sector is decreasing.  We expect this to continue.

    The Digital Oilfield marches on with the advent of IT-OT Convergence, Digitalization, etc.  This process has been underway since at least the late 1970s with the advent of the first computerized data acquisition systems.  Likely, much longer if one considers for example, the invention of electric well logging by the Schlumberger brothers in 1926.

    Certainly, other technological advances have contributed as well.  The often maligned fracturing the rock traces its roots back the beginning of the industry (circa 1862).  Contemporary hydraulic fracturing was started by Halliburton in 1949 and shale ‘fracing’ by Mitchell Energy & Development Corporation during the 1990s.

    While we have not done the detailed research, historically oil companies have outsourced to engineering firms, IT companies and others that provide a service as opposed to full time employees.  Today’s disrupted employees may find better careers in the emerging sectors that support petroleum operations as well as other sectors.

    Schumpeter’s Creative Destruction is a work in ‘the patch’ today.  A lot has happened in the Deepwater Horizon incident.  Here’s to calmer waters this next ten years!

    How Are You Positioning Your Career to Capitalize on Disruption?

    For More Information

    Please note, RRI does not endorse or advocate the links to third-party materials.  They are provided for education and entertainment only.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game

    We presented, Should Cross Cultural Serious Games Be Included in Your Diversity Program: Best Practices and Lessons Learned at the Online Conference, New Diversity Summit 2020 on April 9, 2020.  The summit will be offered again soon.  Check it Out!!

    You can contact the author as well.

  • Three Years—Ten Months: How did they do it?

    Three Years—Ten Months: How did they do it?

    The United States officially entered World War II on December 8, 1941.  The war in the Pacific formally ended on September 2, 1945.

    A recent documentary on one of the history channels chronicled the path the United States took from a nation with an underdeveloped military to global dominance over this period.  What struck this author was the technological distance covered.  Not just marshaling the military and civilian workforce, but how heavy industry, including maritime (ships), aircraft, and weapons advanced so quickly.

    Some might say that this period was unique in human history with a strong focus on the survival of the nation.  No doubt this line of thinking persisted at the time, but perhaps something else was driving this behavior.

    Crisis Management is appropriate when nations, industrial sectors, organizations and even individuals are in times of stress.  By some accounts, the managerial prowess of this period stems from the knowledge of industrial manufacturing and logistical processes. 

    While the ‘War Agencies of the Executive Branch of the Federal Government’ played important roles in this wartime effort, it was not this alone that caused a juggernaut to appear.  The size of the United States, “prewar technological industrial base” and “large population” were also contributing factors.

    Large scale hostilities brings a spotlight that is not normally held during peace time.  The fight or flight instincts of all humans help bring focus in times of trial.  However, organization and management are important for societal success for either option.

    Attaining and sustaining Critical Mass in those Critical Success Factors (CSFs) were key to enabling the rapid ascent to industrial might.  Has anything changed?

    Parallels to Today

    A recent article, The Oils Shock That Never Was, reflected on the advancements the upstream oil and gas sector made during the recent downturn.  The piece makes the case that while most prognosticators predicted so-called doom and gloom often associated with downturns, the opposite seems to have happened, particularly in the shale space.

    In a previous blog, we put forth the rationale that Operational Excellence is the key to strong financial performance.  The Oil Shock article documents the transformation of the overall industry Cost Structure.  Operators are also focusing on sectors where profits are possible at current commodity price points.

    Moreover, firms are capitalizing on existing infrastructures that are supported by new technologies.  This sounds familiar to the behaviors of economic actors almost eighty years ago!

    However, challenges remain for service sector providers.  Could these firms utilize World War II business models employed by shipbuilders in the 1940s?

    Does Your Organization have Critical Mass for its CSFs?

    For more information:

      https://www.files.ethz.ch/isn/23588/mcnair50.pdf

      https://www.rigzone.com/news/the_oil_shock_that_never_was-30-jan-2019-158034-article/?utm_campaign=WEEKLY_2019_02_01&utm_source=GLOBAL_ENG&utm_medium=EM_NW_F1

      https://therrinstitute.com/beat-the-market-can-operational-excellence-increase-eps/