Platform to success
"There is no more upstream and downstream" declared new BP boss Bernard Looney in an interview with IHS Markit last month, as part of the online series of CERAWeek conversations.1 Talking about the restructuring of the company to match new priorities, he said: "What we had was two very large segments and they were colossal segments inside the company, and they sort of dominated – you're either an 'upstreamer' or a 'downstreamer.' At some stage we felt that, actually, what we don't want are two big segments; we want one segment and that one segment is called BP." He describes recent attempts to transform the oil and gas major into a "lighter, more agile, more focused organisation". The business of meeting carbon goals (BP aims to achieve net zero emissions by 2050), providing fossil fuels in a post-COVID world and simultaneously satisfying shareholders must be a tricky one; Looney uses buzzwords such as agility, centralisation, diversification and digitalisation, which collectively seem to mean streamlining the different parts of the business and working with – rather than against – the tide of lower oil prices, reduced oil demand and the slow process of decarbonisation.
Looney’s comments on the shale industry are particularly notable: he now views shale as a "tech business", in light of the way that BP has managed to drive costs down in this arena: removing people from the field and using digitalisation to refine and control processes. This way of working is very much presented as the future, so how do you operate your company like a tech company? At a time when we’re rethinking everything in the wake of the COVID-19 pandemic, is this the perfect time to operate and innovate like the best of them?
Tech businesses are typically run flexibly, with the ability to reroute resources quickly to where they are needed. As McKinsey Digital puts it: "What distinguishes these tech companies is that their technology allows them to move faster, more flexibly, and at greater scale than their competitors. IT is not a cumbersome estate 'that gets in the way' but an enabler and driver of continuous innovation and adaptation."2
There is much potential for digitalisation to enable and drive the oil and gas industry, and in particular the pipeline sector. In this issue of World Pipelines, SRJ Technologies (p.49) explores how pipeline asset integrity can be improved using digital technologies: "Digital transformation in the integrity management sector will … require operating and service companies to seek better collaboration, and to rethink their business models" It's not simply a case of digitalising a few components of your business, but incorporating core business processes too, so as to create a holistic digital platform. This, according to SRJ, will result in operational improvements and changes in how services will actually be procured and delivered.
An article from Touchstone (p.53) argues that the adoption of digitalisation is key to maintaining a competitive advantage in the future. Technology should have a central role: CEOs and business leaders must take the leap and entrust both the operation and efficiency of their midstream businesses to the new realities of the changing digital environment. Touchstone's article asks some interesting questions to ascertain how best you can manage pipeline processes.
How else can you adapt and survive? GlobalData’s recent comment on navigating the COVID-19 crisis establishes that best placed to succeed are companies with diversified portfolios, although it occurs to me that exposure to multiple facets of the business could also be damaging given the wide-ranging effects of the pandemic. Perhaps the key is a balanced portfolio where negative impacts can be mitigated across assets.3
One thing is certain, platform-based business models hold a lot of promise for navigating in a brave new world.