All eyes will be firmly fixed on Doha April 17 as representatives from the world’s largest oil producing nations discuss a potential freeze in output.
Markets have already been buoyed by talk that the meeting will see Saudi Arabia agree to restrain production, with Brent crude rebounding to around $40 per barrel. While we can expect any agreement to support prices, it is unlikely to result in any significant oil price correction. That is because the world is still awash with an oversupply of oil and concerns about weakening demand persist amid forecasts of lower global growth and a Chinese slowdown. As a result, any deal struck in Qatar is likely to be welcomed by the industry but also accompanied by an acknowledgement that the sector needs to do more to navigate its way out of the current downturn.
For Middle Eastern operators, embedding behavioral and cultural change at the heart of their organizations will be key to identifying and enabling the necessary sustainable operational improvements which will result in significant cost savings. This can be achieved through increasing the adoption of operational excellence (OE) programs which get producers thinking creatively about where they might be able to make changes. Across the Middle East, the aspiration for continuous improvement is well established and has recently proven to be critical for the oil and gas sector as companies are compelled to find sustainable ways to streamline operations in response to the depressed oil price. Consequently, the industry is grappling with a period of tumultuous change not experienced in the region before.
Progressing to the Next Level of Operational Excellence
Although well-renowned industry schemes such as Six Sigma, Lean, Agile and Kaizen have been put in place to eliminate inefficiencies and improve processes, these initiatives have not been able to provide the complete foundation to drive continuous improvement. With the introduction of OE, leadership teams can confidently say and demonstrate that they are running their assets safely, reliably, sustainability and cost-effectively.
Companies embrace OE as an engine of change, to build momentum, transform the way their organization works and to deliver the costs savings and scale of improvements demanded by the current oil price. Many of the regions’ oil and gas companies have started to implement their vision and strategy for OE but in some cases have lost momentum over time or have yet to achieve sustainable results. Why are these companies struggling? Reasons vary but include: inaccurate project scoping, a false sense of security, lack of motivation or even a lack of leadership support. As there is no single approach to OE that can be applied universally, gaps in initiatives can still persist as OE is about cultural and behavioral change, not just simply a way of effecting cost reduction and quality improvement.
OE programs are sometimes mistakenly seen as being "projects", with a beginning and end – rather than the fundamental shift in mind-set that precedes real and lasting change. The industry is very good at going through the motions rather than effecting deep, meaningful change. If we consider issues around the lack of engagement either intentionally or passively then it is not surprising that we see up to a third of initiatives fail. Success usually only comes when the businesses address deeply-rooted behavioral and cultural issues, identify clear and measurable operational improvements, define a financial target from the offset and articulate the elements of a sustainable result early on. Due to the sheer volume of change initiatives, and because change needs to happen quickly, some organizations experience "change fatigue". It is essential to build an internal change capability to ensure improvement really can be continuous.
Creating Empowered Employees
Whether the task is to deliver improvements from within disciplines such as integrated asset planning, risk management, production optimization or supply chain management, it is essential to communicate a clearly defined change strategy because change needs to be seen as a constant, not a one off event, to become a core competency in an organization.
Moving forward, oil and gas operators have to be more agile when faced with disruption and uncertainty. The adjustment and alignment of staff behaviors to new ways of working is the most critical success factor. Sustainable improvement requires developing the capability to coach those implementing change and to ensure they can provide ongoing coaching within the business.
Behavioral Change Can Lead to Sustainable Future
Success in achieving OE is in understanding the relationship between change management and OE, which is very much dependent on employees’ empowerment and ownership, the desire to embed a culture of continuous improvement and a collective commitment to deep change. By putting behavioral change at the core of each OE initiative, it is possible to achieve remarkable results. Only then can a significant change become a new way of working.
Philip Camp is Hitachi Consulting's Vice President for Energy, Metals & Mining Industries, EMEA. He has over twenty years of experience in the energy industry having gained extensive knowledge and experience leading and delivering transformational programs to both IOC and NOC clients.
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