Breaking the mould in the oil industry
If you were to believe the CEOs of Big Oil speaking at the World Petroleum Congress in Doha last month, you would think that the oil industry is in great shape. Every one of them emphasised how great the industry was doing; how the industry is in effect doing the world a great service and, most of all, how the industry would be able to face the challenges the future holds thanks to its great innovativeness.
The emphasis upon technology throughout the 4 day conference was overwhelming, and it was clear that this is a shared goal amongst the decision makers in the industry. The struggle of meeting energy demand in the future was of course mentioned, but so was the solution; progress in technology.
Given the progress (technologically speaking) that the oil and gas industry has achieved in past decades, it’s not surprising that they are banking on this happening in the future. Developments such as deepwater drilling, horizontal drilling, and enhanced oil recovery, have vastly increased the oil reserves that are now considered to be economically viable, not to mention advances that have seen the Canadian tar sands enter the production phase of development.
But why are we only seeing innovation in the area of technology? What about all of the other areas in which the industry hasn’t changed for years? Secrecy around contracts, the way the industry is structured, the way that exploration areas are split into blocks, to name a few?
Admittedly there are exceptions, for example, transparency put into practice for the first time by a government, when the Kurdistan Regional Government published online all of the oil and gas contracts that they received. In recent months there has been a movement to get the newly incumbent Libyan government to follow suit and publish all of their oil contracts online, but this has attracted sceptism that such a move would ever take place. Legally speaking, there is no reason why it shouldn’t, and in fact it would be an incredible benchmark for the Libyan interim government to set in this new era of Libyan history, not to mention a clearly visible signal to the international community.
It struck me as bizarre that innovation was touted as one of the industry’s great strengths, when there are so many areas in which innovation is seen as unnecessary or even undesired. However, recently I spoke to an oil and gas recruitment consultant who mentioned that the idea of change in the industry is a ‘running theme’ among young people working in oil and gas.
Knowing this, I went to the World Petroleum Congress hoping to meet like minded young people who would be open to the idea of innovation in the oil and gas industry, and perhaps willing to collaborate on future transparency projects. I was, on the whole, disappointed. The majority of those I met were, although very bright, equally keen to progress up their respective career ladders and unwilling to break the mould as they saw this is counteproductive to their traditional career goals.
However, it is clear that somebody needs to break the mould of the traditional oil and gas employee in order for improvement to be seen. Few would deny that governance needs to improve around the oil industry; just look at Nigeria, Iraq and Libya, to name a just a few examples of countries suffering from the so-called Resource Curse.
While the younger generation might currently not have the authority to even begin to implement new, innovative policies, it is this generation who will, in 10 or 15 years time, be at the decision-making level of governments and Big Oil companies. Unless they are encouraged now to be progressive thinkers, future leaders of such establishments will be touting the same policies as their superiors now, and the industry will continue as it is.
Policies such as understanding that transparency around oil industries in resource-rich countries reduces the risk of doing business for international oil companies wanting to work there, need to be mainstreamed in order for them to gain real traction. Companies wanting to improve governance in countries suffering from the ‘Resource Curse’ can lay the groundwork now for future business deals by funding projects designed to increase media awareness, public engagement, or simply transparency, in the countries themselves, and go further than simply signing up to intiatives such as the UN Global Compact or the Extractive Industries Transparency Initiative.
Transparency projects need to be understood as investments to improve the business climate for international oil companies, rather than sidelined as Corporate Social Responsibility projects. The potential rewards are huge; for businesses, a reliable and safe business climate resulting in access to vast oil reserves essential for meeting energy demand in the future, and for the resource-rich country in question, an increase in oil revenues, a reduction in corruption and a much higher chance of the money being spent on improving the lives of the people to whom the oil really belongs.