Pandemic lessons: coming out as strong as you went in

The reality of life within the constant ebb and flow of a crude-fueled boom and bust market is not for the faint-hearted. With a multitude of influencing factors, the international oil and gas industry accepts change as an ‘all-the-time’, not just ‘point-in-time’. However, everyone struggled in the prefect storm of a pandemic paired with a price war of two oil superpowers.

The sheer shock and awe of the impact took everyone by surprise. The wave of change overwhelmed an industry’s business resilience planning that was better suited to an oil spill than a complete loss of national infrastructure. Operations immediately began to adjust to the shifting realities but, due to the sheer magnitude, commercial casualties began to pile up.

Those that did survive had been forced to make decisions that circumvented protocol in order to slash costs and stay afloat. When the dust settled, and the industry found itself in the ‘new normal’, the true cost of those decisions became clear. The disconnect between what was left and what was needed to restart operations soon became clear. This left many asking:

·       Do we understand the changed and have we reconciled the capability restrictions?

·       Have we quantified the risk profile and pinpointed areas of operational vulnerability?

·       Have we completed scenario modelling and accounted for unintended consequences?

·       Have we tested the operating model (and supply chain) to prove it is fit for purpose?

·       Can we stay ahead of any forecasted risk and threats to ensure operational continuity?

The common mistake when reacting to crisis is to over engineer a solution to an already uncomfortable circumstance...that's why a simple four-phase plan works well:

1) Taking stock: The foundation of this process is built upon an after-action review that examines the dichotomy of lessons and risks arising from a) the process of existing change (the journey) and b) the opportunities resulting from the outcome of that change. This stage is also key in identifying the state or phase of change (and to what degree it continues).

2) Mapping and scenario assessment: Each mapping exercise should be tailored and can generally be broken down into ten characteristics: strategy, structure, process, people, systems, facilities, knowledge, intellectual property, equipment, and technology. This involves a comparative analysis between the old and new operating.

3) Risk assessment: The outcome of the mapping and scenario assessment is used as the basis for a risk assessment which compartmentalizes the current and planned work into logical stages, and then identifies the existing and emerging risks associated with each.

4) Implementation plan: A stage-gate plan created from the risk assessment process that will align strategy (local and company-wide) with execution. The plan will contain a defined timeline overlaid with operational requirements and capability that will include a limited number of proactive and reactive key performance indicators within a balanced score card.

The global recession triggered by the financial crisis of 2007 is arguably the most significant pre-COVID period of volatility in history. It was found that by 2009 the earnings of resilient companies had risen by 10%, while others had lost nearly 15%. There is a growing feeling that the same disparity will become apparent within the post-pandemic oil and gas industry.