Imagine thinking that $10 million in savings is just not worth wasting time on. That’s precisely the case on many multibillion-dollar projects, especially during boom times.

This was a key discussion point at a roundtable on the findings from Trelleborg’s recent “Next Level” report. During the past several decades, oil companies often were not interested in improvements unless they led to savings on the order of 20% or 25%. Today, sustainable savings, albeit much smaller, are starting to have more appeal.

The question is whether or not this approach will be thrown out when markets improve along with other positives such as enthusiasm for innovation and a shift toward mutually beneficial outcomes with suppliers.

“In the past, by the time we entered the project phase, specifications were nailed down, and the opportunity for creativity from the supplier had gone. There was no time for thinking out of the box or bringing something new to the table,” said John Dury, managing director of Trelleborg’s offshore operation in the U.K., during the roundtable. “Now we’re seeing a real shift toward collaboration.”

Debarati Sen, global business director for 3M’s Oil and Gas Division, agrees that it’s frustrating to be told what to deliver rather than having an opportunity to present ideas. “We are now seeing an appetite for innovation, but sometimes it’s stated as, ‘What are some ways for us to reduce costs?’” she said.

Sen noted that 3M views those openings as an opportunity to bring in new materials that make parts fail less, increasing the mean time between failures. “In that way, you are bringing down costs, direct as well as indirect.”

Report findings
The report found that:
• 78% admitted to changing the specification of a project to save costs;
• Only 30% are prepared to pay for additional services such as installation training and ongoing project support;
• 4% cited cost as the primary factor in selecting a maintenance supplier; and
• Asked which supplier attributes they seek for reducing risk and ensuring compliance, 37% cited depth of expertise; 29% cited track record; 15% cited breadth of resources; and less than 10% cited geographic accessibility, financial security and creative approach to the brief.

Adding up small gains
Not everyone is approaching this marketplace as an opportunity, however. Philip Lawson, head of Aberdeen Consultancy and ABB Oil & Gas UK, said one result of the industry slimming down has been a split into two camps. Some companies, particularly those with older assets, are taking a batten-down-the-hatches-and-ride-out-the-storm approach.

“They don’t want to change; they just want to survive and get through the next 18 to 24 months,” Lawson noted. Other companies are treating this period as an opportunity to make improvements, even if they result in marginal gains. In isolation, $10 million in savings may not mean much on a multibillion-dollar project, but when several gains are put together, they become significant, Lawson said.

“Customers say, ‘Show me where this has been done before,’” said Philip Cooper, an independent consultant to subsea and pipeline companies. “They want results based on the same water depth, pressure and temperature conditions—almost a blueprint of someone who has already done exactly what you are proposing. Of course, if we all worked that way, nothing would ever change.”

Sen agrees in part with Lawson and Cooper. “There are some who will not change, who want to find [an existing] blueprint and use it,” she said. “But other operators are far hungrier now and want to try things out. Some are looking for ways to bring a project to a different level while achieving the best ecology.”

Survival of the collaborators
The key to that type of industry innovation, all the panelists agreed, is collaboration. Lawson points to changes in the auto industry brought about by poor market conditions. “The motor industry was crashing and had to share best practices to survive,” he said. “Now we look at the industry, and it is probably one of the strongest in the world. The way that was achieved was through collaboration.”

Lawson said he strongly believes the challenge does not lie with the suppliers but the operators who tend to be resistant to change. “Their minds are firmly set on ‘their’ price and what they bring to the table. Around the table, the suppliers probably hold the key to the future, and it is about collaboration,” he said.

Dury and Sen supported this line of thought. “Relationships are now about technology, understanding, collaboration and solving problems,” Sen said. “The industry needs to become more mature on the supply chain and purchasing side. Companies are sending their people for purchasing training, and in some cases they are coming back more adversarial. That is where the industry just needs to stop itself and become more collaborative across the functions.”

That approach could stifle innovation and speed of response, Dury said. “The current procurement philosophy is contradictory to an industry that needs more innovation and faster routes for new ideas into the field.”

Price matters
The panelists were skeptical about the honesty of respondents to one survey question. Only 4% cited cost as the primary factor in selecting a maintenance supplier.

“We get into price conversations frequently,” Dury said. “Once we’ve gotten through the discussion about are we going to deliver and is the product right, there’s never a decision made without a discussion about price.”

Lawson noted that cost cuts might potentially affect safety and/or performance. “If you’re asked to reduce cost by 10%, you’d look to reduce costs in any form. I think the people who will be here in the future are those who will take that 10% reduction but make sure it doesn’t affect safety or performance.”

Sen said she sees some variation in how cost cuts are handled and that the tone is set at the top. “Typically, the responsible operators make very well thought-out decisions, squeezing where they can but not squeezing as hard in places where it might compromise the viability of the project.”

Drury added that he is currently optimistic about both the way cost cuts are being handled and the opportunity for innovation. “For example, we have new technology that allows seals to be welded in situ on an FPSO platform, eliminating the need for the platform to disconnect and return to shore,” he said. “It feels like there is a hunger for collaboration up through the value chain to the operators in the current climate.”

The bottom line, the panelists said, is to never waste a crisis. “I think that rather than stifling innovation, this period should drive us to something more economical and more sustainable,” Lawson said, and Cooper agreed. “We’re in a period of change. Make those changes work for you as an individual and an organization,” Lawson said. “There will never be a better opportunity to find better ways to do things than there is right now.”

Comments