UK firms aren’t maximizing UKCS value: Deloitte

LONDON -- A lack of effective supply chain collaboration means that companies are missing out on opportunities to maximize the potential value from the UK Continental Shelf (UKCS), according to a Deloitte survey of oil and gas operators and services companies.

According to Deloitte, 74% of respondents said collaboration was an integral part of their day-to-day business, but only 27% reported that the majority of their efforts resulted in a successful outcome.

Cost reduction was found to be the main driver for collaboration today, with nearly a third (31%) of company respondents in agreement. And 90% said that supply chain collaboration would also play a greater role in their company’s success.

“While it’s encouraging that collaboration is seen by the industry as an important tool in helping companies succeed in maximizing economic recovery of the UKCS in line with the Wood Report, there’s clearly work to be done, and fast given the current tough environment,” Nick Clark, a director in Deloitte’s consulting team and contributor to the research, said. 

“The industry needs to address a number of practical, cultural and behavioral barriers that are standing in the way of realizing this successful future. These include fundamentals, such as a lack of effective financial incentives, a lack of clear communication and misalignment of expectations between operators and service companies in execution.”

Incentives

The most critical finding highlighted the discrepancy between what drives successful collaboration, and the actions of leadership and business processes to underpin it. Whilst there was clear recognition of the value of collaboration and what’s needed to make it happen, trust and mutual benefits for example, less than 10% said that leadership regularly emphasized its importance or included it in their business strategy.

Despite this, 20% of respondents still said they actively sought out opportunities to collaborate, which shows that the potential is there if the right leadership and incentives are in place.

Deloitte suggests that whilst industry must take the lead to make collaboration effective in the UKCS, it should look to the regulator, the Oil and Gas Authority (OGA), and Oil and Gas UK (OGUK), the industry trade body for support, pointing out that initiatives like OGUK’s Efficiency Task Force can be a real driver for positive change.

Fallen prices

“In a world of a fallen oil price and high costs, industry is facing a difficult time,” Stephen Marcos Jones, Oil & Gas UK’s business development director, said. “Whilst there are some signs of recovery—through an upturn in production and concerted focus on improving efficiency—there's also growing consensus that much more needs to be done.”

“Collaboration is crucial if we're to fulfil Sir Ian Wood's vision to maximize economic recovery from the UK Continental Shelf. I believe industry is now starting to readjust its way of working together. It is vital we work together proactively—not just between operators, but crucially between operating companies and the wider supply chain—to deliver the transformational change we need to see,” Jones added. “That is why Oil & Gas UK has put in place an Efficiency Task Force—championed by leaders from across the industry—we hope this group will challenge existing behaviors and be a catalyst for pan-industry improvement, in addition to the extensive work being undertaken by companies individually.”

“Thirty years ago health and safety was the major focus for the North Sea, and the industry made that a central tenet of its culture—for collaboration to succeed it has to be addressed with the same urgency and senior leadership,” Deloitte's Clark added. “Our research shows that the industry recognizes this, and the critical value that effective supply chain collaboration can deliver in securing the future of the UKCS. We need to act fast and I believe that every company involved in the North Sea will want to play its part in making it a safe, collaborative, efficient and profitable region for many years to come.”