Independents: Who Art Thou?
What exactly defines independent operators in the oil and gas industry? TWA staff members gave many suggestions about how to answer this question. Most thought they are companies that lack something, such as integrated upstream and downstream operations, market capitalization, or total booked reserves. One good analog is our own magazine, The Way Ahead, where we consider ourselves the "independent" of oil and gas publications. We are much smaller than our “major” sister SPE publication, the Journal of Petroleum Technology. We target readers who are in the early stages of their careers and who might be able to relate more to our content. And we make the most out of the limited amount of resources we have at our disposal.
Personally, I have always been curious about the complementary value of the independents. I was born and grew up in a developing country in South America, Venezuela. My country is blessed with one of the biggest hydrocarbon reserves in the world. However, despite the immense amount of resources, our oil and gas industry has always been dominated by the majors and the country’s national oil company (NOC). I have always believed that the oil industry in my country is missing a critical element due to its lack of independent companies, which excel at targeting overlooked hydrocarbon exploitation opportunities and making them profitable when larger companies cannot. In this context, the independents are the perfect complement to majors and NOCs.
In the global oil and gas industry, the independents have thrived by fulfilling this complementary role to the maximum. Their main business has developed because they are quick and flexible enough to take advantage of opportunities. This is why they are leaders in the unconventional resources boom and also why they are applying innovative and effective enhanced oil recovery and production technologies to maximize recovery factors in brownfields, which are considered marginal by majors and NOCs.
But independents fulfill much more than just a complementary role. They also have an entrepreneurial spirit that entices a lot of workers willing to play the game of risk and reward. For those dreaming of starting their own business, independent companies offer an unmatched level of empowerment and ownership, while providing the individual with the experience and skills required to potentially lead them in the pursuit of their dreams. This is what I like to call the reproductive nature of independent companies, which is the potential capacity to produce more oil and gas companies by giving their workforce the exposure, business acumen, and confidence required for becoming oil and gas entrepreneurs. From a societal perspective, this is a key aspect of organic growth and development.
For this issue, we have focused solely on oil and gas operators when referring to independents. The truth is that, in the service sector, the contrast between majors and independents is even more evident. The majors of the service industry are essentially four big companies that dominate the sector, while a huge number of smaller companies fight every day to grow their business and challenge the majors on specific services. The most important contribution of independent service companies is their innovation and ingenuity.
In recent years, there are many examples of entrepreneurial service companies that have managed to offer unique services and wind up dominating their product line and challenging the majors for market share and prestige. For example, in the multizone fracturing packer systems sector, a small service company was able to produce the technology required for fracturing unconventional gas wells and is now considered the market leader, enabler, and pioneer for tapping hydrocarbons in tight formations. By leading the way, this company was able to beat strong competition from the major service companies and even avoid being taken over, mainly due to its solid foundation.
In this issue of TWA, we explore the world of the independent oil and gas companies. We got perspectives from chief executive officers (CEOs), staff, and academics on the pros and cons of working and developing a career with these companies. I especially recommend the interview with Aidan Heavey, CEO of Tullow Oil. I hope you read between the lines and appreciate the honesty and openness of his answers. This is just proof that independents are truly about cutting to the chase, maximizing opportunities, and using innovation to remain competitive. It does not always work out as planned, and success is not guaranteed; but, that sense of adventure is exactly what many young professionals actively seek—and independents can deliver.
Don't miss our latest content, delivered to your inbox monthly. Sign up for the TWA newsletter. If you are not logged in, you will receive a confirmation email that you will need to click on to confirm you want to receive the newsletter.
25 April 2019