Management Bulletin

Managing complexity in engineering and construction projects: (HP in May 2022) - Corrales, J., Veiga, J. P., Tecnicas Reunidas

It is widely accepted that new management methods are needed to curb the frequent delays and cost overruns observed in engineering and construction projects. New approaches, such as the Last Planner system of production control and advanced construction packages, can help to increase construction efficiencies; however, none of them address the root causes of problems, which is the difficulty of managing the inherent complexities of large engineering and construction projects. (more about ...)

Accelerating sustainable and inclusive growth - McKinsey 2021 ESG Report

While this report focuses on 2021, today we face a humanitarian crisis in Ukraine and beyond. Like others, we have mobilized to tackle the consequences of a horrific war, including by stopping our work in Russia, relocating our people, and contributing $28 million—inclusive of our $18 million cash donation to relevant organizations, and our $10 million commitment in pro bono support. We hope for a path to peace and to the rebuilding of lives and livelihoods. (more about ...)

Accelerating toward net zero: The green business building opportunity - Katherine Tam, digital editor, New York

Sustainability is top of mind for both consumers and businesses today. And while there is so much to be done to achieve net-zero emissions of greenhouse gases by 2050, the growing demand for zero-carbon technologies could present exciting opportunities to build new green businesses. Now is the time for leaders to act on the growing demand for net-zero offerings, which could generate more than $12 trillion of annual sales by 2030. Get updated on what it will take to see exponential growth, and the seven key principles to scaling green businesses. (more about ...)

Digitally uncover profitable pathways to net-zero: March 2022 - Hydrocarbon Processing: Dubey, S., AVEVA

Many view COP26—the 2021 United Nations Climate Change Conference in Glasgow, Scotland—as a missed opportunity. However, it did score a few achievements, one of which is draft guidance on Article 6 of the Paris Agreement that is expected to pave the way for operationalizing effective carbon markets. Energy executives should take notice, as this signifies the role economics and market mechanisms will play as industry decarbonizes. As many leading energy companies commit to net-zero targets, it is important to reaffirm that good planning, execution and the capability to demonstrate additionality in abatement measures can lead to an economically viable transition to net-zero. 

Start managing your stress effectively ( - McKinsey Quarterly)

The analogy between sports and stress helps illuminate a big challenge in managing stress: poor self-awareness. At the gym, for example, we’re acutely aware of when we’re straining muscles or resting them (the two phases of supercompensation). And when we consciously add new, varied exercises (behaviors) to our workout, we become stronger and more flexible over time. The same should be true for managing stress. Yet at any given time, we’re unaware of which stress state we’re in (engagement or recovery), let alone consciously seeking behavior changes that would improve the efficacy of either state. Managing stress, therefore, starts with self-awareness.

When bigger isn’t always better ( - McKinsey Quarterly)

A group structure can make it difficult for executives to determine how to balance investments in high-risk, high-reward opportunities (or, “the most exciting initiatives”) versus low-risk, low-reward ones.
Management focus and strategy: Experience shows that senior leaders in conglomerates tend to overinvest attention and organizational resources in high-growth parts of their business and underinvest in lower-growth or more mature parts of the organization. The opposite can happen, too. Senior leaders may be overly focused on the success or failure of the biggest business unit and less so on overall growth. The result is often uneven development of businesses within the portfolio.

The four global forces breaking all the trends Mckinsey

In the Industrial Revolution of the late 18th and early 19th centuries, one new force changed everything. Today our world is undergoing an even more dramatic transition due to the confluence of four fundamental disruptive forces—any of which would rank among the greatest changes the global economy has ever seen. Compared with the Industrial Revolution, we estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact. Although we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second- and third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends are producing monumental change.

Building workforce skills at scale to thrive during—and after—the COVID-19 crisis: Mckinsey

The state of AI in 2020: Mckinsey Survey - November 17, 2020

The results of this year’s McKinsey Global Survey on artificial intelligence (AI) suggest that organizations are using AI as a tool for generating value. Increasingly, that value is coming in the form of revenues. A small contingent of respondents coming from a variety of industries attribute 20 percent or more of their organizations’ earnings before interest and taxes (EBIT) to AI. These companies plan to invest even more in AI in response to the COVID-19 pandemic and its acceleration of all things digital. This could create a wider divide between AI leaders and the majority of companies still struggling to capitalize on the technology; however, these leaders engage in a number of practices that could offer helpful hints for success. And while companies overall are making some progress in mitigating the risks of AI, most still have a long way to go.

How AI can better serve the chemical process industry: Lou, H. H., Gai, H., Lamar University - HP, July 2020

Years of production have accumulated rich data assets throughout the chemical process industry (CPI). In the age of artificial intelligence (AI), there is a strong momentum to use AI in process modeling, optimization, advanced control, debottlenecking, troubleshooting, etc., in case a first-principles-based approach cannot solve the problem effectively. However, it may be very difficult to explain or interpret the resulting black-box AI models, and this hinders the trust and adoption of AI approaches. In this article, a brief introduction is provided of a novel method of “trustworthy AI (TAI)” for the CPI and its successful application in two chemical processes for improving operational excellence. Process development is a daunting task for the CPI, which faces constraints on budget, time and manpower, and a limited number of pilot tests. Even though design engineers can use process simulation packages to run different scenarios or build in-house process models, the eventual process still could be suboptimal, and some important variables may still not be monitored and controlled. Additionally, some practical issues may not be exposed until the production stage, market conditions may change, and the original design purpose may not fit anymore. These factors indicate that room exists for further improvement in CPI performance metrics. 

Scaling modular construction September 2019:

Early adopters of modular construction will likely be the construction leaders of tomorrow, driven by several circumstances. For one, smart building technology will increase the labor demand of construction per unit, and greater design complexity will require modular approaches to secure building quality and congestion. In addition, sustainability restrictions will tighten construction-site regulations regarding duration; transport quantities; or light, noise, and dust emissions. As modular players continue to gain credibility and scale, we expect modular construction to revitalize and help to finally push construction productivity to new heights. To get there, government leaders, developers, investors, and others around the world will need to take stock of the factors that determine the path modular construction takes to scale. ...

Global AI Survey: AI proves its worth, but few scale impact:

Adoption of artificial intelligence (AI) continues to increase, and the technology is generating returns. The findings of the latest McKinsey Global Survey on the subject show a nearly 25 percent year-over-year increase in the use of AI in standard business processes, with a sizable jump from the past year in companies using AI across multiple areas of their business. A majority of executives whose companies have adopted AI report that it has provided an uptick in revenue in the business areas where it is used, and 44 percent say AI has reduced costs. The results also show that a small share of companies—from a variety of sectors—are attaining outsize business results from AI, potentially widening the gap between AI power users and adoption laggards. Respondents from these high-performing companies (or AI high performers) report that they achieve greater scale and see both higher revenue increases and greater cost decreases than other companies that use AI. The findings, however, provide a potential road map for laggards, showing that the AI high performers are more likely to apply core practices for using AI to drive value across the organization, mitigate risks associated with the technology, and retrain workers to prepare them for AI adoption. ...

The mindsets and practices of excellent CEOs:

A company has only one peerless role: chief executive officer. It’s the most powerful and sought-after title in business, more exciting, rewarding, and influential than any other. What the CEO controls—the company’s biggest moves—accounts for 45 percent of a company’s performance. Despite the luster of the role, serving as a CEO can be all-consuming, lonely, and stressful. Just three in five newly appointed CEOs live up to performance expectations in their first 18 months on the job. The high standards and broad expectations of directors, shareholders, customers, and employees create an environment of relentless scrutiny in which one move can dramatically make or derail an accomplished career. ...

Rethinking the renewable strategy for an age of global competition:

Over the past decade, renewables have developed from niche technology to global industry. With environmental concerns rising to the top of global and regional agendas, the debate has shifted from “When will renewables take off?” to “How much faster will they grow?” As the cost of renewables continues to fall sharply and their growth rates soar, a virtuous cycle is set in motion. The need for clean power in emerging economies only adds to the momentum. Earlier concerns about intermittency and grid stability are fading as countries increase their share of electricity generated from renewable sources and as battery costs plummet. In Germany, for instance, renewables represented 38 percent of gross electricity consumption in 2018, up from 25 percent in 2013. At the same time, battery costs decreased from $650 per kilowatt-hour (kWh) in 2013 to $176 per kWh in 2018. According to McKinsey’s latest Global Energy Perspective Reference Case, renewable-based power generation will represent more than half of the global total by 2035.

Managing your external supply system for innovation:

When it comes to innovation, there’s too much to do and too little time to act. Across sectors, companies are experiencing a significant rise in demand for innovative products and services. Customers want products that perform better, offer new features, and are thoroughly tailored to their individual needs. As a result, product lifecycles are shrinking, while complexity increases. Meanwhile, novel and disruptive business models are radically changing the capabilities and technologies companies need to compete. Globalization exacerbates these challenges, creating the need for products and variants that comply with different local regulations and meet specific local market requirements.

From pure investor to entrepreneurial owner: How private-equity firms can master the shift: Article

To take their investments from good to great, PE firms need to act more like entrepreneurs: totally engaged and willing to take risks to create value. Historically, in a buoyant economic environment with ever-growing multiples, active management hasn’t always been required for private-equity (PE) firms to make healthy returns. Today, the economic underpinnings of PE deals have changed. There is a palpable sense in the market that deal prices have likely reached their peak. As competition intensifies, secondary and tertiary buyouts have become the norm and value creation for PE investors is less straightforward than it once was.

The future of Asia: Asian flows and networks are defining the next phase of globalization:

Securing software as a service:

Companies are rapidly adopting software as a service (SaaS) in place of purchasing commercial off-the-shelf software (COTS). Companies using SaaS rely on SaaS vendors to host their applications in the cloud instead of running them in their own data centers. Industry analysts estimate that the SaaS market will grow by more than 20 percent annually, reaching nearly $200 billion by 2024, a level that would represent nearly one-third of the overall enterprise-software market. With enterprise values for SaaS businesses reaching approximately seven times forward revenue, software companies are racing to convert from on-premises to SaaS-based delivery models. ... (more about ...)

What executives are reading in 2019: Article

We have books on the brain, with the recent release of the Financial Times–McKinsey Business Book of the Year long list. (See coverage of last year’s winner, Bad Blood, on our blog, and check back December 3, when the 2019 award is given.) There’s inspiration aplenty in the selections, which offer compelling insights on topics crucial to business today. But we also wanted to see what CEOs and other business leaders are keeping on their shelves or tucking into their suitcases—consider it food for thought in picking your next read. Read on for selections from leaders at Novartis, PayPal, Walmart, and more. ... (more about ...)

Unlocking business acceleration in a hybrid cloud world:

Digital technologies continue to transform every facet of business. Across industries, CEOs have a consistent top priority—harness technology to jump-start growth, speed time to market, and foster innovation. Several factors are ratcheting up pressure: investors are valuing top-line revenue growth; rising customer expectations for simple cross-channel experiences are compelling companies to systematically tear down silos; and an organization’s ability to respond to market shifts is becoming a core differentiator. Meanwhile, digital leaders across sectors have changed the competitive landscape by demonstrating that agility and velocity can beat scale. ... (more about ...)

The real power of real options: Article

Over 30 years of operation, one North Sea oil company accumulated a portfolio of license blocks—five-year rights to explore and produce oil and gas. Where net-present-value (NPV) analysis suggested that the economics were positive, the company drilled and developed the blocks. Where the blocks proved uneconomic—as most did, usually because development costs were too high in relation to expected revenues—development was shelved. Left with unwanted blocks that were consuming cash (albeit very little) and that had limited investment appeal, the company decided to sell them to other companies that would buy them, cheaply, for reasons of geography or strategic fit. ... (more about ...)

A case for restructuring before spin-off: Article

Making big operational changes before spinning off assets can be daunting, but our research indicates that doing so can dramatically improve the odds of deal success. The goal of most executives leading large spinoffs is to establish two (or more) successful and focused companies instead of just selling off noncore assets. Such transactions represent opportunities to create more value for shareholders. Since eBay spun off PayPal in 2015, for instance, PayPal has become one of the largest payments companies in the world and has been able to grow its base of active users, potentially exceeding 300 million accounts by the end of 2019—up from 169 million active accounts in 2015. ... (more about ...)

Curacao says PM, Venezuela oil minister discussed PDVSA remaining as refinery operator: Hydrocarbon Processing on 23 July 2019

Curacao’s prime minister and Venezuela’s oil minister discussed the possibility of Venezuelan state oil company PDVSA remaining as the operator of the Caribbean nation’s 335,000 barrel-per-day (bpd) Isla refinery, Curacao’s government said. PDVSA’s contract will expire at year-end, and the government-owned refinery has been searching for a business partner to replace it. A lack of crude shipments has left the facility largely idle. In the statement, Prime Minister Eugene Rhuggenaath’s office said he and Venezuelan Oil Minister Manuel Quevedo, who also serves as PDVSA’s president, during a meeting at the refinery “spoke about the startup of the refinery and the interest of PDVSA to remain as the operator after 2019.” ... 

North American gas outlook to 2030:

The North American gas landscape has changed substantially over the past decade, and the next 15 years will be no different. Looking ahead, we expect to see the role of natural gas shift as the number of coal retirements increases and renewables become a larger part of the energy mix. Debottlenecking and capacity additions that are currently or soon to be in progress will lead Appalachia to take a much larger role in supply, though associated gas from the Permian Basin will remain a substantial—and low-cost—supply source for much of the US Gulf Coast. ... (more about ...)

The future of work in America: People and places, today and tomorrow: 13 July

The US labor market looks markedly different today than it did two decades ago. It has been reshaped by dramatic events like the Great Recession but also by a quieter ongoing evolution in the mix and location of jobs. In the decade ahead, the next wave of automation technologies may accelerate the pace of change. Millions of jobs could be phased out even as new ones are created. More broadly, the day-to-day nature of work could change for nearly everyone as intelligent machines become fixtures in the American workplace. ... (more about ...)

Fine-tuning the growth engine: M&A in engineering and construction:

Mergers and acquisitions (M&A) frequently drive growth in the engineering-and-construction (E&C) sector. In fact, M&A growth usually outpaces organic growth, except in some niche sectors. But even though E&C companies frequently acquire other companies, many companies, surprisingly, face significant integration challenges, particularly compared with other industries ... (more about ...)

Goal: Set refinery profitability goals (June 2019, HP) - Johnson, A., Johnson, E., Graham Corp.; Lieberman, N., Process Improvement Engineering

While the ultimate purpose of operating a refinery is to produce gasoline, diesel or asphalt, key objectives include improving return on investment (ROI), net profitability and cash flow. Great strides have been made in improving plant efficiency and productivity by implementing online, interactive computer controls. Key segments of refineries have been upgraded, such as vacuum tower steam ejectors and vacuum condensers. Tower resid stripping trays have also been replaced with new types of structured packing. But has this improved profitability or cash flow? How can the first-line management level know that its cash flow or ROI has been improved?

Four success factors for workforce automation:

The fear of the future can be a powerful deterrent to change, as shown by a recent McKinsey Global Survey about the spread of automation in the workplace: 1. Aim high to capture clear value; 2. Commit and communicate; 3. Set up the right governance, ensure business drives change, and move quickly; 4. Create internal capabilities

China’s growing natural gas demand—key projects and market insights: EWA Support Team, Energy Web Atlas 

Since market reforms first started in 1978, China has shifted from a centrally planned economy to a market-based economy, experiencing rapid economic and social development. At more than $12 T, China’s economy is the world’s second largest. The country has witnessed substantial GDP growth over the past several decades. Since 2000, China’s GDP has surged from approximately $1.2 T to more than $12 T, according to the International Monetary Fund (IMF) and the World Bank. (more about ...)

AI: How AI and machine learning benefit refineries and petrochemical plants: Welsh, T., AX Control

Embedding machines with artificial intelligence (AI) allows them to learn from their past experiences. This means that machines at a petrochemical plant can use past data to predict future events. These predictions could include equipment maintenance or future disruptions that may occur at the plant. One of the best uses of AI is enabling computers to optimize plant operations based on historical trends. The overall automation of  refineries helps plant managers minimize downtime and provide better returns on investment for the owners. ... (more about ...)

Industry 4.0 in the oil and gas business - Lahti, T., Saurus, L., Hellgren, N., Neste Engineering Solutions

The operational cost structure of oil and gas companies is very capital- and labor-intensive. The long-term peak of oilfield production capacity may be reached when the world is actively chasing alternative solutions for fossil fuels. Everyday operations are constantly challenged by the scattered and continuously evolving supply and demand of raw materials and end products. To ensure profitable and sustainable business, the efficient delivery of on-specification products to the right location at the right time is key. Therefore, flexibility and real-time visibility of every operational function is a must. ... (more about ...)

The five trademarks of agile organizations: By Wouter Aghina, Aaron De Smet, Gerald Lackey, Michael Lurie, and Monica Murarka

Our experience and research demonstrate that successful agile organizations consistently exhibit the five trademarks described in this article. The trademarks include a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and a common purpose that co-creates value for all stakeholders. These trademarks complement the findings from “How to create an agile organization.” ... (more about ...)

What can we expect in China in 2019? By Gordon Orr

The US–China economic equilibrium of the past 20 years has gone, and as we look into 2019, it is not yet clear when and where a new equilibrium will form. What level of economic separation will develop between the world’s two largest economies? How much will businesses need to change in their business model—from the customers they target, the products and services they offer, their overall supply chain, and even their capital structure and ownership? The next stages of this transition will play out over 2019 in ways that cannot be fully anticipated, but without doubt, uncertainties will lead to lower levels of long-term investment by businesses in 2019 and to greater levels of volatility in market growth and in the valuations of many kinds of assets. ... (more about ...)

Editorial Comment: What is the future role of the process engineer? - Nichols, Lee, Hydrocarbon Processing Staff

During the American Institute of Chemical Engineers’ (AIChE’s) Spring Meeting, held in Orlando, Florida in April, I was honored to sit on a panel discussion with Paul Durand from ExxonMobil and Sanjeev Kapur from Apex PetroConsultants. The panel discussion, which was part of AIChE’s Fuels and Petrochemicals division, focused on how US shale gas production is changing the energy landscape in North America. Topics discussed during this 1.5-hr session included capital expenditures, downstream processing capacity additions, pipeline bottlenecks and the growth of additional takeaway capacity, supply and demand factors, and increases in US crude, fuels and petrochemical exports. ... (more about ...)

Lubes growth opportunities remain despite switch to electric vehicles: By Alvaro Bau, Giovanni Bruni, Luqman Hussin, Dieter Kiewell, Bijan Kohler, and Richard Verity

With consistently high margins overall, lubricating oils have traditionally been one of the most attractive areas in the oil and gas value chain. However, looking ahead, we could see disruption as electrification takes hold in the transport sector. To assess what may be on the horizon, we conducted an in-depth market study and developed granular projections out to 2035. The main finding was that, while volume growth may be flattening, there is still room for value-pool expansion. This will, however, be highly variable by region, market segment, and product type, so where to play matters. This growth is also subject to some significant risks, so investors will need to keep a close eye on developments in areas such as technology and policy ... (more about ...)

How would an accelerated energy transition impact natural resource demand?

Every year, we publish our Global Energy Perspective to help our clients understand the implications of the energy transition. The perspective builds on our Reference Case, which captures our view of how energy demand will evolve over the next few decades. However, it is challenging to project the speed with which the transition will take place and the magnitude of the resulting shifts in our energy systems, as these shifts are inherently complex and can be affected or reinforced by other shifts. To account for a world in which the energy transition occurs faster and to a greater degree than in our Reference Case, we have developed this outlook, which reviews the impact of eight potential shifts that could further accelerate the energy transition. ... (more about ...)

Africa’s overlooked business revolution: By Acha Leke, Mutsa Chironga, and Georges Desvaux

As global business interest in Africa has blossomed, we have found ourselves traveling the world to help executives understand where the true opportunity lies, and how their businesses can seize that opportunity before their competitors do. A few years back, one of us (Acha) found himself in Seoul, presenting to the chairman of one of the largest Korean conglomerates. At that stage, the company had almost no presence in Africa, and its executives were concerned that their Chinese competitors were stealing a march on them. ... (more about ...)

Viewpoint: New thinking to old problems - Mestari, Y., Honeywell

The oil and gas industry is aging, and it is time to get wiser when it comes to training and productivity. More than a decade ago, World Petroleum Council Director General Dr. Pierce Riemer warned the industry that it was on “the edge of a demographic cliff.” At the time, the average age in exploration and production was 50 yr old, and the industry had already lost more than 1 MM employees. Many more are now enjoying their retirement. Oil, gas and energy recruitment specialist Petroplan’s most recent Talent Insight Index 2017 report found that more than 20% of oil and gas professionals said the industry lacked the right talent for its growth. ... (more about ...)

A flare for successHow an environmental hazard was transformed into a multi billion dollar business: By James Langton

It began with a bad smell but ended with a multibillion-dollar industry for Abu Dhabi. The smell reached the nostrils of Founding Father Sheikh Zayed on a tour of the Western Region. It was acrid and unpleasant, so strong that it was hard to sleep. What was it, Sheikh Zayed asked. The answer was more than 160 kilometres away. Burning gas from the offshore oilfields. The gas was a byproduct of oil extraction and useless, everyone said. ... (more about ...)

Unlocking future growth for deepwater in the Gulf of Mexico - By Kassia Yanosek and Matt Rogers
Operators in the Gulf of Mexico (GOM) have had success recently focusing on incremental tie-backs and near-field opportunities, and there remains uncaptured upside there. However, recent challenges in deepwater exploration puts into question the scale of the GOM’s growth potential. New trends in technology, development, commercial models, and financing—and industry players’ responses to these innovations—will determine whether the GOM will return to its former role as a high-margin, cash-generation contributor for the best operators. ... (more about ...)

Refiners still strong in second quarter, outlook bright for rest of year – By Tim Fitzgibbon

North American independent refiners posted strong financial results in the second quarter, building on gains notched in the earlier three-month period. Major contributors to strong margins include growing discounts for local crude and stronger than usual diesel markets. ... (more about ...)

Viewpoint: The need for change—Why the industry is looking at crude-to-chemicals: Birdsall, C., ExxonMobil

As the world’s population increases and living standards continue to improve, the demand for energy and chemicals is stronger than ever before. As the world’s population increases and living standards continue to improve, the demand for energy and chemicals is stronger than ever before. Global demand for chemicals is expected to outpace global gross domestic product (GDP) by nearly 40% over the next 10 yr ... (more about ...)

The risks and rewards of outsourcing: By Calin Buia, Christiaan Heyning, and Fiona Lander

In the digital age, companies in the energy and materials industries must balance the classic advantages of outsourcing a segment of the value chain with the new realities of shutting down their strategic options if a supplier becomes too powerful. Outsourcing is nothing new to big companies in the energy and materials industries. Many have relinquished control of lower-value functions, such as payroll, or even slivers of the value chain that are more central to their business. Mining companies lease trucks and rail freight, for example, and most oil companies outsource drilling. To date, however, these same companies have seen little reason to let go of higher-value functions, ...  (more about ...)

Unlocking future growth for deepwater in the Gulf of Mexico (July 2018): By Kassia Yanosek and Matt Rogers

McKinsey projects deepwater prospects will be an important part of future global oil and gas supply, with the Gulf of Mexico representing a sizable portion of new production expectations for 2030. Operators in the Gulf of Mexico (GOM) have had success recently focusing on incremental tie-backs and near-field opportunities, and there remains uncaptured upside there. However, recent challenges in deepwater exploration puts into question the scale of the GOM’s growth potential. New trends in technology, development, commercial models, and financing—and industry players’ responses to these innovations—will determine whether the GOM will return to its former role as a high-margin, cash-generation contributor for the best operators. (more about ...)

China’s fast climb up the value chain: From high-tech unicorns to specialty chemicals, the country’s economy is moving swiftly beyond its lower-margin roots.

The Chinese are now the world’s most avid online purchasers of goods and services, which they are likely to pay for with a mobile device. The deepening digital ethos reflects a broader consumerization of the Chinese economy. These trends are creating fertile grounds for digital start-ups while also transforming traditional industries such as specialty chemicals as they supply materials for advanced industries and higher-margin consumer goods. Global companies in China should ensure that they’re not competing for yesterday’s markets. (Source: McKinsey)

Africa: The challenge of investing in Africa’s additional capacities: Oirere, S., Contributing Editor - According to BP’s Statistical Review of World Energy 2017

Africa’s total crude oil production is approximately 7.9 MMbpd. Nearly 78% of the continent’s oil production is located in four countries—Algeria, Angola, Egypt and Nigeria. The region’s crude oil production significantly outweighs its refining capacity, and its oil production is more than double the amount it consumes. However, lack of investment, along with failing infrastructure and inadequate refining capacity are forcing the continent to rely on imports to satisfy increasing fuel demand. Most African refineries operate well below capacity, and the majority of new refining investments rarely progress beyond the initial concept stage. As a result, refined-product imports have increased for years. Africa’s oil demand is forecast to increase from approximately 4.3 MMbpd in 2017 to nearly 5 MMbpd in 2023, according to the International Energy Agency’s Oil 2018 report. (Source: Hydrocarbon Processing)

A framework for fostering effective energy transitions: By Daniel Hund, Sébastien Léger, Arnout de Pee, Occo Roelofsen, Thomas Seitz, and Kassia Yanosek

Globally, energy systems are experiencing significant and fast change, driven by forces such as technological innovation, changes in consumption patterns, supply dynamics, and policy shifts. These forces offer opportunities to resolve the challenges that the global energy system faces today, namely: providing energy access to the more than one billion people who lack it, and meeting demand for an additional two billion people by 2050, while also delivering that energy at an affordable cost and with a declining carbon and emissions footprint. (more about ...)

Global Energy Perspective 2018:

McKinsey Energy Insights has released the 2018 Reference Case from its Global Energy Perspective on long-term energy demand. Global CO₂ emissions are expected to plateau by 2030 due to major shifts in the global energy landscape, particularly related to electric vehicles and renewable energy sources. However, increased global energy demand means that emissions will remain at more than double the level required for a 2 degrees Celsius warming pathway. (more about ...)

10 Breakthrough Technologies 2017

These technologies all have staying power. They will affect the economy and our politics, improve medicine, or influence our culture. Some are unfolding now; others will take a decade or more to develop. But you should know about all of them right now. - Reversing Paralysis, Self-Driving Trucks, Paying with Your Face, Practical Quantum Computers, The 360-Degree Selfie, Hot Solar Cells, Gene Therapy 2.0, The Cell Atlas, Botnets of Things, and Reinforcement Learning. (Source: MIT Technology Review)

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 transformations

Organizational 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 3: Nichols, L., Hydrocarbon Processing

Hydrocarbon 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. 

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: Zurlo, J. A., GE Water and Process Technologies

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. 

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.