MN Solution Space – from the archive

Here is a second news-sheet from MN Solutions. It may in a small way entertain or inform you and perhaps provoke your thoughts in new directions. In the first issue in March, I wrote – prophetically – that it would appear only occasionally. Plans to produce a summer edition were thwarted by a couple of demanding projects. Perhaps the reader who suggested I should be Tweeting or Blogging was right…..

Backyard news

After an exceptionally hot, dry April and May, we had the coolest wettest August for 20 years, and then the warmest November on record. This amply fuelled our British obsession for discussing the weather but put paid to any attempts to become self-sufficient on the vegetable plot. The only folks I know who appreciated the abundant summer weather were friends visiting from Reno Nevada, ‘your English rain is kinda cute’.

Safe, expeditious, precise & consistent

These words were drummed into me during training for a Commercial Pilots Licence, which I completed in March.

Safe – means eliminating or minimising all the risks and that starts with meticulous pre-flight planning and preparing for eventualities such as a diversion or emergency, and briefing the crew and passengers.

Expeditious – we must be cost-effective in getting from A to B using as few resources (in the case of aviation, that’s aircraft time and fuel) as possible.

Precise – is about operating to the highest standards and being alert to small errors and correcting them before they become big ones. If you plan to fly at 3500 feet, then 3550 feet is not good enough!

Consistent – dealing well with the ordinary, and the extraordinary, every time. Flying smoothly, avoiding turbulence and providing the highest level of customer comfort.

These headings could easily be transferred to other businesses. What does professionalism mean in your world?

The world of training and the real world

The many hours of training and practice prepared me for the ‘skills test’ which I took in March, the toughest test I’ve ever faced, due to the relentless pressure and high performance standard required. The test entails a flight from A to B, diverting to C, and demonstrating an ability to cope with all kinds of simulated emergencies as well as flying blind on instruments alone.

That is challenging enough, but on the day of the test the visibility was abysmal. My examiner was an ex-air force pilot, a pragmatic individual who felt that the exercises in the 2½ hour test often lacked a practical dimension, though not today… The emergencies weren’t for real but every other exercise was. Navigation was a genuine challenge. The instrument flying and tracking of radio beacons were not exercises but needed to get us back to base and out of cloud.

So again, a question for your world of business. How have you trained and developed your people? The best test of professionalism is in situations when things are not going as expected.

Cross business

Oil & gas consulting remains the core of my work, but occasionally I advise on projects in less familiar areas, and I appreciate those of my clients who are willing to look beyond the familiar for new ideas.

These included an IT firm in Saudi Arabia who were setting up a joint-venture with a major western company. I’ve also spoken to managers and executives from a major Chinese bank about the challenges of growth – preserving distinctive corporate values whilst introducing systems and processes and delegating decision making, so that the growing business remains effective.

Some practices appear to have universal relevance, such as conducting a thorough framing (scoping) of new projects, engaging effectively with the work-force and building productive relationships with external stakeholders.

Does your company regularly look beyond its own realm for concepts which they could employ?

Best practice in oil & gas exploration

In May, I delivered two courses in London entitled ‘Best practice in exploration management’ which were well received. Since then we’ve given a third course in Houston and two more in London.

Engaging with course participants from exploration companies large and small has been thought provoking. Small companies don’t have the resources to develop elaborate processes, but some are eager to learn from others and wish to put in place some systems in order to be more effective and allow them to grow. How to tailor ‘big company systems’ to the ‘small company’ context is a challenge I’ve been confronting in several of my projects.

Building a portfolio of quality

This year I have been working with three oil company clients – in the USA, Europe and the Far East. In each case, they faced the substantial challenge of assembling a portfolio of opportunities to deliver growth and consistent performance over a sustained period. Too often the portfolio was incomplete or opportunistic and leaders had to deal with the uncomfortable reality of spiky performance from year to year, a fact of life when individual exploration prospects have chances of success as little as 10-20%.

There is no easy solution to the performance conundrum, but one step is developing a competitive strategy which plays to the organisation’s strengths. The strategy then needs to be widely understood within the company, together with the criteria which an investable opportunity has to meet.

Do the staff in the organisation with which you work understand the strategy, and how decisions are made, so that they can tailor their work accordingly? If they do, your decision making will be simpler!

Leaders need to devote dedicated resources to building the opportunity portfolio. However, that does not mean just taking on new concepts at random – they must be underpinned by good technical work in order to make discerning decisions, and leaders have to be ruthless in rejecting or divesting sub-standard opportunities.

When budgets and staff resources are severely constrained, it is paramount to secure as many ‘rolls of the dice’ as possible in plays and prospects. The strategies of the smaller oil independents are most informative in this respect, as the technical and commercial strategies to minimise risk are surprisingly diverse.

Industry news

Who would have predicted the way events in the Middle East and North Africa have unfolded? I was reminded of the fall of the Berlin Wall and the break-up of the Soviet Union – equally incredible events which unfolded in the late 1980’s when I was working in Cairo.

As companies repatriated their Libyan teams to Europe, some scratched their heads as to what to do next. Others made the best of the situation and put the ‘spare’ geoscientists to work on new opportunities and regional geological evaluations – work which needed to be done but for which previously there was no manpower available.

Industry analysts remain impressed by the success of some of the oil and gas independents, and critical of the super-majors for not taking enough frontier exploration risk. A number of independents have done well this year – Heritage’s gas discovery in Iraq, and Tullow’s continued successes in Uganda and Ghana spring immediately to mind.

The concept of continental drift and conjugate continental margins is something with which many analysts are familiar. Tullow’s well in French Guiana proved the ‘Jubilee play’ across the Atlantic from Ghana. In the other direction, companies like HRT – with its charismatic CEO Marcio Mello – and Chariot intend to pursue the Brazilian pre-salt plays offshore southern West Africa.

North American unconventional gas acreage is still highly sought after despite the current US gas price, but in Europe this segment is making slow progress. A number of exploration ventures are stalled or failed to live up to the promise. Beyond the technical challenges, my take on the situation is that neither the contractor community nor the general public are ready to embrace these resources – I think it will be a decade or more before these resources make a significant market contribution in Europe.

Competing:  the 4 F’s

In a luncheon addresses to analysts in New York and Boston, I spoke about how the NOC’s have built international capabilities and are increasingly competing with the oil and gas super-majors who helped them build that very capability. I characterised the super-majors’ responses as the four F’s:  Forge alliances, Flight (out of mature basins), Fight (with advanced technology and integrated value propositions), and Focus (on basins requiring super-major capability, risk appetite and investment capacity).

What is it in your business that allows you to compete effectively against the incomer?

Those big consulting firms

I was engaged by a leading consulting firm for an exploration strategy project. The way they worked impressed me. Their analysts and project leaders are smart people who very effectively tap the experience of their more senior partners and work hard at providing a regular flow of appropriate information up and down the management line. The analysis and solutions were precise and specific to the client’s needs– there was no question of ‘peddling’ a re-badged answer developed for a previous client.

Strategic alternatives were developed and investigated through numerical modelling. That rigour is an essential part of the approach, and helps secure the buy-in of their client’s senior management. As the ‘hired expert’, my advice was frequently sought but only used when it had been dissected and understood. Having to justify why ‘my’ approach was best practice was a refreshing challenge.

I’d like to end this news-sheet with a quote from the British journalist, musician and broadcaster Miles Kington. He could have written it for consultants: “Knowledge is knowing the tomato is a fruit, wisdom is not putting it in your fruit salad”.

Mike Naylor