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LBS GES 2014 - Keynote 2 - Antoine Rostand
- 1. © 2014 Schlumberger Business Consulting. All Rights Reserved. 1 Schlumberger Confidential LBS Annual Global Energy Summit: Resources Efficiency and Security London, England November 27th, 2014
- 2. Energy: an impossible equation? © 2014 Schlumberger Business Consulting. All Rights Reserved. 2 Schlumberger Confidential Source: SBC analysis Provide safe and affordable energy to the world 5 Reduce and mitigate impact on climate change Renewables Hydro Nuclear Coal Gas Fight energy poverty Bn Tons Oil Equivalent 20 15 10 0 1990 2000 2020 Oil and condensate 1995 2005 2010 2015 2025 2030 Year Presentation Focus
- 3. Onshore and shallow water Major contributors of last decade’s discoveries: Gas 1980 1985 1990 1995 2000 2005 2013 © 2014 Schlumberger Business Consulting. All Rights Reserved. 3 Schlumberger Confidential Oil & Gas: end of peak oil? 5-YEAR AVERAGE OIL DISCOVERED VOLUME (2P DISCOVERIES) Bn bbl 55 50 45 40 35 30 25 20 15 10 5 0 Source: IHS Edin; Rystad Energy; SBC analysis +2% -8% 2010 Deep and ultra-deep water Billion bbl Oil Brazil, Angola and Kazakhstan Iran, China, Russia, Turkmenistan, Mozambique, Australia, US and Canada
- 4. Upstream O&G: the end of an easy ride? E&P EXPENSE EVOLUTION VS. CRUDE OIL PRICE 1,400 140 120 100 80 60 40 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 © 2014 Schlumberger Business Consulting. All Rights Reserved. 4 Schlumberger Confidential Bn USD, USD/bbl Source: Rystad Energy; World Bank; SBC analysis Note: (1) O&G global annual CapEx + OpEx, (2) EIA European Brent annual spot price 0 1,200 1,000 800 600 400 200 0 E&P Expense (1) Crude Oil price (2) Oil prices have flattened during the last years but not the expenses
- 5. Oil & Gas companies challenges: what can an MBA do? SBC’S VIEW ON COMPANIES INTERNAL CHALLENGES © 2014 Schlumberger Business Consulting. All Rights Reserved. 5 Schlumberger Confidential Source: SBC analysis Cash from operations Operations Excellence Maximizing production and optimizing OPEX, safely Capital Efficiency Optimize portfolio Ensuring capital discipline and increase project value Talent shortage Managing the shortage of senior staff while adapting to the changes in the industry’s demography In Country Value Developing people beyond Oil & Gas Promoting long term industry development in O&G countries
- 6. Cash from operations Production efficiency : management or technical problem? MAIN SOURCES OF LOSSES % of Maximum Production Potential Compression train Tanks/ vessels Wells Power generation & distribution Wellhead & subsea equipment Flowlines/ pipelines/ risers/ exports Instrumentation & control systems Benchmark Efficiency is not correlated with facility age © 2014 Schlumberger Business Consulting. All Rights Reserved. 6 Schlumberger Confidential NORTH SEA PRODUCTION EFFICIENCY % 85% 80% 75% 70% 65% 60% Source: 4 years over 180,000 boed North Sea production (3 companies); DECC; SBC analysis Safety systems TAR overrun Pumps Artificial lift systems Injection Metering Other surface equipment and facilities 55% 04 05 06 07 08 09 10 11 12
- 7. Capital Efficiency More companies are doing mega-projects, but delays are still rising E&P COMPANIES SPENDING >$5BN CAPEX PER YEAR AND MEGA-PROJECTS1 DELAYS # of companies; years of delay # of companies Avg. delay (yrs) 17 © 2014 Schlumberger Business Consulting. All Rights Reserved. 7 Schlumberger-Private Average delay # of companies 4 5 7 8 11 12 18 22 15 20 27 32 32 35 30 25 20 15 10 5 0 2.5 2.0 1.5 1.0 0.5 0.0 2000 2001 2002 2003 2010 2012 2004 2005 2006 2007 2008 2009 2011 2013 Source: IHS; Rystad; US PPI (1)Projects with budget >$1bn
- 8. Capital Efficiency Are MBAs capabilities relevant to address O&G project challenges? MAIN CHALLENGES FACED BY COMPANY Normalized % of Survey replies Safety & environment Technical & economic challenges 6% 8% External stakeholders 8% Supply chain 28% 30% 20% Internal to O&G companies People & organisation © 2014 Schlumberger Business Consulting. All Rights Reserved. 8 Schlumberger Confidential Source: SBC Capital Projects Survey 2013; Post-Survey Interview notes Governance . Talent availability / skill pool management Team alignment Availability & quality: Critical equipment Engineering service Contracting and Procurement Assurance & risk management Framing, decision-making and FEL Aggressive targets
- 9. 1990 Now © 2014 Schlumberger Business Consulting. All Rights Reserved. 9 Schlumberger Confidential Capital Efficiency What can we learn from other industries? Photographs from Renault, Airbus, Ariane Espace, northjersey.com Lower costs Faster developments Higher quality
- 10. Talent shortage Will the Oil & Gas industry become the coolest industry? © 2014 Schlumberger Business Consulting. All Rights Reserved. 10 Schlumberger Confidential PTPS PER AGE BRACKET ON A GLOBAL BASIS Percentage of PTPs Note: Excluding China and oilfield services companies Retirement rate: 20% for 55y-59y, 50% for 60y-64y, 70% for 65y+ Recruitment targeted inputted in the demographic profiles as follows: 40% in 20y-24y, 60% in 25y-29y Attrition at 2% (people leaving the E&P industry) Source: SBC O&G HR Benchmark 2013
- 11. Talent shortage Upstream O&G : do not forget the engineers and scientists! PTPS BY DISCIPLINE VS. RESERVES AND OPERATED PRODUCTION1 2012, # of PTPs, Reserves in MMboe, Operated Production in kboe/d 2P reserves (mmboe) 1P reserves (mmboe) Operated Production (kboe/d) © 2014 Schlumberger Business Consulting. All Rights Reserved. 11 Schlumberger Confidential R² = 0.92 n3 0 n2 0 n1 0 5000 10000 15000 R² = 0.96 R² = 0.95 19000 0 5000 10000 14000 0 4700 EXPLORE # of PTPs Reservoir & Production Eng. G&G Eng. Oil-weighted2 Gas-weighted DEVELOP PRODUCE Drilling & Completion Eng. Product effect R² = 0.95 Note: 1 For confidentiality reason, company data and numbers of PTPs have been modified to mask sensitive information 2 Oil-weighted: oil production >50% of total production Source: SBC O&G HR Benchmark 2013
- 12. In Country Value O&G industry can plan ahead: why don’t we do it for In Country Value? EXAMPLE: JOB CREATION IN A SUB-SAHARAN Craftsmen Welders pipe Civil Craftsmen Operators Machine Operator Driver heavy duty Technicians Mechanical Engineers Formal education time when needs to be supported Time to start recruitment for training/certification © 2014 Schlumberger Business Consulting. All Rights Reserved. 12 Schlumberger Confidential EDUCATION AND TRAINING TIMELINE AFRICAN COUNTRY Cumulative number of people (FTE) Engineers Craftsmen Technicians Operators Source: SBC analysis Mechanical Electrical Lead time to certify/train to work in industry Time to start work Years 2015 2020 2025 2030 Today ILLUSTRATIVE
- 13. MBAs can help solve O&G industry challenges MBA’S POTENTIAL CONTRIBUTION © 2014 Schlumberger Business Consulting. All Rights Reserved. 13 Schlumberger Confidential Cash from operations Source: SBC analysis Operation Excellence Organizational Behavior Capital Efficiency Project Management Supply chain integration Talent shortage Leadership development Project Management Local content development Local entrepreneurship Policy definition
Hinweis der Redaktion
- I am sure that most people in this room will agree that project execution is an issue today. We have plotted in light blue the average delay for megaprojects (i.e. over one bn$). In 10 years, the average delay has been multiplied by 4, moving from 6 months to 1.8 years. The O&G industry is now performing far worse than other capital intensive industries. We have also plotted here the numbers of companies spending more than $5bn of CAPEX per annum, the bars. In the same period, we moved from a world where 4 companies were spending this kind of money, to a world where 32 companies are in this league. Nearly 5 times more.
- When we asked for the reasons affecting project’s performance, the majority of companies reported that issues internal to the organizations constitute the main challenges First of all, lack of skills in project management and technical domains. Second, issues around governance of these mega projects: how to set targets and timing, how to approve budgets and improve decision-making quality? Third, supply chain issues, like engineering services and contracting & procurement. Obviously these depend also on the external market but decision on who to hire and how to contract is clearly under management control External issues are still there, but with much less weight than internal capabilities issues. In my mind, this summarizes well the industry issue today: we are facing major challenges to deliver and these challenges are ours, they are not externally driven. They are mainly under management control, and many times influenced by unrealistic expectations from senior management. So, what management should do?
- (Exhibit 4) We heard this morning how other industries have profoundly transformed their approach to projects to survive. As a result, they reduced costs, accelerated their developments and increased the quality of their designs.