Roundtable Discussion: Two North Sea Industry Leaders
The TWA Interview invites industry leaders who shape our E&P industry to share their wisdom, experience, and knowledge with young professionals. For this issue, we decided to mix things up a bit and have more of a discussion rather than fire a long list of questions at our subject. To break even more with tradition, we decided to focus the questions on a single province, in this case the North Sea from the UK perspective, and talk about its present state and its prospects for the future. During the Offshore Europe conference in Aberdeen last September, we invited two North Sea leaders to speak to us about the region.
What constitutes a good leader? Can you share any examples from your own professional life, for example, the mentors who inspired you?
PL: To me, leadership does not come with position; it does not reside at the top of the tree. Leadership can occur anywhere in a structure, and that’s one of the things we do in our company—encourage people to exercise leadership and recognize that they can make decisions. It’s an important thing because it makes people have ownership of what they are doing. You want the sort of people that can exercise leadership because there is no point in having a company where there is one leader and, if that leader is on holiday, everywhere goes quiet. At all levels of the company you have to be cognizant of what you can influence, and exercise leadership and be proactive.
I have experienced iconic leadership in some companies, where you have a Leon Hess or somebody like that at the head of a company, who personifies the company. That can be very good, or it can have the negative connotation of a cult. I think good leadership is potentially not iconic; you are there to provide leadership but you also encourage people to be part of a team and almost treat you like an equal. You don’t need to separate yourself from everyone else to have great leadership. You can lead from within, and that to me is an important part of leadership. It is not just a hierarchical position; you can exercise leadership from below. You own an issue and you do something about it.
MW: I agree with a lot of that. A leader is more than a manager, though a manager keeps things running. A leader is somebody who shares the experience with you and motivates you, a person you can put your trust in. A leader is someone who takes you to a different position, somewhere you weren’t before, either as an organization or you as the individual. A leader gets you to a new place, and that’s what leadership is about. And Paul is right: it’s not just the “big star” stuff, it’s about personality and trust, and professionalism, as well.
I was fortunate to work with some excellent leaders through my career. One in the early days was an American named Don Shimmon. He was a great man, treated people around him with great respect, a good delegator who reposed trust in his team and got tremendous payback from them as a result of that. But he would also dare to take you and the organization to places you had never tried before, which was very interesting and personally rewarding.
PL: Malcolm is right; the clue is in the name. A leader will lead you somewhere that you currently aren’t. And they can either take you as an individual or they can take the whole company. And one of the words Malcolm used underpins it all: leaders exude respect. They respect the young engineers, the individuals around them, and by practicing that respect, they get it in return. And that’s where leadership stands out, in any position around the company. It’s not just the managing directors (MDs). Kerr-McGee had a great MD in the UK, Chuck Melloy, and he challenged his management team to become a leadership team. He gave them challenges, where they had to show their character and behavior, show respect, and grow the individuals working under them, not just step on them to get further.
In a recent survey of young professionals (YPs), a respondent said, “After 2 to 5 years, having completed the training and gained enough technical expertise, I will have the skills to search for better opportunities offering better compensation than with current employer.” How does your company ensure that younger employees, who may want it “all and now,” stay with you for the long run? In your case, Malcolm, we also are asking your impression of what’s happening generally in the industry and if you see younger people jumping impatiently from company to company every chance they get.
MW: Looking at the industry, and going back to other experiences in the larger companies I have worked for, I do think it is, to some degree, about persuading the individual that they can develop themselves in this organization. Particularly for young graduates, you have to keep on challenging them, help them stay refreshed, avoid giving them just repetitive jobs, and show them that within your organization you’ve got all the challenges that anybody could want. Then you counter the attractiveness of other organizations, which can pay more but do not treat them the same way. So I think it boils down to paying attention to the career aspirations of an individual and trying to address them with a series of challenges.
PL: I think it can be different depending on the scale of the company. A supermajor has offices in 40 countries around the world; they can get their bright young things hooked on to a new job every 2 to 3 years going around the world. You may become trapped by that, even addicted to it. I think there is much more power to the big companies in this respect. But at the end of the day, it goes back to one question: you have to understand what makes you good or can make you better. For some individuals, and it tends to be technically focused ones, it will be that path, where at every stage you become a bigger technical expert in that focused discipline.
Contrast that with our company. In the UK we are 35 Lundin staff. All the technical subsurface people sit within that group, so all the YPs who would be reading this magazine would be sitting within that Lundin group. The other 85 people who make up our UK office principally come from our operations contract provider. As a smaller company, we do not have that natural ability to attract somebody who wants to have such an international career. What we are looking for is different. We are actually one of the companies who will take those people who, after 5 years, are genuinely ready for something else. What we would hope is that we can then retain them after that, for a period of time valid for the business cycle that we operate in as a company.
Our forward plan is to invest more than GBP 500 million in drilling our three existing fields. We have done the redevelopment work, and now we are about to start drilling wells. That will last us 5, 6, maybe 7 years or more, and these fields will then go on producing for another 15 to 20 years. That’s our place in the market; we take on previously owned fields and we give them a new lease of life. The work that we do is not necessarily seen as sexy by some migrant Generation Y young professionals. But the case I would make to them, and I do when we do interviews or go out and speak to them, is this: something that is brand new doesn’t really, genuinely have any challenges!
Get a field that is 20 years old and has uncertain data, and now it’s getting interesting; especially if you have a genuinely analytical mind. So our challenge would be to make them part of the team and to give them ownership for what they are about to do. Yes, there is a lot of money to spend, and they have to justify that, but if they spend it wisely, it becomes “their” field. So, for us, it comes back to the leadership issue: what we try and do as Lundin is make the team own that field. I am not telling them what to do with it, but I will give them approval when they come in with a recommendation. I just sign the check. They are the ones who own it and live by it.
That sort of thing, hopefully, for a company of our size, will help retain some of the younger people. But we have to be realistic: we do not have the depth of technical people to take graduates straight out of university. The industry as a whole owes a debt of gratitude to the majors, because they have the depth of personnel to be taking on new graduates, properly mentoring and coaching them. We are a lot leaner as organizations; we are taking much thinner pickings off these old fields in that economic content, and we don’t necessarily have the ability to give ourselves that depth. Once we add a couple of installations and do a couple of more acquisitions, which is what we are planning to do, we will reach a size at which we can. Our game would be, in this context, to attract people once they have done 5 years elsewhere.
MW: A big company can move people around and mix teams. Small companies cannot do that. And it’s good to have new blood and have new people come in from another organization. So I think the benefits of longevity in one place during a career can be overstated, and both the individual and employer can benefit from a wider variety of experience.
So that they do not become “institutionalized”?
MW: Yes, for example, “This is how it works in XYZ Company, and I know only that.”
PL: I spent 17 years with one company. It was bought and sold twice. But we were always a company up until the end that thrived on a bit of chaos; we were always changing, we were always responding to what the business and the environment was. We were never the size that we could be like an Exxon, and carry on regardless; we were somebody that had to be more flexible.
When you come from that sort of background and you go to a different company, you realize how much you don’t know. Some degree of change is a good thing, so that you don’t become institutionalized. If you keep your eyes and ears open, listen and learn, you then understand what makes business tick. So when you step into a totally different company, just because you’ve done it slightly differently, you can challenge the ongoing status quo. And most companies will benefit from that.
Speaking of challenges, what are the key short- to medium-term challenges, commercially and technologically, for the North Sea?
PL: For me, it is cost per barrel, in a whole variety of ways. We all have to be conscious that, although we are predicting the oil price to be in the USD 60–80 range in the long term, getting oil out of the ground—even in a developed field—under these price constraints is not easy. Whether the solution is just using your smarts or using technology, it comes back to cost per barrel. Malcolm and I have been in conversations, as part of Oil & Gas UK, and we agree that the government has to be a key part of that. The fiscal policy has to recognize the changes needed. This isn’t just the oil industry putting its hand out and saying “give me my money back.” A 20% supplementary corporation tax is a bad thing, yes, but just giving it back to us won’t happen. We have to come up with a business case, but fundamentally it comes down to this: if we don’t do something together, especially companies like Lundin and the others like us that take over fields from the supermajors and give them another 20 to 30 years of life, we are going to struggle to find a return for our money, and we’ll go to other countries.
Because even within your organization, you are competing for resources with other operations in other countries?
PL: Yes, so to me it comes back to the cost per barrel and being the best place to invest. The way you address that is also by technology and the right people having the right jobs. One of the issues for the industry, part of our success in keeping these installations going, is having the best people. What used to be the A team of 10 years ago is no longer in one place. They are spread across the industry. The number of people within the industry has grown in recent years faster, in a way, than we can increase the competence. When we bring new people into the industry, we have to remember that the productivity may go down and the accidents may tend to go up in the short term. So it is something that we have to watch: in just striving for the right cost per barrel, we have to be conscious that we do it through people as well as technology and that we do it safely.
MW: The challenge of a mature province, such as the North Sea, is that the production curve is on the wane. Therefore, it is absolutely right what Paul says. As the basin matures, you have to get quicker, smarter, and leaner and think of new ways of operating. It’s a tremendous challenge. In the North Sea, we carry far too much complexity in what we do as a legacy; we have got to make it simpler and quicker and easier to do business here. I think that’s a commercial challenge, and there are some political challenges too, for example, regarding decommissioning. We have a huge amount of unnecessary fiscal and regulatory burden on the industry, which I think we need to work together with government to eradicate. We have got to do our work at a cost that leaves us, as a basin, competitive with other basins. We have got to go on attracting capital to this basin, and as it matures, that becomes ever more difficult.
PL: Regarding your readership of YPs, I can say that the sort of people we are looking for as a company, to square up to the short- to medium-term challenges, are those who can think outside the box. Because if we always do it the same way, then we will only get what we always got, and that’s getting less. So we have to be thinking about doing it differently. That doesn’t require someone to invent a new platform, but it needs them to think about things differently.
How has the current global recession impacted your business and the North Sea in general?
PL: A lot of activity over the last few years had been generated by the new, independent entrants to the UK Continental Shelf (UKCS). Usually, they did not operate any production and were financing themselves through the banks. When that lending/leverage was taken away, there was nowhere for them to go. They had been created by the banks, and then the banks in effect left them to it. The government here had been very successful in encouraging the promotion of licenses, getting new companies in, relying on the banks to fund them, getting tax revenue in, so it was a very virtuous circle in that respect.
But eventually, when the money dried up, in my opinion, it had a much bigger impact on the morale of the North Sea, than the oil price going down to USD 40. I think if you look at how the whole supply chain has been affected, the biggest impact has been the credit being removed. Hence a lot of companies were unable to finance their activities. The bigger companies, yes, have stopped a few projects, which has had its own impact on the supply chain. But the fact is that almost all business was stopped by the smaller companies, which were drilling a lot of wells. The activity report this year won’t be the same as last year, and the majority of that is due to the small companies to whom the banks will no longer lend the money. They say that they will eventually, but it will be 2 years down the line before we go back to where we were, when they will be able again to put their money behind creative ideas.
So for me, it’s not necessarily the recession that hurt the region. It was the credit crunch and the banks being part of the supply chain, and because that lifeblood that created new energy in the North Sea was cut off. The confidence will take time to come back.
So what is your vision for your company for the next decade and then what do you think the future holds for the North Sea and the UKCS beyond 2020?
PL: Lundin Britain has a predominantly mature asset base in the North Sea, and we are now at a point where we are starting to drill up those assets. We are committing to a substantial development program over the next 5+ years on drilling up these assets. We want to be investing in the fields and getting the reward out of them. When we get to the end of those 5 years, there will be another tranche of opportunities and wells. They may not be as prolific as the first round, but they will be there. So what we are looking at is trying to turn our fields as they are now, which are already in some cases 30 years old, into having another 20 years of life, maybe 30. With the oil price we have at the moment, we have a program ahead of us that will easily last 5 years. What we want to be able to do is find the next opportunity that allows us to repeat that life cycle. We have a positive approach to something that was too challenging for our fields’ previous owners; they left a little bit in the ground, we will find that little bit and a bit more, and that’s our part of the food chain. You put on top of that finding exploration to tie back to the installations, and that’s where we are trying to take our company. There are a lot of other people in that same sector of the industry, but we believe there is an awful lot more life left in the North Sea. You just have to shake off someone else’s conventional wisdom about the field and take your own view.
Close geographically to where you are, you have Taqa and Fairfield doing pretty much exactly the same thing—taking a 30-year-old asset and breathing new life into it. And Apache with the Forties field has proven that it can be done.
PL: Malcolm and I were talking about it just recently. We are sort of “second owner” companies, if we can put it that way, and when an asset comes on the market, we will be in competition with each other. But for us to survive and flourish, we have to speak with one voice, within the industry and with government. So you have to realize, there is a certain synergy in working together and benefiting each other, even though you will be competing for the next prize. It’s an interesting relationship we have with each other, but we have a mutual interest. And if this interests the people we are trying to attract into our company, they are into the right place.
What is your vision, Malcolm?
MW:I would like Oil & Gas UK in 10 years time to be such a well respected association that no company doing business in the UK offshore, whether as an operator or a contractor, can even think about not being a member of it. I want them to be absolutely bowled over by the quality of the service they get and the value added that they can see they achieve by being a member of our trade association. Linked into that, I wish us to be respected as a highly professional organization that people can trust, whether they are in the industry or outside it, including government. People should be confident that when they come to us, they get a very informed and honest view of our industry. I think all that is entirely achievable.
As for the future of the UKCS beyond 2020, I hope it will be a strong producer of oil and gas for decades yet to come. I also hope that we will see the northeast of Scotland go on and develop as a truly leading international supply-chain hub, providing world-class goods, services, and expertise to the global offshore oil and gas industry, which has not just decades but centuries of life ahead of it!
Paul Lindop (left in picture above) joined Lundin Britain in 2007 as asset manager, and subsequently became managing director. Previously, he spent 17 years with Oryx/Kerr-McGee/Maersk. Lindop holds a degree in chemical and petroleum engineering and has extensive knowledge of North Sea operations. Lundin recently announced a spinoff of its UK business into a newly formed company, EnQuest.
Malcolm Webb is the chief executive of Oil & Gas UK, a trade association serving the UK upstream industry. A graduate of Liverpool University and a lawyer by profession, he has extensive senior management experience in both the upstream and downstream oil industry, gained in the UK and internationally. Before joining Oil & Gas UK (then called UKOOA) in February 2004, Webb spent 3 years as director general of the UK Petroleum Industry Association.
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29 October 2018