By Tom Arnold
Celerant Consulting boss David Smith on why oil turmoil spells big business for consultancy firms.
David Smith, senior vice president of Celerant Consulting, explains why a rough year for oil prices and a hazy economic outlook is prompting Gulf national oil companies to review their operations, creating openings for his firm in the region.
The turbulence that has rocked the oil market in the last year has opened opportunities for Celerant Consulting, a global management consultancy company whose energy division is establishing a firm foothold in the Arabian Gulf.
The expertise of Celerant is coming to the aid of Gulf national oil companies (NOCs) struck by a dramatic reversal in their fortunes.
Raking in a mountain of petrodollars after oil reached a record peak of $147 last July, NOCs in the most oil rich region of the world were able to embark on projects aimed at raising capacity in anticipation of a continued price climb.
But a dramatic collapse to $32 in December last year slashed company profits, in turn leading to ambitious expansion plans being hastily moved to the backburner.
Prices have since rallied to between $60 and $70, but an uncertain global economic outlook leading to questionmarks about near-term crude demand, has meant the region's big state-owned oil players are suddenly less optimistic about the future.
"$32 oil got people's attention; there's a realisation that it could go back there," says David Smith, senior vice president of Celerant and the man in charge of energy operations for the firm globally.
"A couple of years ago no one wanted to talk about cost as everyone was making so much money it didn't come top of the list of items - that's now changed."
This turnaround is encouraging NOCs such as Abu Dhabi National Oil Co (ADNOC) to consider calling on the services of companies like Celerant for the first time.
The UK firm, which opened an office in Abu Dhabi in April, has been working on everything from improving the drilling rate at ADNOC's offshore oil rigs by 20 percent to increasing the number of Omani nationals at US oil and gas firm Occidental Petroleum Corporation's (Oxy) operations in the Gulf state.
In addition, they are holding talks with NOCs Saudi Aramco, Qatar Petroleum and Kuwait Petroleum Corporation.
International oil companies (IOCs) such as Shell have been Celerant's traditional client base, with the company having worked with nine of the top ten industry leaders, delivering $2.5bn in client value.
Typically, Celerant's role involves deploying its team of engineers to work on an offshore oil rig or oil field for months at a time to recommend and implement efficiency or production improvements.
Now, the company is turning its attentions to the Gulf, a region where years of soaring prices ahead of last year's slump kept NOCs from turning to consultancies for assistance.
"There's not a lot that's been done in Saudi Arabia and around this region," acknowledges Smith. "I think some (NOCs) have used strategy consulting houses which will give you ideas but the danger is that those will sit on a shelf and nothing happens, so there's a certain amount of cynicism and disillusionment with strategy consulting.
"But we're an implementation house so we do a piece of work to find out what needs to be done and then we partner with the client and implement it and commit to the result."
As prices level between $60 and $70, the most pressing issue that may affect NOCs in the short term, according to Smith, is a skills shortage.
This, he warns, could lead to "bottlenecks" in completing projects designed to ramp up capacity as NOCs embark on infrastructure developments following a period of spending restraint when prices were lower.
"The key thing that will affect them (NOCs) is that a skills shortage will start showing again," he warns. "That's been less of an issue for the last year because things have started slowing down."There could be a particular skills shortage in Iran, as the government looks to raise production on the world's second-largest oil and gas reserves, Smith points out.
"With places like Iran opening up in the region and with the fact the oil price is now looking attractive, the pace of projects, of which there's been a lack, will start increasing," he continues.
"We will start coming into some bottlenecks which were very much there a year back when they (NOCs) couldn't get the skills set they wanted."
Under Celerant's contract with ADNOC, it is committed to improving the drilling rate at the company's five offshore drilling rigs by a minimum of 20 percent over nine months.
"They had five offshore drilling rigs and were going to have to get another one, but we said ‘as an alternative, why don't you improve the drilling rate at the ones you've got?' That means they don't need another rig, which is a lot of money," Smith says.
Taking steps to make ADNOC's existing workforce more productive was a key way to increasing efficiency, he says.
"We've found from elsewhere in the world that there's a lot of lost time and a lot that get in the way of things working in an ideal way and we identify what those problems are and make sure they get taken care of. A lot of it is around planning as our experience is that people don't plan enough."
In addition to another project with ADNOC involving how it can reduce purchasing spend and make its supply chain organisation more efficient and effective, the company has two further projects it is close to signing agreements with ADNOC.
One involves maintenance production at ADNOC's offshore operations and the other is energy management at its giant Habshan oil field in the desert south west of Abu Dhabi.
"We have a unique way of looking at energy and think we can bring something to the party in terms of reducing energy cost, which is a huge expenditure in some of these plants," says Smith.
In Oman it has worked closely with Oxy to boost the percentage of Omani nationals working for the company from 85 percent to 95 percent to meet a government-set quota.
In the result, Celerant Consulting raised the number of Omanis at two oil fields to 98.2 percent.
"At Oxy at a technician level it wasn't a problem but at the supervisor and management level, there weren't many Omani nationals.
"Up until recently, the temptation for many [national oil] companies was to bring experienced expatriates over and not give local people the opportunity they could potentially take advantage of," Smith continues.
"But when you look at the skills that local people have, they're often pretty good. However, the key word is confidence as they're used to an environment where they're told what to do and have to get on with it and don't like taking responsibility."
Celerant is also pushing to pick up further oil company contracts in Saudi Arabia, Kuwait, Qatar and Libya.
"We've always found it a challenge to get to grips with IOCs but the real opportunity for us is with the NOCs," Smith says.
"Saudi Arabia is an interesting market, while Qatar and Libya are vastly expanding so there is potential there. Iraq and Iran we're not pushing hard at the moment as we are not in the business of putting our guys under any danger. However, I'm sure we will be in those countries in the future."