INTERCULTURAL ISSUES in the Upstream Oil & Gas INDUSTRY

1. INTERCULTURAL ISSUES in the Upstream Oil & Gas INDUSTRY University of Warwick: November 15, 2012 Glen Burridge NDB – New Digital Business Ltd

2. Structure of Presentation 1. Overview of Upstream Oil & Gas business 2. The Three-Way Intercultural Challenge 3. The Consequences 4. Possible Solutions

3. 1. Overview of Upstream Oil & Gas Business

4. The Upstream Oil & Gas Industry

11. 2. The Three-Way Challenge

12. A. The NATIONAL Challenge Algerian American Egyptian British Living in France British Living in Indonesia Pakistani 7 Production Engineers 6 Reservoir Engineers 7 Geologists 3 Managers 2 Geophysicists 2 Admin Support 2 Software Support 1 Petrophysicist 1 Data Manager Algerian-American Living in US British Living in Hungary British Living in Australia British Portuguese Living in UK

13. B. The ORGANISATIONALChallenge Operating Company Government Project 2 Operator P3 Partner 1 Project 1 P2 P4 Consultants Service Co 1 Contractor 2 Advisors ……Contractors n Contractor 3 C4 C5 C6 …………..…………Sub-Contractors x many n?

14. C. The TECHNICAL Challenge

15. The Technical Challenge I - People The Big Crew Change: - Large number of highest experience staff to retire in coming decade - Missing Generation of mid-career professionals - Budding economic powers providing increasing share of workforce - Steadily more gender-balanced professional workforce Knowledge Transfer: - Professional operational status: 5+ years - Project-specific expertise: 6 months+ - High degree of training, but poor mentoring of new staff - Poor knowledge capture & transfer from experienced staff Geoscientists (“Geo’s) vs Engineers: - Large-scale, 4D conceptually-driven thinking of geoscientists - Focused, measurement & building-driven view of engineers

16. Engineer Geologist Geophysicists So, an Engineer, a Geologist & Geophysicist are in a room with the Boss. The Boss asks the Engineer “What’s 2+2?” The Engineer replies “4.0000″. Then the Boss ask the Geologist the same question. The Geologist replies” Oh, somewhere between 3 and 5″. Finally, the Boss ask the Geophysicist the same question. The Geophysicist replies ” What would you like it to be?”

17. Well Engineer / Driller Production/Facilities Engineer Geophysicist Geologist Reservoir Engineer Petrophysicist

18. The Technical Challenge II - Process • Long, complex, projects with multiple partners & web of contractors: • - Differing perceptions of lines of command • - Matricial vs hierarchical decision-making structures • - Opposing motivations -> poor integration • - Vastly different psychological contracts (Handy, 1999) • Project Governance: • - Nationalisation of JV projects often written into Production contracts • - Ability of host country to effectively manage resources • - Training and technology transfer aspects often poorly executed • - National identity strong in management, but workforce diverse • - Major disparities in remuneration, roles and expectations • - Mentality conflict of operational expediency vs project management • - Office-based vs Operations (off-shore vs on-shore)

19. Explore Develop Produce “Cloud Thinking”

20. Explore Develop Produce $$$ X X $$$ X $$$

21. Explore Develop Produce

22. The Technical Challenge III - Technology • Increasingly difficult targets: • - Geopolitical constraints • - No Elephants Left to Discover? • - Extreme physical environments (deeper water, arctic) • - Multitude of environmental considerations • - Rarely a “silver bullet” technology • Unrelenting levels of: • - Heterogeneous technology development • - Complex infrastructure testing & deployment • - Potentially massive data overload (which patterns, trends important?) • - Residual risk and carried uncertainty (the subsurface is never “known”)

23. 3. Consequences

24. Examples of 3-Way Cultural Challenges faced by Oil & Gas Managers: Differences in interpretations / recommendations between local and expat subsurface staff: Need to reconcile & select most appropriate fitting all necessary criteria Critical Issue / Error / Risk Reporting: Face, power-distance, individual vs collective responsibility Goal Conflict: Idiocentric Corporate multinational company goals vs Allocentric National Polychronic perspective Large project planning: Point outcomes vs consensus building. Time perceptions. Delegation. Roles & Responsibilities: Power-Distance, Linear vs Circular decision-making, Matrix vs Hierarchy. Multiple projects Uncertainty handling (sub-surface environment, external constraints etc) Recognition, acknowledgement, assessment, consequence

25. International National European British Close-knit consultancy Consultant Client Interaction English THE INDIVIDUAL Project Teams Client Staff Organisational Solo work Geologist Engineer Client Management Geophysicist Technical

26. Western European IOC (Integrated Oil & Gas Company) National Yemen ORGANISATION 1 Russian Arctic Organisational North Sea Technical

27. Middle Eastern NOC (National Oil & Gas Company) National ORGANISATION 2 Russian Arctic Yemen North Sea Organisational Technical

29. Root Causes/ Failures of Macondo Well Explosion Ref: US Chief Counsel’s Report to President “As a result of a cascade of deeply flawed failure and signal analysis, decision-making, communication, and organizational - managerial processes, safety was compromised to point the blowout occurred with catastrophic effects.” Perhaps there is no clear-cut “evidence” that someone the organizations in the Macondo well project made a conscious decision to put costs before safety; nevertheless, that misses the point. It is the underlying “unconscious mind” that governs the actions of an organization and its personnel. “Cultural influences that permeate an organization and an industry and manifest in actions that either promote and nurture a high reliability organization OR actions reflective of complacency, excessive risk-taking and a loss of situational awareness.”

30. 4. Possible Solutions

31. National Understand Cultural Intelligence Communicate Organisational Engage Technical Ref: E. Plum et al., 1998

32. What can be learnt by O&G from the world of aviation? • Recognition of the importance of Human Factors • - Integral to aviation industry training and culture • - Established as primary factor in many incidents • - Cultural factors tackled head-on with safety justification • High Reliability Organisation (HRO) foundations: • - Standard Operating Procedures (SOP’s) • - Checklisting • - Licensing • - Crew Resource Management (CRM) • - Command, Control, Communicate (C3) • Promotion of Quality Assurance, Safety & Excellence • - Non-negotiable barriers • - Confidential Reporting • - Pro-active RCA (root-cause analysis) • - Accident Investigation • High levels of accredited training all the way through an organisation • - Simulation, simulation, simulation….. • - Emulation of What If’s, Consequences, ….not just Deliverables

33. 3-Way Cross-Cultural Management Requirements: • Strong inherent understanding of and ability to distil: - complexity - risk - uncertainty - motivations - consequences • Ability to enforce, engage or drive (the “stick”): - best practice goals - learning from past mistakes - non-negotiable thresholds - 3-way cross-cultural awareness - awareness into action (RACI) • Encourage, steer and define (“the carrot”): - context-sensitive communication - multi-threaded, flexible management style - knowledge transfer, management & sharing - team-working as inter-cultural exercise

34. Q&A