EY - Oil and Gas report: Adapt to win

Adapt to win

How Australian oil and gas companies improve productivity in challenging times

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Operators, contractors and service providers in the Australian oil and gas industry face significant challenges. There is intense pressure to lift productivity on megaprojects, across operations, and in the back office.

In this, our second EY-UQ report on productivity and innovation in the Australian oil and gas industry, we collected and analysed data from more than 100 organisations. In framing this second report, we asked the same critical question which informed our first study:

What are the drivers of productivity in the Australian oil and gas industry?

In a powerful endorsement of the findings from the first study, we found the same three factors stood out:

1

Innovation

 

2

Competitive capabilities

 

3

Collaboration

Our new analysis provides for a richer understanding of competitive capabilities and positioning. This research found two distinctive strands within competitive capabilities:
  • Comparative advantage: A measure of how well an organisation rates on features such as range of goods and services offered, depth of expertise in each area, supply chain management and integration, and network positioning.
  • Adaptive advantage: A measure of how well an organisation responds to changes in business conditions, reflecting traits such as flexibility, problem solving and risk management capability.
We found that companies with better 'adaptive capabilities' are significantly more likely to achieve improvements in capital productivity (odds of 8:1) and labour productivity (odds of 16:1).

EY - Adapt to win infographic

Other interesting findings from this study include:

  • Most organisations are still failing to measure productivity
  • Innovators do not cite external factors as barriers to their business success
  • If companies conducting megaprojects can materially improve their flexibility, problem-solving, risk management, and use of lessons learned – they can expect real productivity improvements
  • Companies that use a wide variety of contract types are more likely to achieve productivity improvements

Conclusion

Innovation, competitive capabilities, and collaboration are the key drivers of productivity in the Australian oil and gas industry. We make the following recommendations to all operators, contractors and service providers in the industry:

  • Measure and report on productivity
  • Define a productivity strategy, centred on innovation
  • Improve your ‘adaptive’ capabilities
  • Collaborate with more and different organisations
  • Critically review your portfolio of contracts

This report is produced by EY in collaboration with UQ Business School April 2014