December 2016, McKinsey & Company, www.mckinsey.com. Copyright (c) 2018 McKinsey & Company. All rights reserved. Reprinted by permission.
Organizational choices made during a time of resource scarcity need reexamination when the cycle turns.
When business cycles turn, cyclical industries can struggle to retool their organizations for the new environment. For instance, today’s oil and gas companies were developed in a time of resource scarcity. To get at those hard-to-find, difficult-to-develop resources, companies greatly expanded the role of their central functions—mandating them to set common standards, make technical design decisions, track company-wide metrics, and disseminate best practices. This worked well during a decade of high growth and high prices but created complexity that added costs, stifled innovation, and slowed down decision making. As these central teams expanded, general and administrative costs grew fivefold, hitting nearly $5 per barrel in 2014 (exhibit), with the biggest increases coming from technical functions such as engineering, geosciences, and health and safety.
With prices now below $50 a barrel, that organizational blueprint is no longer sustainable. While companies have cut their support functions since 2014, the overall organizations supported by these functions are also smaller. This suggests further reductions in corporate functions will be needed, as well as new organizational models.
A more agile organization, with fluid teams and looser hierarchies, can lower costs and create greater responsiveness to today’s vastly different markets—ranging from megaprojects to less asset-heavy unconventional shale-oil and renewable-asset plays. Technologies such as networked sensors that generate and share data can help optimize production processes, while digitally enabled automation of routine manual activity can reduce human risk and spur productivity. Critically, the structures built to manage scarce talent and large-scale megaprojects will need to be fundamentally redesigned. We see two models arising: for lower-risk assets such as tight oil, a very lean corporate center with highly autonomous asset teams will suffice, while higher-risk, more capital-intensive assets will need a comparatively stronger center with deeper functional and risk-management capabilities.
For additional insights, see “The oil and gas organization of the future.”
- Robotics projects announced with both Sonomatic and University of Strathclyde
- Technologies focus on reducing cost and improving safety of vessel inspection
- Next Asset Integrity ‘Call for Ideas’ seeks corrosion under insulation solutions
The Oil & Gas Technology Centre has invested in three robotics projects to transform pressure vessel inspection, which costs the industry hundreds of millions each year and poses significant safety challenges.
The projects were selected as part of our first Asset Integrity ‘Call for Ideas’, which launched in 2017. Pressure vessel inspection was identified by the industry as a crucial challenge to maximising economic recovery from the UK Continental Shelf.
Non-intrusive inspection (NII) of pressure vessels can deliver significant cost and safety benefits. Sonomatic’s aim is to develop the next generation of robotic NII technology, with improved speed, agility and autonomy compared with existing systems. The robot, incorporating advanced inspection technologies, will help increase production uptime, reduce costs and improve efficiency.
Separately, we’re working with the University of Strathclyde to develop a new robot crawler equipped with 3D laser scanning and non-destructive testing technology. Existing crawlers are typically deployed only when there is clear line-of-sight for the operator. The University’s solution will construct a virtual, dynamic 3D representation of the inspection site meaning it can be operated safely from a remote location.
We’re also supporting the University of Strathclyde in the use of swarms of small unmanned aerial vehicles, or drones, for visual inspection offshore. Drone swarms, which are being rapidly adopted by the military and for logistics activities, could deliver a safe, flexible and cost-effective alternative to human inspection.
In March 2018, we launch our second Asset Integrity Call for Ideas, focused on predicting, preventing, detecting and repairing corrosion under insulation. More information will be communicated in the coming weeks.
Rebecca Allison, Asset Integrity Solution Centre Manager, said:
“From day one, developing and deploying new technology for pressure vessel inspection has been a key focus area for the Oil & Gas Technology Centre. We’re delighted to be investing in robotics projects with Sonomatic and the University of Strathclyde, which we believe can significantly reduce costs, improve efficiency and enhance safety.
“Process vessel inspection and corrosion under insulation cost the industry more than £300 million each year so it is important that our first two Calls for Ideas focus on these challenges. We’re always looking for innovative ideas and concepts from inside and outside the oil and gas industry and look forward to launching our next Call in March.”
Mark Stone, Integrity Services Manager, Sonomatic, said:
“We’re excited to be working with the Oil & Gas Technology Centre to develop the next generation of robotic inspection tools for non-intrusive inspection. There have been significant advances in robotics technology, inspection solutions and data science over the past few years and the support from the Technology Centre will ensure these are soon available in a practical tool for field application.”
Willie Reid, Director of the Strathclyde Oil and Gas Institute, said:
“The robotics team at Strathclyde, led by Dr Gordon Dobie and Dr Erfu Yang, are excited to be working with the Oil & Gas Technology Centre on these challenges for improving inspection for offshore asset integrity.
“In a multi-disciplinary approach, they will use the broad experience of both the Centre for Ultrasonic Engineering and also the Department of Design, Manufacture and Engineering Management. We will also utilise our experience in transferring technology from other sectors into oil and gas.”
Canrig Robotic Technologies has developed an innovative autonomous robotic drilling rig for unmanned drilling operations. The new system (Robotic Drilling System™) sets new standards with increased safety and cost-effective planning and drilling, and can be implemented on existing as well as new drilling structures both offshore and on land.
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- Builds on Global Climate and Energy Project’s 15 years of success
- Strong science and exploratory research to develop low-carbon energy solutions
- $20 million commitment in addition to ExxonMobil’s GCEP investment of more than $100 million
- Expands company’s collaborative work with academic and research institutions around the world
IRVING, Texas–(BUSINESS WIRE)–Exxon Mobil Corporation (NYSE:XOM) today announced that it will become the first founding member of the new Stanford Strategic Energy Alliance, an initiative that will examine ways to improve energy access, security and technology while reducing impacts on the environment. As part of its commitment, ExxonMobil will contribute $20 million in funding over five years to research and develop lower-carbon energy solutions.
The Stanford Strategic Energy Alliance builds on the success of the Global Climate and Energy Project (GCEP), also led by Stanford, which focused exclusively on low-emissions, high-efficiency energy technologies. ExxonMobil has sponsored GCEP since its inception in 2002 with a commitment of $100 million and additional contributions toward specific projects. In its 15 years of work, GCEP has evolved into a pioneering collaboration of scientists, engineers, researchers and students focused on identifying breakthrough low greenhouse gas emission energy technologies that could be developed and deployed on a large scale.
“ExxonMobil has worked with Stanford to advance low-carbon technologies over the last 15 years, and we’re excited to be the first founding member of this new endeavor,” said Bruce March, president of the ExxonMobil Research and Engineering Company. “Identifying scalable solutions for addressing the dual challenge of supplying energy to meet global demand while minimizing the risk of climate change is one of our core missions. We are continuously looking for ways to improve existing supply options and manufacturing processes while managing carbon intensity.”
Since its creation, GCEP has sponsored more than 100 research programs in the United States, Europe, Australia, China and Japan, and has resulted in over 900 papers in leading journals and more than 1,200 presentations at conferences. Building on fundamental science, significant advances have been made in the areas of photovoltaic energy, renewable and lower carbon fossil fuels, batteries and fuel cells. More than 60 technologies have also been developed and 15 patents have been issued. Multiple companies have also started up as a direct result of or inspiration from GCEP research.
The new Stanford Strategic Energy Alliance will pair industry alliance members and Stanford professors who share common research objectives across the spectrum of energy topics from science and engineering to policy and business. Managed by the Stanford Precourt Institute for Energy, the alliance will also fund some early-stage research at the direction of its faculty leadership.
ExxonMobil’s support for the Stanford Strategic Energy Alliance expands the company’s collaborative efforts with other academic and research institutions that are focused on developing an array of new energy technologies, improving energy efficiency and reducing greenhouse gas emissions. The company currently works with about 80 universities in the United States, Europe and Asiato explore next-generation energy technologies, including founding members of MIT Energy Initiative, Princeton E-ffiliates Partnership and University of Texas at Austin Energy Institute.
Source: Exxon Mobil Corporation
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