Developing Capabilities in Iranian E&P Companies for Strategic Advantage

 

Mohammadmahdi Mozaffar
MBA, DBA

Given the nature of the upstream industry, including capital intensive, the need for advanced technologies and high expertise, the presence of the private sector have not been significant in the recent years. In this regard, the issue of establishing Iranian private E&P companies to transfer some of the responsibilities of NIOC under current legislation is an important step.
The main question is how 11 accredited local E&P companies can become a real E&P company? Is it possible to prescribe a single instruction for all of them?
By reviewing the history of Iranian E&P companies, we realize that they have different experiences in the fields of EPC contracting, oil services and investment, and their nature is public, private and state-owned. This leads to confrontation with spectrum of cultures and capabilities in these organizations.
Here we are going to outlines critical actions that E&P companies in Iran must take to develop properly. E&P companies have many paths to growth while achieving sustainability. The figure below illustrates the six major competencies that an E&P company needs to grow sustainable.

 

One of the defining characteristics of the oil and gas industry, especially in the upstream, is the importance of its human resources like geologists, geophysicists, and engineers. To such extent, the leadership roles within these enterprises are filled with geologists, geophysicists, and engineers who began their careers in technical roles before promoting to management and leadership positions.

Organizational Capabilities

As the industry evolves, strategic agenda, portfolio management, operating model, and organizational capabilities
must evolve. A general template shown in Figure 2 outlines 16 upstream organizational capability areas.
The reconciliation of strategy, portfolio, and operating model is the first step in the process to identify and strengthen key capabilities.

Integrated Geosciences Capabilities

 As our industry continues to evolve to confront challenges brought on, geoscience, engineering, and other technical capabilities are becoming more and more important. Given the significant evolution of subsurface technology, there is cause for greater adoption and use of multi-disciplinary asset teams to leverage integrated technical capabilities  with streamlined workflows, such as the subsurface interpretation of an unconventional play. More effective workflows may help arrest the decline in exploration success, reduce operational risks and costs, and increase resource recovery. Safer, cheaper, and more productive wells can be drilled by predicting zones where fluid losses, potential kicks, and borehole instabilities could occur.

Field Life Cycle Management

In a low-price environment, the trade-offs between capital expenditures (CAPEX) and operating expenses (OPEX) require more careful consideration in the design stage. Project plans often underestimate both OPEX and field life. In mature fields, the end of life (EOL) is very sensitive to OPEX, as in recoverable reserves, it is often much higher than original estimates. Extended field life (and reserves growth) also may be achieved through better imaging,  modeling, and production technologies, enhanced oil recovery methods, infill drilling, the development of new zones or adjacent prospects and tie-ins, and improved reservoir management. Estimated recovery factors can increase as fields mature. In some cases, we see very conservative initial reserve estimates.

Supply Chain Management as Capabilities
Sourcing
Historically, many projects have failed to meet schedules and budgets; so the approach to upstream supply chain management of the past two decades must be revisited. There is opportunity for a new strategic agenda that takes sourcing and supply chain management beyond the confrontational and unsustainable world of vendor concessions to the collaborative world of capabilities sourcing. Capabilities sourcing is about (1) how to eliminate waste and
create inefficiencies in the supply chain, (2) how to improve overall workflows, utilization, and scheduling and loading, (3) finding ways to leverage capabilities where they are most advantaged, (4) in-sourcing versus outsourcing capabilities, and (5) whether to find economies of scale internally (e.g., via headquarters) or externally (e.g., via a vendor).

Capital Planning and Portfolio Management

Cost structures are evolving and new project economics emerging—capital projects increasingly must be redesigned to be economic in a “lower for longer” price regime, with offshore projects scaled down to enable greater use of existing subsea infrastructure, more effort to standardize procurement specifications, demanding through remote
operation, and investment in technology to enhance recovery.

Strategic Competencies

The most important competencies are strategic competencies which E&P companies should focus on them to get more competitive advantages.

Conclusion

What seems to be is that Iranian E&P companies must at first have a thorough understanding of their capabilities
and limitations. After that, they need to know what they have portrayed for themselves and make sure that all the
stakeholders are on the same page. And then, in line with their strategy, they should have a clear blueprint for developing their key capabilities.