Reducing deferred production and operational expenditure for an oil and gas company

Reducing deferred production and operational expenditure for an oil and gas company

Situation

An upstream oil and gas company operating in Asia was struggling with low growth because of insufficient new discoveries and developments, combined with a rising cost base associated with fields that were in decline and were producing more and more water.

Several change efforts had been tried but none had had any material impact on the performance of the operating company.

How we helped

The corporate centre to which this operating unit reported got involved and co-created a new approach to turn the unit around. Two elements stood out in how this was executed: first, a significant number of employees of the operating unit were interviewed to understand what the real issues were and why previous efforts had failed to have any impact. And second, a selection process was carefully run to identify a team of pride builders who were tasked with turning the situation around. Both of these elements had major positive consequences.

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Exhibit 1
Developing a pride-building capability is worth the effort. As previous PwC’s strategy consulting team Strategy& analysis has shown, pride in one’s work is a great motivator – even greater than money. The pride-building capability bridges the gap between business strategy and execution by aligning formal organisational levers, such as capabilities, roles, and performance management, with informal levers such as motivation networks and cultural norms, thus translating official directives into on-the-ground behaviours.

The interview findings confirmed that the unit had been managed for too long in a traditional, top-down, and purely functional fashion, without sufficient attention paid to what the staff deeper down in the organisation was observing and proposing. Worse, the functional focus disregarded the reality of tough production-sharing contract terms, all of which negated the potential profits of many investments that had initially seemed highly attractive. For instance, major modifications were made to offshore facilities that were very close to being relinquished back to the host government.

Results

The pride builders became the heroes of this story. They were first encouraged by noting that senior people in the corporate centre cared about doing the right thing, which gave them courage to speak out and challenge their peers and supervisors. These pride builders also developed unconstrained, clean-sheet designs for the production and maintenance organisation, which had been suffering from highly ineffective interfaces between the teams looking after the reservoirs, wells, facilities, and the commercial needs downstream. There simply had been no clear ownership of the entire oil and gas conduit from the reservoir to the flange. Many more areas improved thanks to this pride-building approach, including local talent development, and contractor management.

Not surprisingly, most of these pride builders have accelerated their careers by extending their influence to encourage behaviours that have a lasting effect on performance.

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