MN SolutionSpace – from 7 years ago

Backyard news

I optimistically label this first edition Spring 2011. After a winter of deep snow, freezing fog and torrential rain, there were some signs that better weather is on the way and the snowdrops are flowering.  Why does the weather matter, besides being a peculiarly British obsession? Well firstly, it makes the ‘mini-commute’ across the garden from home to office more appealing, and secondly it determines how much time I spend consulting rather than flying aeroplanes.

The adage ‘Treat the company’s money as you would your own’ is often paid lip-service in big companies. Its significance only becomes truly apparent when you start your own business and are personally responsible for everything, including marketing and the profit & loss bottom-line. The business is now a limited company, MN Solutions (Cambridge) Limited. This won’t affect my interaction with clients but will be more fiscally efficient, i.e. minimise my income tax.

Plus ça change, plus c’est la même chose

It’s now 9 months since I began a soft and gradual start in consultancy as MN Solutions. The aim then, as now, is to offer expertise in the oil and gas business, and apply my experience in general management, leadership, strategy and project management to other areas close to my heart, notably education, technology and businesses which in various ways have to manage significant risk.

The oil and gas client base is growing, with a pleasing number of contacts coming back for more. Breaking into other areas has proved to be a challenge, but little by little, I hope to make inroads and establish a reputation….. As with exploration itself, perseverance and patience are necessary.

Innovation: learning from others

Having previously worked with the Cambridge Judge Business School on Shell’s exploration leadership programme, it’s perhaps natural that my very first piece of consulting work last year was with their executive education programme for China Mobile. Why did they want to hear about the oil and gas business? With ambitions to expand their business, they were interested in the international dimension and were looking for innovative approaches in different markets. I talked about what various stakeholders expected of oil supermajors and illustrated this with several partnerships and venture relationships from my own experience.

Many of you know of my passion for learning from other businesses. In February this year, through the knowledge consultancy Gerson Lehrman Group (GLG), I gave a webcast to 250 professionals from the fields of manufacturing, pharmaceuticals and medical services. Drawing on experience in oil exploration and R&D, I offered them models and concepts around the themes of process, roles, culture, corporate values, portfolio management and commercialisation. In preparing for the talk, I realised that there’s far more to this subject than proponents of ‘Open Innovation’ would have you believe.

MN Solutions has a contract with WTG (World Trade Group) Training Division for a course entitled ‘Best practice in exploration management’. The intent of running two courses in 2011 quickly expanded to three, as the first course was over-subscribed.

In Shell, we did a number of things well but looking back, I see room to improve and – above all – simplify. I’ll be putting that into practice in the course, offering original concepts and processes for others to try out. The aim is to help smaller independents become more successful in their chosen areas by introducing a more structured and effective approach to running the exploration business, whilst still remaining lean, nimble and opportunistic.

Oil and gas

My first big project was an in-depth report for an American independent, providing them with a full blueprint for the organisational structure, strategy and processes needed to manage their growing and now global business.

Another aspect of my work is advice to hedge funds and investment banks. In their quest for investment opportunities, sometimes they just require general industry background: about markets and methods. Often, their interest is more specific: about a basin, a newsworthy discovery or the competitive advantage of a particular technology. Occasionally they want to dive into the detailed valuation of a field or an exploration portfolio.

My researches have helped me appreciate the huge extent and variety of the competitive landscape in oil and gas, far beyond what one sees as a big company employee. Also startling is how much information is in the public domain, if you know where to look and how to use it.

You may have called on the big consulting firms for advice or studies, and wondered how they quickly assemble so much expertise and knowledge. Well, they have good people of their own, extensive knowledge-bases and great global networks. They complement this by contacting acknowledged experts in specialist areas and pumping them for information through telephone interviews.

In that context, I’ve advised how to set meaningful targets for exploration finding costs, discussed how joint ventures and non-operated ventures are best managed, described approaches to R&D and compared how local content issues are managed in different countries.

Bright spots, dim spots: oil industry news

I’ve been invited by GLG to comment on various newsworthy items in the past 6 months. Some of these fall firmly into the good news category – Noble’s Leviathan gas discovery offshore Israel, Petrobras and BG’s continuing success in the pre-salt of  Brazil, Heritage’s gas discovery in Iraqi Kurdistan, and new player Polarcus’s entry in the marine seismic business. There has also been a lot of interest in Africa in the wake of discoveries by Tullow and others in Ghana, Uganda and offshore Tanzania.

Some news causes us to wonder what the future will bring – for example, the BP-Rosneft Arctic alliance; Shell’s partnering with PetroChina following their acquisition of Arrow Energy’s coal-seam gas business in Australia, and the limited success of Cairn’s drilling offshore Greenland.

The low point in the past 12 months was undoubtedly the tragic loss of life and environmental damage caused by BP’s Macondo blow-out in the Gulf of Mexico. Its reverberations will affect the industry’s reputation and regulation for years to come.

Other less-than-good news includes the Israeli’s revision of PSC contract terms after Noble’s discoveries, the latest dispute on costs  between the KazMunaiGaz and the other Kashagan venture partners, and falling production in Reliance’s KG fields offshore India. Investors are keen to understand whether such issues can be mitigated and how they affect underlying company value.

In the area of technology, we’ve seen notable developments in geophysics. New efficient X-bow seismic vessels are now roaming the seas, with advantages of fuel efficiency, greater tolerance of adverse sea conditions, greener credentials and Arctic capability. Onshore, investments are being made in cable-less seismic systems and the use of MEMS chips as seismic sensors. Increasingly, electro-magnetic methods are being used for direct hydrocarbon identification as a complement to, or replacement for, seismic DHI techniques.

Aviation: lessons for regulators

A newsletter from Mike Naylor would not be complete without reference to aviation. My general aviation writing is mainly a hobby which I hope makes a small contribution to safety awareness and creating a better informed pilot community.

As well as being tremendous fun, it brings me into contact with organisations from whom we can all learn. Visiting the UK’s Civil Aviation Authority and NATS, National Air Traffic Services, has expanded my thinking about technology innovation and rule making. The CAA’s approach to safety regulation puts into sharp focus the concepts of the ‘just culture’ and ‘proportionate risk-based regulation’.  There are lessons for the oil and gas business in the way the CAA handles what I call the regulator’s dilemma – balancing the need for the highest levels of public safety with an earnest desire to maintain the respect of those whom they regulate, whilst ensuring that they remain proactive and committed to learning and change.

Coming up next time

In the next newsletter, I’ll continue the theme of oil industry highlights and I also hope to report on how the new course on exploration management was received. On the aviation front, I’m going to look at UAV’s, unmanned aerial vehicles – undoubtedly there are technology opportunities here for the oil and gas business.

A number of consultants, many being senior ex-Shell folks, have formed a loose association called the Consultants of Distinction, CoD. Not to be confused with an endangered North Sea species, they are a group who want to share their experience in strategy and risk management more widely. It’s an exciting opportunity for potential clients, as it gives access to a diversity of skills and expertise, and I look forward to working with the CoD.

Let me end with a quote from Winston Churchill. It seems relevant to the worlds of business, innovation, private aviation and education which I aspire to inhabit: “It’s no good saying we did our best, we have to do what’s necessary”.

Mike Naylor