cookies, McKinsey_Website_Accessibility@mckinsey.com, reshaping the environment in which oil and gas companies operate. We see three potentially game-changing disruptions that will lead oil and gas companies to rethink their operating models fundamentally: 1. While many companies tend to think they must make a trade-off between dynamism and stability, our research shows that agile organizations master both at the same time. We are committed to ensuring that tomorrow’s energy policy will be one in … It was founded in 1935 and authorized by Congress and the United States Constitution. While other industries are further along the agility curve, many oil and gas companies already have pockets of agility. A positive external footprint. The Interstate Oil and Gas Compact Commission (IOGCC) (link leaving DEC website) is a voluntary organization of oil and gas producing states. Never miss an insight. Profound technological advances are disrupting old ways of working and enabling step changes in productivity. The Texas Oil & Gas Association (TXOGA) is a statewide trade association representing every facet of the Texas oil and gas industry including small independents and major producers. In particular, success in unconventional and late-life operations requires local coordination and integrated decision making at the front line—not layers of review from corporate. One oil and gas company, for instance, took inspiration from the software-development world and used a “scrum” approach to simplify drilling standards from 1,000 pages to fewer than 100. People create and sustain change. However, many of these ideas could be self-reinforcing. collaboration with select social media and trusted analytics partners 3. There are 100s of upstream and downstream oil and gas companies based in the United States varying from large international players such as ExxonMobil and Chevron Corp., right down to … Use minimal essential Millennials will constitute a majority of the US workforce by the early 2020s and have already started their climb into management and even executive roles. Leading companies will design an environment that meets the expectations of millennial leaders: More flexible employment structures. The company completed this exercise in a matter of weeks and cut drilling cost by 30 percent. Select topics and stay current with our latest insights, The oil and gas organization of the future. A world of resource abundance is leading to sustained lower oil prices and a focus on cost, efficiency, and speed. Our 4-day, in-person Building your Foundation in Oil and Gas course is the ideal training! Vital for Colorado: Oil and gas generates more than $600 million per year in revenue for K-12 and higher education in Colorado, new research shows Click here to read the entire report from Vital for Colorado Key state lawmakers warn “we cannot ignore the contributions of oil and gas… Digital organization. We believe the future oil and gas company will more closely resemble today’s industrial manufacturers, with a move away from tactical contractual arrangements and toward long-term strategic partnerships with a network of tier-one and tier-two suppliers. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. At the same time, agility is not meant to be chaos. Oil and gas companies may need more profound changes to meet demands for meaningful work and social responsibility to attract the next generation of top engineering and leadership talent. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Another trend is on-demand sabbaticals to support personal development via education, leisure, or time with family. Talent is no longer scarce, exploration capability is less of a differentiator, megaprojects are not the only way to grow, and market opportunities may only be economical for the earliest movers in a basin. Subscribed to {PRACTICE_NAME} email alerts. Looking for oil and gas accounting courses for new employees? Loose hierarchies. These developments are driven in part by cost and market pressure, as costs have risen to unsustainable levels and operators must find cheaper ways of working. We will likely see two dominant models arise: lower-risk assets employing a very lean corporate center with highly autonomous asset teams, and higher-risk, more-capital-intensive assets employing a much stronger center with deep functional capabilities and a strong emphasis on risk management (Exhibit 3). Get more information on the US Oil & Gas Association divisions in Louisiana, Oklahoma, Texas and Mississippi/Alabama. The collapse in crude prices has made large overhead costs unaffordable, and slow decision making has become a threat to long-term viability. Onshore Shale Gas Production, Access Questions State Issues reg. 10/20/2020 Supreme Court of Ohio Set to Issue Guidance Regarding Ownership of Oil & Gas Rights. Similarly, Statoil gave an engineering team full freedom to manage their own hours and working locations. It also means great improvements in workforce productivity. Although it’s hard to predict where the industry will land, one thing is clear: oil and gas companies that are quick to equip their organizations for a new world will find themselves well ahead of their peers. Over the past 15 years, the corporate centers of most oil and gas companies grew significantly, as a way to manage risk, leverage scale, and share scarce technical talent. Onshore Shale Gas Production, Water Management Issues reg. We are now entering a time of great change, with major societal, technological, and political trends reshaping the environment in which oil and gas companies operate. Learn more about cookies, Opens in new An example here is the default use of industry standards—with applications tailored by asset type—to create and enforce a simple but strong backbone. YPE Houston Leadership. Digital is also an important enabler of organizational agility, for example, through instant access to information for frontline decision makers or via the real-time deployment of maintenance teams linked to predictive-maintenance algorithms—an Uber model for the oil field. The Organization of the Petroleum Exporting Countries (OPEC) was created in 1960 by five countries: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Companies are thinking again about what activities they need to control in-house versus those they manage via partnerships and supply-chain relationships. A redefinition of what’s core. Meanwhile, conventional, deepwater, unconventional, and renewable assets each require a distinct operating model that cannot be delivered optimally from a single corporate center. Water in Onshore Production, Louisiana Mid-Continent Oil and Gas Association, US Oil & Gas Association Mississippi/Alabama Division. Young Professionals in Energy (YPE) is a non-profit organization with more than 10,000 members in its Houston Chapter. Data generation continues to grow exponentially, as every physical piece of equipment wants to connect with the cloud. DEC's Division of Mineral Resources mission is to ensure the environmentally sound, economic development of New York's non-renewable energy and mineral resources for the benefit of current and future generations. However, 14 percent of millennials say they would not want to work in the oil and gas industry because of its negative image—the highest percentage of any industry. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. International Association of Drilling Contractors. Organizations have been digitizing for decades, but the digital revolution is still only just beginning. Many human-resources functions are already investing in advanced analytics to mine large data sets about their workforce—training history, productivity, calendar and email, surveys, social-media profiles, and so on—to identify the drivers of employee performance, recruitment, retention, and employee engagement. An oil and gas company, for example, has created an end-to-end production-delivery grouping with teams that have missions such as optimizing the production output of a specific asset. These innovations are about to change the way oil and gas companies work in three substantial ways: A step change in safety and productivity will result from digitizing both technical and nontechnical work in a way that automates 60 to 90 percent of routine manual activity while identifying true best practices. Demographic shifts mean that employees are demanding changes in the working environment and expressing concerns about the role of oil and gas companies in society. This not only resulted in fun experiments like a remotely controlled submarine built from an empty beer case but also yielded the prototype of Statoil’s new Cap-X subsea system, which cuts development and operating costs by up to 30 percent. In parallel, the rise of lower-risk asset types, such as light tight oil, has changed the thinking about the role of the corporate center. Learn about Rapid prototyping. Press enter to select and open the results on a new page. Consequently, firms with a broad portfolio will feel the tension as they try to accommodate fast-paced, risk-taking operating models alongside slower, more risk-averse ones. For example, NASA, the Royal Bank of Scotland, and Virgin, among others, already use social networks such as Facebook, Slack, and Yammer instead of traditional intranet and file-sharing tools. Formed by the Organisation for Economic Cooperation and Development (OECD) as … Flip the odds. Onshore Shale Oil Production, Environmental Issues reg. For example, Schlumberger identified the relocation of its people as one of its central processes, as it ensures the company can deploy talent as rapidly as possible anywhere in the world. The US Oil & Gas Association (originally the Mid-Continent Oil & Gas Association) was founded in October 1917 in Tulsa, Oklahoma, following the United States’ entry into World War I. This will include a small number of simple but mandatory processes that are universally followed, a common culture to allow faster collaboration, and instant access to reliable data and the full company’s knowledge base. Reinvent your business. Onshore Shale Oil Production, Water Management Issues reg. The IOGCC's mission is to promote conservation and efficient recovery of domestic oil and natural gas … More important, though, it is no longer necessary. Moreover, the current market is pushing oil-field-services-and-equipment (OFSE) players to aggressively market integrated service packages, resulting in new partnerships formed out of mutual necessity. The Energy Workforce & Technology Council is the national trade association for the oilfield services and equipment sector, representing more than 600,000 jobs in the technology-driven energy value chain. In response to these disruptions, we see five big ideas for how organizations can adapt: 1. Please try again later. The millennial-managed organization. For the dynamic elements to succeed, they must be linked to a stable backbone. Capturing value from M&A in upstream oil & gas. Aggressively standardizing and simplifying processes can allow companies to react quickly to unforeseen events while improving safety and productivity. Onshore Shale Oil Production, Air Issues reg. hereLearn more about cookies, Opens in new work to enable small teams to form, take a defined task, and execute it quickly. Managing risk—technical, commercial, and operational—is still a compelling reason to centralize and is particularly evident for high-complexity plays such as deepwater, frontier, and liquefied-natural-gas (LNG) assets. Today’s oil and gas organizations were developed in a time of resource scarcity. Share your comments with us and the community about oil and natural gas issues that are important to you and your fellow peers. Unleash their potential. Jobs, including knowledge work, are being replaced by automation on a large scale, and those that remain require increased human–machine interaction. Gas Utility Operations Best Practices Damage Prevention, Locating and Cross Bores Roundtable, September 12-14, 2017, Chicago, IL Gas Utility Operations Best Practices Leak Survey & Leak … Any one of these ideas would have far-reaching implications for oil and gas organizations. Something went wrong. This explosion of data—combined with advanced analytics and machine learning to harness it—creates opportunities to fundamentally reimagine how and where work gets done. Christopher Handscomb is a partner in McKinsey’s London office, Scott Sharabura is an associate partner in the Calgary office, and Jannik Woxholth is a consultant in the Oslo office. The decentralized company. In extreme cases, we may even see total separations or spin-offs as the best way to manage the complexity—much as we have seen the long-term separation of downstream from upstream. Onshore Shale Oil Production, Hydraulic Fracturing Issues reg. Millennials are no longer a small group of new university graduates; in many oil and gas companies, they occupy managerial roles and are starting to climb into the executive ranks. The Independent Petroleum Association of America is the national voice of U.S. independent oil and natural gas producers. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. … The US Oil & Gas Association … To succeed, this requires truly differentiated governance and performance metrics. The relentless pace of change puts a premium on the ability to adapt quickly to changing conditions—… To carry out this mission, the Division of Mineral Resources regulates drilling and operation of all oil, natural gas, underground gas storage, and solution mining well… For example, IOCs have already learned that they must copy successful US independents to profitably exploit unconventional resources and have set up separate units to operate these assets. For example, prior to its acquisition by Shell, BG Group signed a long-term strategic alliance for front-end project engineering with KBR, an EPC company. However, this will not be consistently felt across assets. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Millennials don’t just want personal career growth; they expect to make a positive contribution to society. Organizational agility. Such ideas are gaining traction in the industry, with 17 international oil companies (IOCs) and national oil companies (NOCs) currently working together, through the World Economic Forum, to agree on standardized procurement specifications and pilots for ball valves, subsea trees, and low-voltage switchgear. A new working environment and culture. “Digital natives” in the driver’s seat will bring their own expectations of technology, collaboration, pace, and accountability. To get at those hard-to-find, difficult-to-develop resources, companies built large, complex organizations with strong centralized functions. 3. Meanwhile, existing roles will be redefined. The New Mexico Oil & Gas Association (NMOGA) is a coalition of oil and natural gas companies, individuals, and stakeholders dedicated to promoting the safe and environmentally responsible development of oil and natural gas … This organizational model is no longer sustainable with oil prices below $50 a barrel. As they rise through the organization, millennials will bring their own ideas about collaboration, accountability, and the use of technology. Teams will develop prototypes of new designs with a rapid, iterative “test and learn” mind-set, rather than going through cascading layers of review. With nearly 3,500 members, KIOGA is the lead state & national advocate for Kansas independent oil & natural gas producers. This model allowed them to tackle terrific technical challenges, manage great political and operational risks, and deploy scarce talent across the world as needed. The relentless pace of change puts a premium on the ability to adapt quickly to changing conditions—in other words, to be agile. Operations and Safety in Onshore Production, Permit Activities Issues of Onshore Exploration and Access, Access Questions State Issues reg. Onshore Shale Oil Production, Environmental Rules and Regulations for Water, Group for Rules and Regulations reg. We expect to see continued experimentation with models that recognize the differences, including separate business units or holding-company structures. At the same time, independents like BG Group, Devon Energy, and EOG Resources grew increasingly successful in exploration and unconventional plays, but they still struggled to scale operations without copying the bureaucratic operating models of the majors. This is not a simple transition, however. Interstate Oil & Gas Compact … Resource Assessment and Environmental Review, Environmental Rules and Regulations for Air, Group for Rules and Regulations reg. As a result, oil and gas companies must take a much closer look at their relative value drivers to determine where to play. But agility is … The agile oil and gas organization will look and feel very different from today (Exhibit 2): Fluid teaming. Collectively, the … By providing a forum for networking and career … 1 In 2010, it had 12 member countries — the founders … Onshore Shale Gas Production, Environmental Issues reg. As the most knowledgeable and influential accounting professionals in oil & gas… We'll email you when new articles are published on this topic. Keeping you informed on domestic oil and natural gas issues in Washington, DC. tab, Engineering, Construction & Building Materials, McKinsey Institute for Black Economic Mobility. 2. Air in Onshore Production, BLM Leasing Issues for Onshore Exploration / Access, Offshore Production Issues concerning End of Life / Salvage, Environmental Rules and Regulations for Endangered Species, Group for Federal Legislation Issues / Advocacy, Group for Federal Regulation Issues / Advocacy, Group for Discussions on Federal Royalties for Onshore Production, Permits for Offshore Access, Leasing and Exploration, Offshore Production Issues with Operations and Inspections, Operations and Safety Issues of Onshore Exploration and Access, Rules and Regulations reg. For instance, one engineering, procurement, and construction (EPC) firm was able to use advanced analytics to sift through thousands of capital projects and discovered a few simple practices that improved engineering productivity by more than 20 percent. The group, which describes itself as a local organization representing “citizens and officeholders, business owners and students” with more than 400,000 supporters, is funded by oil and gas … This could include the application of social-media tools in the corporate setting. Instant feedback. 4. The organization will be built around tasks and projects, rather than rigid hierarchies; teams may have no formal leader, instead leaving decision making to whoever has the relevant expertise. New job classes and capability profiles will rise, and many of these (such as data scientists, statisticians, and machine-learning specialists) simply don’t exist in oil and gas companies today. If companies want to attract the best and brightest, they must design ways for employees to make an impact beyond the walls of the company. New to Oil & Gas? If you would like information about this content we will be happy to work with you. The Houston Chapter of the API is a nonprofit organization of oil and gas professionals dedicated to providing a forum for discussion of energy related issues and promoting actions to improve the energy … RRC – Rail Road Commission (governs oil and gas production in Texas) RROCK – Routine Rock Properties Report; RRR – Reserve Replacement Ratio; RSES – Responsible for Safety and Environment on Site; RSPP – a publicly traded, oil and gas producer focused on horizontal drilling of multiple stacked pay zones in the oil … Onshore Shale Gas Production, Hydraulic Fracturing Issues reg. The International Energy Agency (IEA) is one of the larger organizations involved in the oil and gas industry. Responsible development of non-renewable energy sources includes a primary focus on protecting land, air, and water supplies. our use of cookies, and Last, breakthrough digital technologies are being deployed in core upstream operations, disrupting the business model and creating entry points along the value chain for original-equipment manufacturers and OFSEs. Within ten years, oil and gas companies could employ more PhD-level data scientists than geologists, either in-house or through partnerships with increasingly sophisticated vendors. As a result, we expect some oil and gas companies to reverse the 15-year trend by decentralizing business and technical work, creating a corporate core that is radically smaller than today’s. The US Oil & Gas Association (originally the Mid-Continent Oil & Gas Association) was founded in October 1917 in Tulsa, Oklahoma, following the United States’ entry into World War I. There will be new ways of managing people and performance. 4/18/2020 Meet Andrew Casper: Director of Regulatory Affairs at OOGA. Within a few years, the Internet of Things will consist of more than a trillion sensors that generate and share data. In our view, agility combines two distinct concepts: dynamic capabilities, such as the ability to rapidly form cross-functional teams and reprioritize tasks to adapt quickly, and a stable backbone of core value-adding processes and cultural norms that provide resilience, reliability, and relentless efficiency.
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