The UK’s offshore oil and gas industry is putting the recommendations of the landmark Wood Review into practice, according to the findings of an annual sector survey published by Deloitte and Oil & Gas UK today.
The Wood Review identified collaboration as a fundamental behaviour towards securing the successful future of the UK Continental Shelf (UKCS). Now the 2017 UKCS Upstream Supply Chain Collaboration Survey – which sought the views of over 150 operators and suppliers across the UK Continental Shelf – has returned a 7.1 Collaboration Index score, the highest score to date. As part of the survey, the Collaboration Index measures the effectiveness of companies as partners in collaboration.
• The Collaboration Index score has increased to 7.1 in 2017 from 6.6 in 2016 (out of 10)
• 95% of operators and suppliers say collaboration is an integral part of their day-to-day business (86% in 2016 and 74% in 2015)
• 43% of survey participants considered their collaborative engagements successful in 2017 compared to 27% in 2015
Commenting on the findings, Oil & Gas UK’s Continuous Improvement Manager Dr Mariesha Jaffray said: “The results demonstrate that for most operators and suppliers, collaboration is shifting from being an aspiration to a reality. The third successive improvement to the Collaboration Index score has been achieved despite the prolonged period of flux faced by the offshore oil and gas industry, with many companies still experiencing tough conditions.
“Industry in general has a long-standing record in working together towards shared goals and this survey shows our sector has taken the same approach. It also underlines the importance of Oil & Gas UK’s Efficiency Task Force, which continues to seek out, promote and provide access to efficient and collaborative practice across the sector.”
Graham Hollis, senior partner for Deloitte in Aberdeen said: “In this year’s results, we are starting to see real progress in terms of improved behaviours leading to more successful collaboration outcomes in the UKCS. The messages on the benefits of supply chain collaboration are starting to be embedded.
“Cost reduction is still the main driver of collaboration, but the focus is shifting from transferring risk to sharing knowledge, new ideas and solutions. The results suggest more openness towards business partners and that more companies are taking a closer look at how they can incentivise collaboration better financially. Engaging suppliers earlier in the project lifecycle is also becoming more widespread.”
The report was launched at an Oil & Gas UK breakfast briefing event held in Aberdeen today. Deloitte, who sponsor the event, took part in a panel discussion exploring the results of the report alongside leading figures from Shell UK and the ECITB.
Underlining the value of collaboration to the sector, Dr Mariesha Jaffray concluded: “Through collaboration companies are able to reduce costs, share knowledge and maximise the economic recovery from the basin. We can speak with tentative confidence that these behaviours are the new normal. Provided these results are built upon, we have every reason to believe that the UKCS will become the most attractive mature basin in world with which to do business.”
Graham Hollis concluded: “While the extended period of lower oil prices has been very challenging, it has also given many companies the impetus to take a transformative approach to their own cost structures and ways of working. Many of these companies are now reaping the benefits of more direct relationships with their partners. Companies now need to accelerate the transformation and embed these new ways of working to ensure their future high performance, regardless of oil price.”
Notes to Editors:
1. The full report can now be downloaded on Deloitte’s website. Key findings and backgrounds are below for your reference.
• This is third UKCS Upstream Supply Chain Collaboration Survey, and for the second year running, the Survey is jointly conducted with Oil & Gas UK. The Collaboration Index serves as the main measurement tool of Oil & Gas UK’s Industry Behaviours Charter and provides confidential feedback to companies on its board.
• Oil & Gas UK’s Efficiency Task Force (ETF) launched the Industry Behaviours Charter at the end of 2015. The Charter is a collective commitment to work effectively, efficiently and co-operatively.
• The UKCS upstream supply chain collaboration survey consists of three main parts:
o The Collaboration Review covers the level and quality of collaboration across the UKCS and discusses attitudes towards collaboration as well as cost reduction
o the Collaboration Index measures the effectiveness of companies as partners in collaboration. While individual company scores are kept confidential, the aggregated Index scores published here give an indication of how effectively operators and suppliers collaborate
o the Framework for Action provides guiding principles that companies can follow to make collaboration more effective and drive real transformation in supply chain performance.
• Attitudes to collaboration continue to improve year on year
• 95% of respondents say collaboration is now part of their day to day business acknowledgement demonstrates the widespread understanding and support for this behaviour
• 43% of those surveyed said collaboration efforts were successful compared to 27% in 2015
• Operators reported significant growth in success rates, 68% in 2017 against 51% in 2015
• Cost reduction remains the main reason to collaborate (31%) but for the first time sharing knowledge and learning is seen as more important than risk reduction (23% in 2017 against 17% in 2016)
• Collaboration is increasingly at the heart of business strategy – evidencing that cultural change is embedding by shifting from behavioural motivations to process motivations
• 78% of operators and 82% of suppliers believe there is either a strong or a very strong need to collaborate to improve the economics of decommissioning
• The Collaboration Index (CI) score has increased to 7.1 in 2017 from 6.6 in 2016
• This is the third successive annual improvement
• For the first time, operator averages are higher than supply chain averages – the improvement in operators demonstrates momentum is building
• The supply chain index increased to 7.0, showing operators are recognising the efforts that suppliers are making
• The Wood Review identified collaboration across the UK’s offshore oil and gas sector as a fundamental behaviour in securing the successful future of the UK Continental Shelf. It placed emphasis on the need for industry’s existing collaborative approach to be extended across all activities – whether it be production efficiency, rig sharing, more effective deployment of new technology or sharing access to key spares.
• The implementation of the Wood Review was embraced by industry and the UK Government, working together with the Oil and Gas Authority to deliver a principal objective to maximise the economic recovery of UK petroleum (MER UK). This objective is now being delivered through the MER UK strategy.
Issued by the Communications Team, Oil & Gas UK. Contact Communications Adviser Natalie Coupar on 01224 577 343 [email protected] and Deloitte PR Manager Will Black 020 7007 82 42 [email protected]
Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its membership comprises oil and gas producers and contractor companies.