pine - productivity in the new era
TRANSCRIPT
Productivity in the New Era
We are well and truly in a new era for oil and gas
Need to make the business sweat
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Partner with Deloitte Canada on secondment to AustraliaSeveral years working in oil sandsFind me on social mediaWeekly blog about the LNG sectorTwitter accountiTunes channel
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• productivity is too low.• Various studies report that the productivity of Australian
workers is 65-70% that of the US Gulf Coast• stand-around time (where workers are waiting on delivery of kit,
permission to work, or completion of previous work) is morethan 40%.
• 150 separate legislative acts governed by 50 agencies providingoversight to the industry
• The unit labour costs in Australia’s gas sector are high for theglobal industry.
• Confirmed by several independent studies• Australian gas wages 35% higher than comparable roles in the
US, and on par with the Norwegians• Labour is 22-27% of the budget to build oil and gas
infrastructure• Shortages have eased considerably as the mining boom has
moderated, but unit costs have not come down.
• Supplier base has been here for decades, but not in quantity.
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• Ramp up very quickly, and suppliers have been free to test theceiling on rates
• Operators have had to supervise suppliers more closely than typical, and now havetoo many people in the field.
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• People – the right skills for the job• Processes – work being actually done• Organisation – the right structure• Systems – not just technology but ways of working• Performance – KPIs that actually measure and reward
productivity, not just unit cost• Supply chain – contracts with suppliers that reward productivity• Assets – only enough to do the job, productive
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• simplification of the business• manage the asset mix
• streamlining compliance• Fraser institute survey
• embracing digital and automation• key is substituting technology for people where-
ever possible• improving agility
• McKinsey – time to 50% penetration of innovationis 35 years
• unlocking innovation (technology, business models,operating models
• collaboration, co-creation, incubation andacceleration
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• Discover what is truly core• For upstream – geology and reservoir, initial
capital spend, production• For midstream – asset management and
optimisation• For downstream – customer requirements,
logistics• For services – cost, quality or customer
relationships• Outsource what is important but not core
• For Irving Oil, this meant shipping, oceanvessels
• KKR-Veresen deal in Alberta• Many Australian oil and gas companies trying
to do it all• Sell off remainder
• Asset sales – pipelines, gas plants, gatheringsystems, farm land, telecoms, power
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• Pages of laws – 15,000 in the 70’s. 30,000 in the80’s. 60,000 in the 2000’s
• Compliance workers now 9% of total economy,doubled in past
• 1m employees, more than in construction andeducation
• More expensive workers• Managers spending 1 day per week in straight
compliance activities• 20% of rules deemed unnecessary by managers• $27b in annual admin costs – more than profits of
banks, all GST collections• $65b in compliance with public sector imposed
costs• $21b tax on private sector• $134b compliance cost
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• Consequence to gas sector• $250b in red tape compliance burden• 2.6% GDP (APPEA study 2014)• $6.5b in red tape costs
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Deloitte study on digital disruptionOil and gas not reflectedGas is combo of construction, extraction (Mining) and manufacturing (gas plant ops)
Between 6 and 15% business improvement potential
Construction – 48%, 14%Mining – 48% - 4%Manufacturing – 51% - 6%
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• Become more agile in adopting change• Unlocking innovation to change business models,
operating models• collaboration, co-creation, incubation and
acceleration
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