Billy Connolly has been in the news a lot recently with his 75th birthday and when I read some of the stuff that comes out of our various industry bodies and quangos I’m reminded of one of his lines about the Queen thinking the world smells of paint because everywhere she goes there’s a man five feet ahead of her with a paintbrush! “Who are these people?” is another Connollyism which springs to mind when listening to industry talking heads speak of collaboration like it’s something that is actually happening in our industry.
Collaboration has been the great buzzword in the industry since the oil price crash. Quangos love it and extoll the virtues of how it makes the North Sea efficient and the odd subservient service company will mention it in earshot of the operators to keep on their right side. But, when speaking openly to oilfield services companies, which we do on a regular basis, it’s quite a different story. Collaboration – what collaboration?
Of course, there are people who use the term genuinely thinking that is what they are trying to achieve but, in practice, that top management mantra gets lost somewhere in the middle ranks or in procurement.
The reality is our North Sea (and international) service sector is hurting – operators and the odd large service company (who should be ashamed of themselves) are taking longer to pay bills, finding excuses to challenge invoices and then putting the re-submitted ones back to the start of the payment queue so that they can comply with “timely payment” statistics. Not to mention re-tendering contracts that have been awarded but not yet started in a race to drive prices to the bottom in a “let’s see who’s the most desperate to survive” attitude. At least the “take 30% off your pricing and back date it to the start of last year” letters seem to have stopped!
So, as the industry congratulates itself for being fit at 40 or whatever the latest slogan is, maybe they should have a look at what’s really happening. I hear much talk of the industry changing forever – in reality, the steel toe-capped boots have been stowed in the service company cupboards waiting to come out as soon as the industry turns.
If there was a real desire to collaborate, operators would be offering extended contracts (proper contracts with guaranteed levels of work, not call-off contracts which are just a ticket to the game). This would mean that the supply chain could plan manpower and resources to meet requirements more efficiently. Service companies would be encouraged to make a sensible profit and rewarded over the long-term for innovation and true sustainable cost savings and increases in productivity. Up-time, for example, would be rewarded with “life of field” partnering arrangements. Now that sounds like proper collaboration and then we might actually become a lower cost operating basin for the longer term.
Maybe I missed it, but if there’s a service company out there who feels that’s what they are getting then please let me know – real collaboration should be encouraged, publicised and praised.
In the meantime, wouldn’t it be great if the quangos got a view from the coal face instead of repeating pointless mantras? Maybe then we would have real change. In the meantime though, I guess we just keep on polishing the steel boots.
Nick Dalgarno is the managing director of Simmons & Co, corporate finance advisers to the energy industry.