Service providers carve out new role as offshore sector evolves

By Herman Jorgensen, GAC UK

To start a new way forward, we need to take an honest critical view of the changes ahead, and take decisive action where needed
To start a new way forward, we need to take an honest critical view of the changes ahead, and take decisive action where needed (photo: GAC)

This is a moment like none in living history for the offshore sector, and the world at large. Six months ago, in an article for this publication, the pathway appeared clear for the oil and gas sector to be at the forefront of the energy transition.

However, no one expected COVID-19 or the oil price war that followed the onset of the pandemic. It has caused immediate disruption with significant short and medium-term consequences, many of which are irreversible. Major energy giants were forced into previously unthinkable moves as their operations came to a standstill.

As the International Energy Agency has pointed out, we are living through a “once in a century event for energy demand” that’s seven times worse than what followed the 2008 financial crisis.

While it is essential to remain optimistic, the coming months look rocky, with some major issues to navigate.

Ushering in the next normal
Anyone working in energy knows that change has been a constant force shaping the sector over the last decade. Again and again, the role of key players is reforged as we navigate market conditions few industries have had to deal with. But history teaches us that expertise and knowledge take on a new value in times of crisis, so offshore experts can expect to be called upon in growing numbers. And their new role will give them greater strength to help define a new way forward after COVID-19.

The gauntlet has been thrown down for service providers and a new opportunity has arisen. It is up to them to respond by establishing a new consultancy role for themselves and continue the endless pursuit of cost efficiencies.

Playing our part in managing change
A clear, holistic view of the issues at hand must be at the heart of the service provider’s response to the crisis. To start a new way forward, we need to take an honest critical view of the changes ahead, and take decisive action where needed.

The rapidly changing market poses challenges for the offshore service providers who have supported traditional energy operations for decades (photo: GAC)

Despite the popularity of the word “unprecedented” in recent months, service providers are not dealing with entirely unheard-of circumstances. For years, they have had to juggle heightened customer expectations, driven by calls for cost efficiencies at every stage of every project. The response of many service providers has been a mantra of added value; stretching to meet the demands of the market and remaining flexible to ongoing change.

This mantra must continue – and strengthen – as service providers play their part in helping the market navigate the current crisis. Suppliers must be proactive in the way they tackle the key perennial challenges of the offshore market: project management, knowledge bleed and technology.

Coming up with solutions will strengthen the sector’s overall approach as it recovers from COVID-19. Apparently unrelated answers could form the basis of the new mindset that the sector needs to adopt as it looks to recover from its current low point.

Faster innovation
A knee-jerk response to the pandemic could stem from the assumption that a dearth of resources will kill off innovation within the sector.

However, some argue that COVID-19 could in fact accelerate some of the innovations the market has already been adopting, as operators look to seek ways to stand out in a commoditised marketplace. By virtue of their position in the supply chain, service providers will find themselves at the cutting edge of such developments, driving and responding to increasing innovation within the markets they serve.

The value of data is thus likely to skyrocket. The previous slow trend away from retrospective reporting to a requirement for real-time analytics will accelerate, as cost concerns take centre stage yet again.

When making big decisions about key projects, customers want in-depth insight into the exact cost and time needed to every element of a project and its management. Real-time analytics enable service providers to supply customers with a constant stream of data – in other words, knowledge – upon which to build a full picture of how to navigate the new challenges.

Greater uptake of data demonstrates that the cost of new assets or systems to gather such knowledge is quickly outpaced by the efficiency and operational benefits it can bring. Thus, the challenge is set for service providers to move in tandem. In effect, data will become as valuable to the offshore sector as oil, gas, or renewable power.

Human capital takes on new prominence
Vast swathes of talent leave the sector as demand ebbs and flows. Current economic forecasting will accelerate this trend, leaving the market in the interesting but unfortunate position of lacking human experience and expertise at a time when it is braced for innovation and growing demand for renewable energy.

Suppliers must be proactive in the way they tackle the key perennial challenges of the offshore market
Suppliers must be proactive in the way they tackle the key perennial challenges of the offshore market (photo: GAC)

Offshore projects slow down when operators have to recruit and train individuals to manage complicated projects. That pressure becomes even more intense where projects must navigate complex local regulatory and legal requirements or take place in difficult environmental operating conditions.

For years, service providers have been filling that knowledge gap. They are therefore set to take an even more integral role in direct project management as sound project management capabilities and market knowledge will be potential contract-winning factors.

New contracts often stipulate an explicit requirement for greater levels of knowledge sharing – up to the secondment and embedding of experienced staff in a customer’s operations. As the offshore sector adjusts to a new operating environment, the knowledge needed to embark on the journey will have to come from somewhere. COVID-19 simply heightens the need for operators to look externally for these answers.

The right balance
The offshore sector is facing some deep challenges. And although project, human and data management may not seem relevant in light of the COVID-19 wildcard, the opposite is true. The way we respond to the challenges it brings, and how we strike the right balance between digital assets and human knowledge, will be what defines a proactive and resilient mindset that should stand us in good stead for the future.

The market is nothing if not unpredictable. As service providers step up, they must accept and adapt to the volatility of the offshore market to set themselves up for long-term success.

Herman Jorgensen is Managing Director of GAC UK and former General Manager at GAC Norway. Jorgensen is based at the company’s Grangemouth office, working alongside the company’s Finance and Human Resources functions.