University of Warwick: November 15, 2012 Glen Burridge NDB – New Digital Business Ltd INTERCULTURAL ISSUES IN THE UPSTREAM OIL & GAS INDUSTRY.

University of Warwick: November 15, 2012

Glen Burridge

NDB – New Digital Business Ltd

INTERCULTURAL ISSUES IN THE UPSTREAM OIL & GAS INDUSTRY

Structure of Presentation1. Overview of Upstream Oil & Gas business2. The Three-Way Intercultural Challenge3. The Consequences4. Possible Solutions

1. Overview of Upstream Oil & Gas Business

The Upstream Oil & Gas Industry

2. The Three-Way Challenge

Algerian-AmericanLiving in US

Algerian

BritishLiving in Hungary

BritishLiving in Australia

British

BritishLiving in Indonesia

BritishLiving in France

American

PortugueseLiving in UK

Egyptian

Pakistani

7 Production Engineers6 Reservoir Engineers

7 Geologists3 Managers

2 Geophysicists2 Admin Support

2 Software Support1 Petrophysicist1 Data Manager

A. The NATIONAL Challenge

Operating Company

Operator

Partner 1

P2

P3

P4

Government

Service Co 1Contractor 2

Contractor 3 ……Contractors n

…………..…………Sub-Contractors x many n?

C4

C5

C6

Consultants AdvisorsProject 1 Project 2

B. The ORGANISATIONAL Challenge

C. The TECHNICAL Challenge

People

TechnologyProcess

The Technical Challenge I - People

People

TechnologyProcess

• Knowledge Transfer:

- Professional operational status: 5+ years

- Project-specific expertise: 6 months+

- High degree of training, but poor mentoring of new staff

- Poor knowledge capture & transfer from experienced staff

• Geoscientists (“Geo’s) vs Engineers:

- Large-scale, 4D conceptually-driven thinking of geoscientists

- Focused, measurement & building-driven view of engineers

• The Big Crew Change:

- Large number of highest experience staff to retire in coming decade

- Missing Generation of mid-career professionals

- Budding economic powers providing increasing share of workforce

- Steadily more gender-balanced professional workforce

So, an Engineer, a Geologist & Geophysicist are in a room with the Boss.

Engineer

Geologist

Geophysicists

The Boss asks the Engineer “What’s 2+2?” The Engineer replies “4.0000″. Then the Boss ask the Geologist the same question. The Geologist replies” Oh, somewhere between 3 and 5″.

Finally, the Boss ask the Geophysicist the same question. The Geophysicist replies ” What would you like it to be?”

GeologistGeophysicistReservoir Engineer

Petrophysicist

Well Engineer / DrillerProduction/Facilities Engineer

The Technical Challenge II - Process

People

TechnologyProcess

• Project Governance:

- Nationalisation of JV projects often written into Production contracts

- Ability of host country to effectively manage resources

- Training and technology transfer aspects often poorly executed

- National identity strong in management, but workforce diverse

- Major disparities in remuneration, roles and expectations

- Mentality conflict of operational expediency vs project management

- Office-based vs Operations (off-shore vs on-shore)

• Long, complex, projects with multiple partners & web of contractors:

- Differing perceptions of lines of command

- Matricial vs hierarchical decision-making structures

- Opposing motivations -> poor integration

- Vastly different psychological contracts (Handy, 1999)

Explore Develop Produce

“Cloud Thinking”

Explore Develop Produce

$$$

$$$

$$$

X X

X

Explore Develop Produce

The Technical Challenge III - Technology

People

TechnologyProcess

• Unrelenting levels of:

- Heterogeneous technology development

- Complex infrastructure testing & deployment

- Potentially massive data overload (which patterns, trends important?)

- Residual risk and carried uncertainty (the subsurface is never “known”)

• Increasingly difficult targets:

- Geopolitical constraints

- No Elephants Left to Discover?

- Extreme physical environments (deeper water, arctic)

- Multitude of environmental considerations

- Rarely a “silver bullet” technology

3. Consequences

Examples of 3-Way Cultural Challenges faced by Oil & Gas Managers:

• Differences in interpretations / recommendations between local and expat subsurface staff:Need to reconcile & select most appropriate fitting all necessary criteria

• Critical Issue / Error / Risk Reporting:Face, power-distance, individual vs collective responsibility

• Goal Conflict:Idiocentric Corporate multinational company goals vs Allocentric National

Polychronic perspective

• Large project planning:Point outcomes vs consensus building. Time perceptions. Delegation.

• Roles & Responsibilities:Power-Distance, Linear vs Circular decision-making, Matrix vs Hierarchy.

Multiple projects

• Uncertainty handling (sub-surface environment, external constraints etc)Recognition, acknowledgement, assessment, consequence

National

Technical

Organisational

Consultant

Geologist

Geophysicist

Eng

inee

r

International

European

British

English

TH

E

IND

IVID

UA

L

Close-knit consultancy

Project Teams

Solo work

Client Interaction

Client S

taff

Client M

anagement

National

Technical

Organisational

Yemen

North Sea

Russian Arctic

Western European IOC (Integrated Oil & Gas Company)

OR

GA

NIS

AT

ION

1

National

Technical

Organisational

Yemen

North Sea

Russian Arctic

Middle EasternNOC (National Oil & Gas Company)

OR

GA

NIS

AT

ION

2

“As a result of a cascade of deeply flawed failure and signal analysis, decision-making, communication, and organizational - managerial processes, safety was compromised to point the blowout occurred with catastrophic effects.”

Perhaps there is no clear-cut “evidence” that someone the organizations in the Macondo well project made a conscious decision to put costs before safety; nevertheless, that misses the point.

It is the underlying “unconscious mind” that governs the actions of an organization and its personnel.

“Cultural influences that permeate an organization and an industry and manifest in actions that either promote and nurture a high reliability organization OR actions reflective of complacency, excessive risk-taking and a loss of situational awareness.”

Root Causes/ Failures of Macondo Well ExplosionRef: US Chief Counsel’s Report to President

4. Possible Solutions

National

Technical

Organisational

Understand

Engage

Communicate

Cultural Intelligence

Ref: E. Plum et al., 1998

What can be learnt by O&G from the world of aviation?

• High Reliability Organisation (HRO) foundations:- Standard Operating Procedures (SOP’s)- Checklisting- Licensing- Crew Resource Management (CRM)- Command, Control, Communicate (C3)

• Promotion of Quality Assurance, Safety & Excellence- Non-negotiable barriers- Confidential Reporting- Pro-active RCA (root-cause analysis)- Accident Investigation

• High levels of accredited training all the way through an organisation

- Simulation, simulation, simulation…..- Emulation of What If’s, Consequences, ….not just Deliverables

• Recognition of the importance of Human Factors- Integral to aviation industry training and culture- Established as primary factor in many incidents- Cultural factors tackled head-on with safety justification

3-Way Cross-Cultural Management Requirements: Strong inherent understanding of and ability to distil:

- complexity- risk - uncertainty- motivations- consequences

Ability to enforce, engage or drive (the “stick”):- best practice goals- learning from past mistakes- non-negotiable thresholds- 3-way cross-cultural awareness- awareness into action (RACI)

Encourage, steer and define (“the carrot”):- context-sensitive communication- multi-threaded, flexible management style- knowledge transfer, management & sharing- team-working as inter-cultural exercise

Q&A