Disconnect between green goals and execution
Despite energy companies setting out with lofty green goals at the board and executive level, there will be a great disconnect with execution at the ground level, unintentionally slowing progress.
Unfortunately, staff that have been in oil and gas for 20 or more years (which seems to be the majority) will have memories of the last almost 20 years of ‘greenwashing’ to make things sound more environmentally friendly than they are. That does not mean that the push for renewables and to reduce emissions has not been serious in the past, it just indicates that investors and executives have been out of touch with the execution-level staff and their ability to deliver on a P/L, train new staff, and find innovative ways to reduce emissions or drive towards renewables.
In the past, these long-term employees have been set up to fail, not something they will soon forget. Execution-level staff hear the excitement, but their reaction may very well be "here we go again". It is possible for us as an industry to make progress to becoming more responsible operators and support our industry execution veterans by learning from the past.
A few oil and gas majors are stepping in the right direction with their investments to build new business units in renewables. This approach should yield real results as big oil and gas can now recruit outside talent to run the operations, then follow with cross training up-and-coming talent to further build their renewable competency – all of this while ensuring long-term employees, with expertise in traditional oil and gas operations, can continue to do what they do best, and apply pressure on executives to do it better.
It may also be wise for oil and gas companies to rebrand their new renewable business units to increase their ability to recruit millennial and Generation Z talent that otherwise would not pursue a job in the field. As an industry we need to be serious about the idiom "evolve or die". If we do not make ourselves appealing, then I am sure there is a large PE firm out there more than capable of taking control and making the necessary changes to ensure energy supply while making it appealing to up-and-coming talent. This may actually be an interesting opportunity for energy investors in the next 5 to 10 years to watch for those repeating ‘greenwashing’ without execution.
The pandemic exposed the fragility of many energy companies, which moving forward will need to future proof operations. This will be done by continuing the acceleration of digital transformation and automation.
As a tech company servicing oil and gas, March 2020 was very interesting for us. At the time, we had four prospective customers in late-stage procurement we were excited to work with to enhance the throughput/production of their existing assets. In April 2020, 2 of our 4 prospective customers called us, one with the message "our stock dropped almost 80% last night, this project will be on hold indefinitely" and then noting "we are removing the department that is heading up this project so we are putting it on hold indefinitely".
This put us on edge, both for our company and for the future of the industry. If oil and gas companies cannot afford to make their operations better in a time of crisis, what hope is there? I then immediately reached out to our two remaining prospective customers and the response was unanimous " we are doubling down on this effort, despite our capital project budget cuts". As the year went on, we had inbound prospective customers asking to learn more about us and how we can help ensure business continuity and tangibly accelerate their digitisation effort.
The crunch of 2020 has had a double positive effect for the oil and gas digital transition: those companies with forward-thinking leadership spurred by past successes are able to continue investing in the cause, and the economic pressures of 2020 have resulted in many artificial intelligence (AI) and machine learning (ML) start-up companies that are focusing on the oil and gas sector, but have not yet proven tangible results, to be pushed to the sidelines. Automation of any human task is an important focus for 2021 and beyond. Centralised control rooms with shift workers have proven to be an operational weakness. Oil and gas executives have had to look closely at how their dividend paying assets are operated and take notice that control room operators are the front lines to profit, losses, safety, and environmental responsibility.
During the initial lockdown in March 2020, I heard of control room operators being plucked from normal shift schedules to one month of quarantine at a time to keep assets in operations. This is a fine short-term band-aid, assuming that the families of control room operators can handle single parenting (potentially on a single income) and home-schooling for a month at a time, but it is certainly not a long-term solution for the essential workers required to keep this industry running. My sincerest hope is that significant effort and investment is put towards creating a more flexible working environment for critical control room operators, enabling them to work from home, in a safe environment. Automation can enable this by reducing the complexity of operation and allowing for remote operation.
New, clean tech energy will be the fastest onto the grid
Existing energy companies will not change overnight. The winners in the race for sustainability will be developed by new operators focused on being the best in those fields.
Existing renewable energy majors have the upper hand in the energy transition: they already have a presence and have been building the operational expertise for years. Their mindset has not been to look at renewables as a side project, but they have been viewing renewables as their core business for years. For example, GM and Ford's efforts towards electric vehicles have not been as successful as Tesla’s since that was not a core business focus for them.
The best way for oil and gas companies to successfully build renewable energy capabilities is to spin out new business units and even go so far as to rebrand those units, then recruit operational talent from those companies that have the head start. Younger talent will see this new branding and not be jaded by an ‘oil and gas’ company with new branding and this will leave their existing workforce to continue to produce oil and gas safely and responsibly without the additional pressures of innovating to a new energy source that they are not familiar with.
Oil and gas companies that focus on digital transformation, innovation, and green efficiency tech will be well poised to dominate the industry in the next few years not only from better workforce and CAPEX/OPEX management but also the ability to attract new and top talent interested in working on transformation technologies in an industry that has been slow to adopt it and adapt. I for one am excited to be at the centre of it.
Author: Vicki Knott, CEO of Crux OCM
Read the article online at: https://www.oilfieldtechnology.com/special-reports/13012021/three-hot-energy-trends-for-2021/