You are Home   »   News   »   View Article

Chris Bird of MOL Energy UK looks at what the industry should do

Tuesday, August 23, 2016

The oil and gas industry needs to understand the current situation, improve the attitude of its leaders, reduce bureaucracy and give young people more exposure to company activities, said Chris Bird, managing director of MOL Energy UK.

'As leaders, how we choose our attitude really affects the industry,' said Chris Bird, managing director of MOL Energy UK. 'We can be grumpy, happy, excited or curious.'

He was giving a talk called 'transforming behavioural change,' presented at the plenary session of the Aberdeen 'Subsea Expo 2016' event on February 3, which is organised by subsea trade organisation Subsea UK. MOL Energy UK is part of Hungarian oil and gas company MOL.

Mr Bird is a former operations director of Endeavour Energy in Aberdeen, and technical director for Centrica UK.

Understanding the situation

The temperature in the oil and gas industry has changed, he said. 'We have to understand it.'

'The 20th century was great for oil, it will be known as century of oil. The 21st century will be known as the century of renewables and sustainability.'

'Today, there's a myth oil is finite. No it isn't. It's infinite. We can't use all the oil in the ground today.'

'Oil money is going to be hard to come by, that's my belief. If you have that belief your attitude changes.'

We are moving to a 'VUCA' world, he said, with VUCA standing for volatility, uncertainty, complexity, ambiguity. This means that 'we need to change our mindset how we deal with things.'

'I think currently oil is at the right price. Before, people paid more because they could.'

If you look at oil price data since the industry began in the 1860s, adjusted for inflation, the price has only been above $40 three times, right at the start (1860 to about 1880), in the late 1970s / early 1980s, and since the mid-2000s. '$40 is only low compared to a few months ago,' he said.

Meanwhile climate change is a big threat to the industry, with calls for a 30 per cent reduction in consumption over the next 15-20 years, and the world to be hydrocarbon free by 2100, which is just 84 years away.

In the past few years, the costs of oil production in the UK doubled, while the Brent futures price halved.

Meanwhile there are 2.5 times more reserves globally than there were in 1980s, and over 30 billion barrels of crude oil in storage tanks. Over $400bn of projects have been delayed or cancelled in the past few months - and a lot of that cost would have been spent on people.

'The UK Continental Shelf basin is the highest cost basin in the world, so we have to compete harder for money,' he said. It doesn't sound like a good place to invest.

There are many changes which might happen outside the industry, for example travel by magnetic levitating trains could become cheaper, faster and quicker than by plane. Solar panels could overtake hydrocarbons in our children's lifetime, he said.

Leadership and behaviour

Companies need a mixture of leadership, management and coaching, three things which are rarely found in the same company.

There are many entrepreneurial companies with leadership and which are a bit chaotic. There are many bigger companies with good management but are very bureaucratic, with processes instead of leadership. 'We need more empathy, we need an open mind,' he said.

The industry will try to survive by putting effort into technology. 'We're good at that. But what else?' Perhaps the industry should look to find ways to include trust.

Perhaps it would be good if more people had an understanding of how the oil and gas industry fits into the wider picture, and what it needs to do to make itself competitive.

Collaboration is often misunderstood in the industry. It is a process, a way of working, not a specific thing. It comes down to aligning your interests with other companies, choosing the right partners, and understanding what you know about and what they know about.

Oil and gas companies often do not have a culture to support collaboration, with managers often believing that a culture of competition works better.

The industry should be finding people who can be tomorrow's leaders, who can work in a VUCA world, he said.

The industry is not generally very interested in these topics. 'Every time we talk about behaviour and culture it's pushed to the side, we want to talk about compressor availability and supply chains.'

'There's a lot of 'emotional stuff' linked to working with transformational change. 'Men don't like it, so we need more females here,' he said.

'It is really tough stuff, but if you do it right, we can be world class.'

Companies need to plan organisational change with the same level of detail as planning an offshore project.

Leaders will need to develop skills in simplifying how they explain what the company does. 'We mystify a lot of the time,' he said.

'We have to make decisions on intuition. We want strength of character.'

Companies need to make sure their culture is 'right', he said. 'How do you know your culture is right? There are processes you can do to measure it. Look at blockages in the system and attack with vengeance.
Deal with people, deal with culture.'

Another behavioural issue is that companies are perhaps too obsessed with reducing risk, to the point where they actually increase risk by increasing complexity. 'Our industry is zero risk tolerance. We all want to reduce risk to zero. But it actually increases our risk,' he said.

Reinventing ourselves

The UK oil and gas industry could go the way of the coal industry (ie nearly extinct), or it go the way of the car industry, reinventing itself and producing high value cars like the Aston Martin.

'My dream is that in the UK industry becomes high quality. We can continue to explore the fields in the UK, and be an exporter of technology.'

'We have to understand the economic engine, what drives our business.
We need an organisational change process, good leadership, supportive coaching,' he said.

'The worst thing is when managers say it and don't believe it. We call it a 'plastic fuzzy'.'

'Ask yourself, how much time you spend each day on 'mindfulness', thinking about your business today and tomorrow. Do you spend your time running around like a headless chicken? What you do today will be your destiny tomorrow.'

'People change for two reasons, they want to change and we help them to learn, or because they've been hurt and need to change,' he said. 'So how do we help our people to learn so they want to change?'

Environment

In a subsequent panel discussion, Mr Bird was also asked about what impact he thought environmental issues would have on the industry.

With a drive to cut CO2 emissions, 'if you go to 2050, there's a 25 to 60 per cent decline in oil requirements,' he said. 'There's a threat out there to us.'

'The EU in Brussels is crystal clear about reducing hydrocarbons.'

Why did costs go so high?

In the panel session Mr Bird was asked why he thought costs in the North Sea rose so much.

'In 1998 I went offshore, we were batch completing 7 wells,' he said. 'Today it takes 3-6 weeks to drill a single well.'

'In 2008 we did 5 subsea projects in 1 year, all under £80m. Today its £180m for [one] subsea tieback. We've let our business increase in costs by 200-300 per cent in 5 years.'

During 2008 to 2014, 'everyone thought that $110 was the lowest price and we'd go to $200 and the costs would escalate.'

If you had to try to finger what is to blame for high costs, Mr Bird blames firstly 'The complexity of our infrastructure and subsequent commercial deals,' he said.

Secondly, 'at the time there was a tax grab. That sent people flying.'

Thirdly, 'because of $110, there was a huge demand for resources [people]. We started losing a lot of our resources internally.'

One tendency the industry has is that the first reaction to failure is to put in a process. 'We become bureaucratic. More focussed on managing the process,' he said.

Training and experience

Mr Bird was asked about whether the industry will come to regret the way it is currently training budgets.

'I do a lot of work with young professionals,' Mr Bird replied. 'We want to give them training but we also want to give them exposure.'

'One guy came from downstream to upstream and told us he needed 10 years of [upstream] experience before he [was allowed to] do anything.'

'In my early days [in a previous oil company] we took someone in their late 20s and said, 'you run this big project for us.''

'We've got to give youngsters ability to come onboard.'

'We need better mentoring, ensure they have someone to talk to when going gets tough.'

This is serious

'The key thing is, is the industry in a disaster or a catastrophe?' he said.

Perhaps you can draw an uncomfortable parallel with the Piper Alpha disaster.

Some crew members thought it was a 'disaster' went to the designated fireproof safe refuge and perished.

Others realised it was a 'catastrophe' and put on a life jacket and jumped. 'Quite a few of them survived,' he said.



Associated Companies
» MOL Group
comments powered by Disqus

CREATE A FREE MEMBERSHIP

To attend our free events, receive our newsletter, and receive the free colour Digital Energy Journal.

FEATURED VIDEO

Clustering Considerations in the Machine Learning Workflow – Examples with Exploration Data
Philip Lesslar
from Precision DM

DIGITAL ENERGY JOURNAL

Latest Edition Apr-May 2020
Apr 2020

Download latest and back issues

COMPANIES SUPPORTING ONE OR MORE DIGITAL ENERGY JOURNAL EVENTS INCLUDE

Learn more about supporting Digital Energy Journal