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Published: November 9, 2006

 
 

Unprecedented and Unseen: The Next Great Energy Challenge

Revisit the nature of the relationship between owner and supplier, so that they can jointly manage the surge in activity while meeting project performance targets. Historically, the quality and availability of contractors have been key to the success of a project. Today, the supply base is consolidating at a fast pace — a situation that is likely to have far-reaching implications regarding the nature of contractor/field owner relationships. Contractors are already being selective about who they work with. A senior manager of a large EPC firm in Houston states that, far from chasing work (as was done in years past), his firm will pick and choose projects in the future.

This is a sobering situation for large oil and gas companies. A senior executive who oversees project management in one such company estimates that the current contractor base has enough capacity to manage only 70 percent of the projects currently in the pipeline. It is imperative that the industry work to bridge the divide and start a dialogue, so that both sides can align their interests and collaborate. Now more than ever before, the world, struggling to secure energy supplies, needs an oil industry that can effectively manage complexity.

Author Profiles:


Herve Wilczynski ([email protected]) is a principal with Booz Allen Hamilton in Houston. Working with companies in various industries, he specializes in supply chain management, manufacturing strategy, and large-scale transformations.
Matthew McKenna ([email protected]) is a vice president with Booz Allen Hamilton in Houston. He has more than 20 years of experience in assisting clients across industries to improve business performance.
David VanderSchee ([email protected]) is a senior associate with Booz Allen Hamilton in Houston, specializing in the energy industry. 
 
 
 
 
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Resources

  1. Global Upstream Performance Review, John S. Herold Inc. and Harrison Lovegrove & Company, 2006: Source of statistics on and forecasts of exploration and production investment and performance. Click here.
  2. Sachi Hatakenaka et al., “From ‘Black Gold’ to ‘Human Gold’: A Comparative Case Study of the Transition from a Resource-Based to a Knowledge Economy in Stavanger and Aberdeen,” MIT Local Innovation Systems working paper 06-002, July 15, 2006: Benchmark study of two North Sea oil and gas sites, focusing on innovation. PDF download. Click here.
  3. Matthew G. McKenna, Herve Wilczynski, and David VanderSchee, “Capital Project Execution in the Oil and Gas Industry,” Booz Allen Hamilton white paper, 2006: The article on which this “leading idea” was based goes into more detail for industry leaders. PDF download. Click here.
  4. “Oil Sands Costs May Rise 35%,” Energy Bulletin, November 2, 2004: Cost overruns in megaprojects in northern Alberta, Canada. Click here.
  5. Peter Parry, Otto Waterlander, Varya Davidson, “Resourcing the Challenges of Maturity: An Oil Industry View,” Booz Allen Hamilton white paper, 2006: Lays out the challenge of an aging workforce (and declining expertise base) in the oil and gas industries. PDF download. Click here.
  6. “Peak Oil Resolution in U.S. House of Representatives,” Energy Bulletin, November 20, 2005: Resolved that the U.S. create an energy project with the magnitude, creativity, and urgency of the “Man on the Moon” project. Click here.
  7. Andy Serwer, “The Gusher Paradox,” Fortune, September 21, 2006: Columnist argues that even megaprojects won’t mitigate the need for oil independence. Click here.
  8. John Wormald, “Engines of Change,” s+b, Summer 2006: Overview of recent books and resources that seek to make sense of future trends in energy and transportation. “A forced transition away from fossil fuel dependence is almost certain,” but no one knows for sure how quickly it will take place. Click here.
  9. Chevron Web site: Official announcement of the Jack 2 megaproject. Click here.
  10. Oil Career Web site: For professionals seeking careers and for those trying to understand the industry’s greatest points of activity. Click here.
  11. Rigzone Web site: Gazetteer of oil and gas projects worldwide, with pictures. Click here.
 
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