The oil and gas organization of the future, by Christopher Handscomb and others – McKinsey&Co

Fuente Web

Today’s oil and gas organizations were developed in a time of resource scarcity. To get at those hard-to-find, difficult-to-develop resources, companies built large, complex organizations with strong centralized functions. This model allowed them to tackle terrific technical challenges, manage great political and operational risks, and deploy scarce talent across the world as needed.

While these reasons were all valid during a decade of high growth, this organizational journey also led to substantial complexity for large players—adding cost, stifling innovation, and slowing down decision making (Exhibit 1). 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.

Three game-changing trends are reshaping the industry

This organizational model is no longer sustainable with oil prices below $50 a barrel. More important, though, it is no longer necessary. 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. We see three potentially game-changing disruptions that will lead oil and gas companies to rethink their operating models fundamentally:

1. A world of resource abundance is leading to sustained lower oil prices and a focus on cost, efficiency, and speed. 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. Meanwhile, conventional, deepwater, unconventional, and renewable assets each require a distinct operating model that cannot be delivered optimally from a single corporate center.

2. Profound technological advances are disrupting old ways of working and enabling step changes in productivity. Jobs, including knowledge work, are being replaced by automation on a large scale, and those that remain require increased human–machine interaction. Data generation continues to grow exponentially, as every physical piece of equipment wants to connect with the cloud. 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.

3. 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. 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. “Digital natives” in the driver’s seat will bring their own expectations of technology, collaboration, pace, and accountability. 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.

Read the full report here.