Justin Pettit - The Final Frontier: E&P’s Low-Cost Operating Model

1. Chapter 2: The New Agenda
2. Chapter 3: E&P Operating Model Redesign
3. Chapter 5: National Oil Company Considerations
4. Chapter 6: Collaborative Operating Models
5. Chapter 7: Financial Implications

1. Chapter 1: Introduction
2. Chapter 2: The New Agenda
3. Chapter 3: E&P Operating Model Redesign
4. Chapter 5: National Oil Company Considerations
5. Chapter 6: Collaborative Operating Models
6. Chapter 7: Financial Implications

Justin Pettit

Copyright 2017 by Justin Pettit. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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To Krista, Trevor, Maddie, and Teddy, for their laughter, love, and patience.

I wish to thank the many people with whom I have had the pleasure of working over the past many years, for kindly providing the impetus, expertise, and resources to produce this book, especially my former partners and colleagues from Booz, UBS, and Stern Stewart & Co. I would also like to thank my previous editors, including David Champion, Don Chew, Art Klein, and Krista Pettit, for teaching me not to write like a scientist.

However, the views expressed herein are solely my own. Moreover, any errors or omissions are strictly my own.

I also wish to thank my IHS colleagues, including Ulviyya Abdullayeva, Ruslan Anisimov, Kurt Barrow, Stephen Beck, Ryan Carbrey, Andrew Day, Erik Darner, Jean Dugan, Blake Eskew, Steve Fekete, Philippe Frangules, Bob Fryklund, Etienne Gabel, Mark Griffith, Tim Hemsted, Mark Jelinek, Ed Kelly, Jerry Kepes, Chris Kiser, Roger Kranenburg, Mike Kratochwill, Nick Lowes, Fernanda Machado, Michael Marinovic, Paul Markwell, Michael Muirhead, Gil Nebeker, Charlie O'Brien, Alastair Reid, Darryl Rogers, Jamey Rosenfield, Senjit Sarkar, Ed Scardaville, Grigorij Serscikov, Nick Sharma, Curtis Smith, Leta Smith, James Stevenson, Dale Struksnes, Jim Thomas, Rodrigo Vaz, Dan Yergin, and Tim Zoba.

Finally, I wish to thank the many clients who have challenged and entrusted me with their needs and encourage them to please continue to do so!

This book guides the reader through the redesign elements for the internal operating model of an enterprise in the oil and gas sectorincluding integrated oil companies (IOCs), majors and independents, national oil companies (NOCs), and services companies in the upstream supply chain. For simplicity, this book references these companies as Exploration and Production (E&P) companies.

A culmination of disruptive forces and evolutionary change in the oil and gas industry has conspired together to make the case for a new lowcost operating model. The industry has experienced tremendous evolution in terms of: our understanding of the underlying global resource base, the nature of its ownership and principal stakeholders, technologies and methods for resource development, and economics and business models. While companies have been very focused on cost and productivity, beyond incremental accommodations to change, there has been little effort to redesign and transform internal enterprise operating models. Moreover, unlike other industries that have undertaken operating model transformations in response to disruptive industry forces, upstream companies rarely undertake operating model change on a systematic or enterprisewide basis, except postmerger integrations.

The industry has made great strides, but now must sort through:

• What different to do
• How to do it differently

Operating models and operational excellence must now be on everyone's agendachanges can yield profound cost savings and operating efficiencies. However, change is much easier to plan than to implement, and operating model redesign is rarely executed on an organizationwide basis.

A culmination of disruptive forces and evolutionary change in the oil and gas industry have conspired together to make the case for a new, lowcost operating model. The industry has experienced tremendous evolution in terms of our understanding of the underlying global resource base, the nature of its ownership and principal stakeholders, technologies and methods for resource development, and the economics and business models.

The industry was focused on cost and productivity even before the 2014 collapse in oil prices, but beyond incremental accommodations in response to change there has been little effort to redesign and transform internal enterprise operating models. Unlike other industries that have undertaken operating model transformations in response to disruptive industry forces, upstream companies rarely undertake operating model change on a systematic or enterprisewide basis.