04 May What Digital Feels Like to an Oil and Gas Professional
Oil, gas and services companies intent on adopting digital (and that means all of you), should be helping their employees deal with some uncomfortable truths and deeply unsettling feelings.
The Change Agents
I meet a lot of change agents in oil and gas who have been tasked with helping their organizations adopt digital innovations. Change agents can have any of a number of business titles but in the main their job is to create the conditions for a business unit to adopt some digital innovation. Without exception, they do not have the authority to drive change directly into the business—that job belongs to the business unit leader or functional head who they are trying to influence.
In the main, these change agents are:
- equipped with an engineering education
- successful problem solvers from various domains, ranging from field operations, plant management, and supply chain
- mature workers, and unlikely to be digital natives
In other words, they look exactly like me (minus the engineering degree) —technocratic, analytic, and experienced.
Change agents relate a standard set of reasons why change is so hard in oil and gas. For one, digital innovations from other industries generally don’t have to contend with the safety, reliability and all-weather performance needs of the oil and gas industry. The value of digital innovation is much harder to compute with the level of accuracy that is customary in an engineering context, making funding approvals harder to obtain. Oil and gas businesses like to buy digital, whereas there are few truly out of the box digital innovations for oil and gas. Few aim to be digital, through a culture change program.
Solid technocratic and analytic insight. But what I rarely hear is discussion about what the world looks like on the other side of the fence — that is, to the employees in the business who are expected to “embrace” digital with enthusiasm.
Here’s what the world probably looks like for the typical industry worker.
Company executives have to paint a rosy and optimistic picture of the fortunes for the industry. For employees in the industry, however, there are now a number of signposts that paint a more worrisome view. These are the uncomfortable truths.
Capital markets are starting to walk away from the industry. Sovereign wealth funds in nations like Norway, built almost entirely on rents from oil and gas, no longer invest in fossil fuels. Financiers such as Goldman Sachs will no longer lend to fossil fuel companies, particularly coal, but oil is perhaps not far behind. University endowment funds are pulling out of fossil fuel investments under pressure from students.
At the same time that capital markets have created not one but four trillion dollar companies (Apple, Alphabet, Amazon, and Microsoft), the contribution of oil and gas to the value of the US stock market has fallen from 15% to below 5%. This represents a value loss of $x trillion. For the first time, Exxon Mobil has fallen out of the top 10 largest US companies by value.
Energy systems are changing rapidly and at the same time. The coal to power industry looks completely doomed with the falling cost of renewables. The idea that gas is a bridge fuel that handles the intermittency problems from renewables is looking shaky as battery technology advances. The EU has mandated that the continental economy be carbon neutral by 2050 and oil companies (Repsol, BP) are falling into line. Company messaging that points to salvation in the petrochemical sector seems unlinked to the pressures to reduce single use plastics, the problems of plastic pollution, and pressures from land fill depletion.
Electric cars are coming
25-50% of the barrel of oil goes into a fuel tank for transportation, and it’s now abundantly clear that the automotive industry has voted to shift. The Economist reports that the industry no longer invests in R&D for combustion engine technology. The 6 largest car companies account for 50% of all sales and they’re all shifting. Sure, oil companies can all aim at the chemical market, but that’s not going to replace all that demand. My neighbourhood electrician is going flat out installing charge points in residential garages.
I remember at one time that energy companies were synonymous with information technology prowess. The papers (that’s how old I am — in the good old days, I subscribed to a print newspaper delivered to my door by child labour), had the occasional story about the latest super computer sale, or the commissioning of a super data center, and the customer was invariably a big oil company. To crunch the subsurface data, oil companies needed their own systems. The whizziest visualization tools helped geologists find deposits. Now the coolest stuff is everywhere else. What happened?
Digital innovation has impacted many other incumbent industries, usually negatively. Amazon has gutted many iconic retailers that have historically focused solely on the in store customer experience, not the on-line shopping experience. No one pays for phone calls any more. Ride sharing has kicked the taxI industry in the teeth and they haven’t recovered. Phone books are gone. The photography industry has almost disappeared entirely. The music industry, board games, gambling, banking… the list goes on.
The digital industry does not appear to be coming directly for the oil and gas sector, but a little research reveals what they are investing in, such as transportation overhaul, supply chain optimization, robots in the work place, carbon management. Pessimistically, these investments will weaken the demand for fossil fuels, and demand erosion fuels capital reduction and negative valuations.
Digital Tourism is Over
Every large oil and gas company that I know is now “doing something” in digital. It’s clear that the Boards and Management now get it. A few have put digital natives on their boards. Search the org chart and you can probably identify the digital innovation team that is toiling away on digital. It’s probably a small group that is trying to shepherd a portfolio of small scale initiatives to scout out candidate solutions, launch some trials, test some ideas. Some companies even have investment funds that take positions in promising new business ventures.
What Are They Experiencing?
The change agents that I know don’t spend much time considering what employees in the industry are feeling. For example:
Oil and gas workers probably have shares in companies in the industry, most likely their own, and they’re probably under water. Hopefully their pension is more diversified. They may be worried about their retirement security.
They may even have options in industry players, and unless the options are very aggressively priced, they look like they will never be in the money. So much for putting the kids through college and being a good provider.
The value of their house, their biggest single asset, is suspect. If they own a dwelling, and they live in a monochrome oil and gas town (Alberta has lots of small towns that exist principally to service the industry), there’s a good chance that the value of the house is actually tied to the fortunes of the industry. They may be alarmed that the house value has fallen, or worse, might not sell at all.
They all know someone, usually a friend, sibling, or close colleague who was laid off in the past five years, or facing discharge any day now, and there’s little sign those jobs are coming back. And few of those retrenchments were due to some digital innovation.
Their kids bring home anti-fossil fuel messages imported into the school system. Surveys in the past have shown that K-12 educators are generally hostile to the fossil fuel industry (jealous of the high pay, perhaps), and are not welcoming to alternative messages in the class that paint a more balanced view of the industry. Their kids might even have participated in a Greta walk. Their kids may not look up to them with the same admiration and respect.
Their adult children hide from their past. My daughter, a STEM graduate now living in Toronto, tells people she’s from Ottawa (born there, but grew up in Calgary) to avoid being branded among her circle as a child of the industry. Loved ones turn their backs.
Managers are saying that safety, reliability, cost reduction and operational excellence are the most important things about today’s job, and there’s little money or time for modernization. That doesn’t quite square with making change happen.
Put Yourself in Their Shoes
Change agents might want to reflect on the inner dialogue taking place in the heads of their co-workers:
I’ve been doing basically the same job for 2 decades, and there’s been little real change. The documents I use to do my job are still in paper format.
I’m older than 45, never learned to program, and don’t understand this digital stuff. Sure, I own a smart phone, but that’s as digital as I get.
My company is “doing stuff” with digital but I’m on the sidelines. Until digital innovations start to scale up, I’m probably not even going to know much about them.
I ask myself:
- Am I too old to learn this stuff?
- I’m so close to retirement, why should I take the risk?
- Why should I care if young people don’t want to work here?
- I know exactly how to execute my work today and hit all my targets. Why would I put that in play?
- Where will I get the time to learn the new stuff? With all the departures, I’m carrying more than a full load.
- What if I make a mistake? What bad things will happen to me? Who has my back?
- Where’s the prize here?
I’m getting left behind in a company that’s getting left behind in industry that’s getting left behind.
I’m feeling abandoned, worried for my future, lost with the change, concerned about my retirement, paralysed by the threat of losing my job, and ingratitude towards society, who all benefit from my work, but don’t have my back.
And my company isn’t prepared to even discuss this, because, after all, oil and gas doesn’t have feelings, just math.
To my dear change agents: Look at the world through the lens of the employees in your company. Ask if you have really considered all that’s going on, and if your approach to change is sufficiently sensitive to these people issues. Your success depends on it.
Check out my book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, available on Amazon and other on-line bookshops.
Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course.
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