Management Bulletin

Accelerating digital transformations: A playbook for utilities (January 2018): By Adrian Booth, Eelco de Jong, and Peter Peters - For utility companies, transforming operations and systems with digital technologies can create substantial value: a reduction in operating expenses of up to 25 percent, which can translate into lower revenue requirements or higher profits. Performance gains of 20 to 40 percent in such areas as safety, reliability, customer satisfaction, and regulatory compliance are also achievable. (Source: Mckinsey)

Operating models for oil and gas fields of the future By Jayanti Kar, Andy Thain, Otto van der Molen, and Francesco Verre: As the global energy transition accelerates, upstream operators must modernize and shift to more economic operating models. Where and how should they seek the next generation of efficiency gains? As predictions of an early peak in oil demand take hold, upstream operators must find ways to produce more energy, more efficiently. Many have made significant performance gains in recent years. Across the sector, production costs are down 30 percent; safety incident frequency has fallen by a third; and production losses have declined by 15 percent since 2014. Yet more is necessary. (more about ...)

Minimize engineering errors with competency and proper engineering review Tharakan, J., Suncor Energy Products - Industry has seen numerous engineering errors during the commissioning phase of projects. Errors that slip through reviews could lead to costly equipment failures. How do these errors creep in? Are organizations learning from incidents and capturing those learnings in their standards? How many times has corporate memory failed us? Some interesting examples of errors that will provide a taste of the broad and diverse range of potential errors are discussed here. Standards and specifications can address repeatable errors, but competency and the right level of engineering review are required to minimize random errors. (more about ...)

An analytical approach to maximizing reservoir production (September 2017): By Anton Maximenko, Otto van der Molen, and Francesco Verre - There is a significant opportunity in subsurface optimization. Our estimates show that an analytical approach to production could improve the global average underground recovery factor by up to 10 percent, equivalent to unlocking an additional 1 trillion barrel of oil equivalents (boe). (more about ...)

Project Management: Bridging the gap in revamp projects—From business need to design basis (September 2017): Sivasubramanian, G., Fleshman, J., Arivergy LLC
Revamp projects are notorious for scope creep, cost and schedule overruns. This article, based on considerable experience in revamp projects from a contractor’s perspective, will discuss improvements for a sound process design basis from the owner’s side. A sound design basis goes a long way in successfully meeting revamp project objectives. (more about ...)

What’s missing in leadership development? By Claudio Feser, Nicolai Nielsen, and Michael Rennie
Organizations have always needed leaders who are good at recognizing emerging challenges and inspiring organizational responses. That need is intensifying today as leaders confront, among other things, digitization, the surging power of data as a competitive weapon, and the ability of artificial intelligence to automate the workplace and enhance business performance. These technology-driven shifts create an imperative for most organizations to change, which in turn demands more and better leaders up and down the line. (more about ...)

The future of HR in oil and gas - By Torstein Hagen, Florian Pollner, Christer Tryggestad, and Jannik Woxholth
Three disruptions that are redefining the role of HR in oil and gas. During the last decade, the oil and gas industry experienced a sense of resource scarcity, leading to high oil prices for most of the period. (more about ...)

How Just 14 People Make 500,000 Tons of Steel a Year in Austria By Thomas Biesheuvel
The Austrian village of Donawitz has been an iron-smelting center since the 1400s, when ore was dug from mines carved out of the snow-capped peaks nearby. Over the centuries, Donawitz developed into the Hapsburg Empire’s steel-production hub, and by the early 1900s it was home to Europe’s largest mill. With the opening of Voestalpine AG’s new rolling mill this year, the industry appears secure. What’s less certain are the jobs. (more about ...)

Business Trends: Standardized modularization—Drivers, challenges and perspectives in the oil and gas industry
Modularization is an alternative way of performing engineering aimed to reduce the number of interfaces, the total installed cost (TIC) and overall schedule length of a project, while optimizing the return on investment (ROI) and allowing standardization for similar future projects.

Artificial intelligence: Implications for China By Dominic Barton, Jonathan Woetzel, Jeongmin Seong, and Qinzheng Tian - The country is becoming a hub for global AI development. Five priorities can help China harness AI for productivity growth and prepare for the societal shifts it may unleash. Artificial intelligence, or the idea that computer systems can perform functions typically associated with the human mind, has gone from futuristic speculation to present-day reality. A new discussion paper from the McKinsey Global Institute, originally presented at the 2017 China Development Forum, explores AI’s potential to fuel China’s productivity growth—and to disrupt the nation’s workforce. 

Mark Zuckerberg just signed the death warrant for the smartphone (19 April 2017): MATT WEINBERGER - It’s no secret that Mark Zuckerberg is pinning Facebook’s future prospects on augmented reality — technology that overlays digital imagery onto the real world, like Snapchat’s signature camera filters. At this year’s F8 conference, taking place this week, Zuckerberg doubled down on the company’s ambitious 10-year master plan, which was first revealed in 2016. On this timeline, Facebook expects to turn artificial intelligence, ubiquitous internet connectivity, and virtual and augmented reality into viable parts of its business over the next decade.

Preserving the downturn’s upside: By Daniel Cole and Robert Harris-Deans 

The fall in oil prices has driven oil and gas companies around the world to focus on reducing production costs. In this article, the first of a regular series providing our perspective on upstream oil and gas operations, we look at global trends in production costs, and how at the same time the reliability and safety of assets have improved. We will use a recent analysis from the UK North Sea to understand the changes and assess their sustainability, along with the key internal and external factors that influence them. The upcoming series will draw from public and proprietary data sources, and recent interviews with senior executives representing both operators and contractors.

Economic Conditions Snapshot, March 2017: McKinsey Global Survey results

Executives are more upbeat about current economic conditions—both globally and in their home countries—than they were for all of 2016, in McKinsey’s latest survey on the topic.1They are nearly twice as likely as in the past two surveys to say conditions in the world economy have improved in recent months, and they report notable improvements in their home economies, too. Their views on the future, though, are more tempered. Respondents are more optimistic than not about economic prospects but doubt conditions will improve much more than they already have.

How to Manage Our Algorithmic Overlords (29 March 2017): By Cathy O'Neil 

Humans are gradually coming to recognize the vast influence that artificial intelligence will have on society. What we need to think about more, though, is how to hold it accountable to the people whose lives it will change. Google tells us what to believe. Facebook tells us what’s news. Countless other algorithms are standing in for human control and judgment, in ways that are not always evident or benign. As Larry Summers recently noted, the impact on jobs alone (in large part from self-driving cars) could be greater than that of trade agreements:

The next step for energy companies: By Sven Heiligtag, Susanne Maurenbrecher, and Niklas Niemann

Strategic and financial scenario analysis has a long, venerable history at energy companies. Shell Oil popularized the technique in the 1970s, and almost all of them have adopted it as a vital part of their decision-making processes. But as executives know well, scenario planning has its pitfalls; 40 percent of the leaders we surveyed in 2013 said that it didn’t meet their expectations. Often, companies fall prey to one of several tendencies, such as availability or stability bias, that hinder the exercise and produce unusable results.

How to start building your next-generation operating model By Joao Dias, David Hamilton, Christopher Paquette, and Rohit Sood

Each company’s path to a new operating model is unique. But successful transformations are all constructed with the same set of building blocks. A North American bank took less than two years to shift 30 percent of its in-branch customer traffic to digital channels and dramatically reduce its brick-and-mortar footprint.

Engineering the switch to digital By Robert Carsouw, Andrea Del Miglio, and Naomi Smit

The CIO of ING Bank discusses the importance of top engineering talent and agile ways of working when it comes to digitizing products and processes. Digital proficiency is no longer just “nice to have” for banks; it is a requirement for successful customer engagement and long-term growth, explains Ron van Kemenade, ING Bank’s chief information officer. In 2010, the company adopted an agile approach to software development and delivery—launching products in rapid iterations and adjusting them based on customer feedback.

Reinventing construction through a productivity revolution By Filipe Barbosa, Jonathan Woetzel, Jan Mischke, Maria Joao Ribeirinho, Mukund Sridhar, Matthew Parsons, Nick Bertram, and Stephanie Brown

The construction industry employs about 7 percent of the world’s working-age population and is one of the world economy’s largest sectors, with $10 trillion spent on construction-related goods and services every year. But the industry has an intractable productivity problem and, according to Reinventing construction: A route to higher productivity, a new McKinsey Global Institute report, an opportunity to boost value added by $1.6 trillion.

From disrupted to disruptor: Reinventing your business by transforming the core - By Peter Dahlström, Liz Ericson, Somesh Khanna, and Jürgen Meffert: When Madonna burst onto the scene in the early 1980s, there was little reason to suspect that she’d have more than her allotted 15 minutes of fame. But in the three decades since her debut album, she has managed to remain a media icon. Her secret? “Madonna is the perfect example of reinvention,” Janice Dickinson, renowned talent agent, has said. Fittingly, the name of Madonna’s sixth concert tour was “Reinvention.” ...

Adopting an ecosystem view of business technology By Driek Desmet, Niels Maerkedahl, and Parker Shi

IT has traditionally functioned as the foundation to keep a company running. One of its core functions has been to protect company operations with firewalls and encryption to keep external technologies out. With the advance of technologies, however, a vast array of capabilities and sources of competitive advantage are emerging beyond a business’ traditional walls. ...

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The people power of transformationsOrganizational transformations are hard work, and according to the latest McKinsey Global Survey on the topic, companies are no more successful at overhauling their performance and organizational health than they were ten years ago. A particular blind spot seems to be the failure to involve frontline employees and their managers in the effort.

Tailoring your integration approach to specific deals By Jeremy Borot, Oliver Engert, Sean O’Connell, and Pablo Salazar: Every merger or acquisition is different, yet many companies stick to the same integration playbook. Here’s how to tailor your approach. Late Thursday afternoon, Carmela Jones sat at her desk reflecting on the failed acquisition of ACME. Carmela had expected to retain most of ACME’s leadership team, but they were fleeing, and customers were following suit. If not stopped, this deal could destroy significant value. How could this have happened? In her five years as head of M&A, she had led the successful integration of over 50 companies. How did the same top-notch team, using the same well-developed playbook and world-class tools, get it so wrong this time?

How to accelerate gender diversity on boards By Celia Huber and Sara O’Rourke:  What happens after companies jettison traditional year-end evaluations? The worst-kept secret in companies has long been the fact that the yearly ritual of evaluating (and sometimes rating and ranking) the performance of employees epitomizes the absurdities of corporate life. Managers and staff alike too often view performance management as time consuming, excessively subjective, demotivating, and ultimately unhelpful. In these cases, it does little to improve the performance of employees. It may even undermine their performance as they struggle with ratings, worry about compensation, and try to make sense of performance feedback.

Ahead of the curve: The future of performance management By Boris Ewenstein, Bryan Hancock, and Asmus Komm: What happens after companies jettison traditional year-end evaluations? The worst-kept secret in companies has long been the fact that the yearly ritual of evaluating (and sometimes rating and ranking) the performance of employees epitomizes the absurdities of corporate life. Managers and staff alike too often view performance management as time consuming, excessively subjective, demotivating, and ultimately unhelpful. In these cases, it does little to improve the performance of employees. It may even undermine their performance as they struggle with ratings, worry about compensation, and try to make sense of performance feedback.

EPA amends risk management program for chemical facilities (22 December 2016): WASHINGTON – The US Environmental Protection Agency (EPA) finalized a rule amending its Risk Management Program (RMP) regulations to reduce the likelihood of accidental releases at chemical facilities and improve emergency response activities when those releases occur. This rule is the latest in a series of actions the federal government has taken in consultation with industry, local and state governments, and other stakeholders to improve chemical process safety, assist local emergency authorities in planning for, and responding to, accidents, and improve public awareness of chemical hazards at regulated sources.

Get more from your next turnaround: Bishop, N., Olsen, T., Emerson Process Management

Turnarounds in continuous operating process plants, such as refineries and petrochemical processing plants, are complicated and costly events where each day of downtime equals lost revenue. 

Business Trends: Global refining overview—Part 3Hydrocarbon Processing continues its series on the global refining industry. This series provides a detailed outlook on the state of the global refining sector, active and new project developments, and an overview of major refining trends in each region. Part 3 provides an overview of the refining sectors of Canada, Latin America and the US. Nichols, L., Hydrocarbon Processing

Viewpoint: Create a culture of safety: Protecting people while boosting your bottom line by Schiff, T., ExxonMobil

Safety has long been a core value for most industrial companies, and with good reason. Implementing safety best practices helps reduce employee risk, which helps minimize the number of workplace accidents and ensures compliance with industry and government regulations.

Refining: High-impact challenges in today’s global refining market: To stay competitive and thrive in today’s uncertain and volatile energy market that is characterized by major shifts in supply and demand dynamics, refiners must find ways to increase operational efficiencies, maximize productivity and produce refined products at lower costs. Zurlo, J. A., GE Water and Process Technologies

UKCS experiencing sustained production efficiency, regulator says - Oil & Gas Journal (3 November 2016): The UK Continental Shelf (UKCS) has experienced sustained production efficiency (PE) compared with 2012 statistics, which marked a PE low point, the Oil and Gas Authority said in a report, UKCS Production Efficiency, that analyzed 2015 statistics

Five strategies to transform the oil and gas supply chain (By Giorgio Bresciani and Marcel Brinkman)

Over the past 24 months, companies in the oil and gas supply chain have gone from boom to bust. Operators faced with crumbling crude prices have cut back sharply on supply-chain spending. As a result, oil-field service and equipment (OFSE) companies are seeing business evaporate. They have cut costs and, in some cases, changed business models in response. However, in pursuit of sustainable cost reductions and near- and long-term profitability, both operators and OFSE companies have begun to work together. Right now, OFSE companies in particular are exploring five strategies to accommodate this changed environment: cost cutting, vertical integration, new revenue models, consolidation, and new equipment and service models.

Business Trends: Global refining overview—Part 2: by Nichols, L., Hydrocarbon Processing

Hydrocarbon Processing continues its series on the global refining industry. Part 1 provided a look at the present state of the refining industry, new project developments, demand outlooks for the refining sector and the move to low-sulfur transportation fuels. Part 2 focuses on the refining sector and capacity construction outlook for the Asia-Pacific region. This detailed overview analyzes major trends in the region and offers data on planned refinery capacity additions, upgrades and grassroots facilities.

Use process knowledge management systems to accelerate innovationby Hall, S., Process Systems Enterprise; Mahoney, P., Ambition Partner

The amount of stored digital data is doubling every two years, and the rate of data acquisition is close to exceeding our ability to process it and sort out what is valuable.

The oil and gas organization of the future (By Christopher Handscomb, Scott Sharabura, and Jannik Woxholth)

Today’s oil and gas organizations were developed in a time of resource scarcity. To get at those hard-to-find, difficult-to-develop resources, companies built large, complex organizations with strong centralized functions. This model allowed them to tackle terrific technical challenges, manage great political and operational risks, and deploy scarce talent across the world as needed.

Lean management reduces repair timesWritten by  Ian Taylor, Sulzer (05 October 2016)

Sulzer’s Ian Taylor explains the principles of lean management, how they apply to the oil and gas sector and the practical steps that deliver benefits to the end users. The low price of crude oil during 2015 has led to many negative headlines, but there have also been several positive initiatives that will continue to deliver improvements in the years ahead.