What Oil and Gas companies should take away from the COVID-19 outbreak?

Skype is continuously ringing as I’m on a call on MS Teams with 15 other people trying to speak one by one from different locations. People are sharing the screen while others are making comments and notes. The meeting scribe is taking the notes live in Trello with everybody capturing the live data as it’s being populated. When the meeting is over, the minutes of the meeting are available for everybody to review and sign online instantly. And once we are done, of course, I have some missed calls on skype to deal with!

While it might take a bit of time till the economy and specifically the oil and gas sector can be up and running again, the most significant impact COVID – 19 could have on our industry is in the way our companies will operate in the future.

It wasn’t that long ago when we all had to sit around a conference table in a meeting room which had to be booked in advance, making sure the room had all requirements of the meeting including a projector and the right lighting to make our model review possible.

Yes, COVID-19 will change the way we work, our previous “norm”, our work practices and the way we used to set up our teams and projects.

Oil and gas industry in comparison with IT, Finance and other sectors has been lazy and not very proactive when it comes to adapting to the new era of the digital world and communication revolution.

With other sectors taking the lead in implementing new tools, apps and digital solutions to maximise the flexibility of working while improving efficiency, our industry has been too loyal to 9-5 work and traditional office environments.

For our industry, many factors have contributed to this passive attitude towards change, including the nature of our work, which needs collaboration from large teams formed by many designers/engineers/managers, etc., at the same time.

Also, we use specialised software with expensive licences on a day to day basis, which has not necessarily been developed to operate over the network licences and remote connections.

 But when the rapid spread of COVID -19 triggered the necessity of working from home (WFH), we had to go the extra mile and make up for what we didn’t manage to achieve when we should have, in a couple of weeks, if not, overnight.

But what exactly is the COVID – 19 lockdown period teaching us?

 Which attributes will change in our “norm” to form the new way of working?

Trust

I believe trust will be our main takeaway from this situation.

Organisations, managers and those who are in leadership roles are learning to trust employees at a different level. They are learning to manage their teams based on production-driven performance rather than physical presence in the office and having the right thing on their screens!

On the other side, employees are learning to be more independent and self-managed, with minimum need to be supervised directly.

This, on its own, will have a significant positive psychological impact on teamwork and individual satisfaction for a persons’ achievements.

A new way of working

Even though Digitalisation has been at the top of the priority list for every single operator and EPC contractor for at least the last five years; when it comes to practice, oil and gas companies are well behind their rivals in finance, IT and management consultancy sectors.

With lessons learned from this period, having large offices with a massive cost for office moves, utilities, etc. will be pointless.

So when COVID-19 is done with us, oil and gas companies will be thinking seriously about reducing both Opex and Capex with maximising the remote working concept.

Office spaces can be significantly reduced with more employees being given the option to work remotely and perhaps attend the office only when they are occasionally required. Hot desks which we used to have for only a handful of them and were for visitors on each task force, will outnumber permanent desks and allocated rooms.

IT infrastructures

With the WFH concept being enforced around the world for the last month, it didn’t take long for IT infrastructure of companies to raise the alarm and show signs of being overstretched due to the number of users trying to connect remotely. This has been worse for the users who had to use specific software, mainly 3D modelling and other graphical applications like E3D/PDMS.

This also happened for main global communication applications like Skype, with users starting to experience low-speed connections, low quality of voice and video, and repetitive disconnections.

So, for sure, this will be a big-ticket for both global communication software developers as well as individual companies to improve their network infrastructure and IT capabilities.

Communication

If any changes to the way we use to communicate and manage our workflows, it will only be an improvement.

The meetings and discussions will be in the form of more efficient conference calls around specific subjects and resulting in a tangible outcome.

New apps and tools will be merged even more into our day to day operation with all aiming towards more transparency and visibility.

Resources will be able to work remotely for most of the week without the hassle of commuting long distances to work.

Collaborating tools and cloud-based solutions will be integrated even more into our work practices facilitating sharing information and data.

 Conclusion

To sum up, oil and gas companies will have a very valuable takeaway from the painful period of coronavirus. A fast-forward in the way the sector would have upgraded itself, similar to what resulted in forming Fintech companies in the Finance sector.

 However, the current low oil price might stay long enough to slow down this process of adaptation. The $20 per barrel price won’t give companies the flexibility required to try and expand their infrastructure and implement the changes they will be learning soon. On the contrary, this will drive the sector towards further cost cuttings and possible layoffs; something which we all experienced in 2015 for a couple of years.

We have to be patient to see the market bouncing back again, this time with valuable lessons learned and a fresh and smarter way of working.

What have EPC contractors learned from using High-Value Centres (HVCs) so far?

Are High-Value Centres really adding value to our projects? or are they simply just Low-Cost Centres?

Like any other business sector, the Energy industry and explicitly the leading oil and gas EPC contractors, have been trying for the last two decades to earnestly reduce the cost of their projects and make their business models leaner and more competitive. This has caused the rise of what is called   “High-Value Centres” (HVC), the engineering execution centres located in countries which can benefit from low-cost local skill workers, capable of carrying out the work under the supervision of the project head office.

Different HVCs have been utilised by leading EPC companies within various regions and countries, with Indian players being the front-runners for doing detail engineering work for many global scale projects.

So, the question is, after almost two decades of practising outsourcing the work to HVCs, how successful and efficient has their approach been?

Have lessons so far been learnt and necessary changes made to overcome the issues from previous projects? Have HVCs become a reliable option for our future projects and clients?

Evidently, the answer is NO.

In fact, a lot more could have been achieved and learned through this period of delegating work to HVCs, comparing to what we have done so far.

However, despite this criticism, the current challenging oil and gas market urges EPC companies who want to stay competitive in the bidding process and acquiring new work, to reduce their cost of workforce significantly. This won’t be possible with executing the whole project from the home office and avoiding the practical challenges of working with HVCs.

Hence, considering the painful experiences and case-studies from past projects so far, certain principals need to be regarded as the essential requirements of outsourcing engineering work to HVCs and must be implemented into any relevant work practice and process by main EPC contractors:

Robust Communication

Setting up a robust communication system is the lynchpin of using HVCs for any project task. Regardless of the geographical locations and time differences between the project home office (HO) and the HVC, there must be a set of reliable and simple communication tools in place to let everybody in all offices communicate effortlessly when required.

While new technologies and communication tools are already helping to avoid some of the past issues and lifting some barriers significantly, more efforts need to be put towards the simplicity of any communication system. This will also have a major effect on reducing the cost of training for the project team.

 

Defining the right tasks

Having access to an HVC to execute a project does not mean the main tasks of the project can be divided between the offices evenly. Careful considerations need to be in place when splitting the work at the beginning of the job. This is only possible with trying to allocate the more straightforward, routine and repetitive tasks to the HVC and keep the more challenging and niche work, which might need various meetings and discussions, between the contractor, client, third parties and other involved parties in the main office.

 

Implementing the right Culture

One of the most challenging aspects of using HVCs and executing a project across various offices is introducing and maintaining the right culture within the global team. This might look simple but needs to be planned and implemented very carefully at the beginning of the project.

The One project – one team culture must be promoted and implemented across all project offices. However, different regions and countries have different local and traditional working cultures. This sometimes conflicts with the routine working culture of the central office which can’t be learnt and implemented over the night.

This can be seen when somebody makes a mistake, or something goes wrong which nowadays, are mainly considered as the fault of a process or system rather than blaming an individual. In contrast, in many HVCs around the world where the no-blame culture is not yet in place, employees are afraid of being punished and lose their jobs if they make a mistake. This, sometimes becomes very problematic when the head office requests a correction on the work, as they focus more on defending their work rather than following procedures and applying corrections.  

This is an important fact which shouldn’t be put on the back burner and needs to be addressed early enough on the job to avoid potential impact on the efficiency of the project team.

Building and maintaining the team

 

While putting together the local project team at the HVCs is a crucial step to kick-start the project, maintaining its integrity for the duration of the project is even more critical.

For instance, there have been many cases where local employees of HVC offices have left the project after adding six months of work experience with a major EPC company to their CV, for a better job in the Middle East or similar places.

Therefore, the right approach is to put together a team of suitable skilful people, providing them with the required further training, and using the right incentive tools and measures to keep them loyal to the project.

 

Conclusion

In short, the competitive market will push the leading oil and gas EPC companies to use HVCs even more often, to keep their costs and prices as competitive. Despite the fact that the experience of using HVCs have not been smooth and efficient, applying the principles mentioned above and some other project-specific considerations would help EPC companies to increase the productivity and efficiency of this practice.

 

In Emveedo Energy, we provide a wide range of engineering and bespoke consultancy services to our clients aiming to improve their work practices, processes and workflows