December 2007
Special Report

Service companies must adapt to changing IOC and NOC needs

High oil prices and high demand for energy services do not make life easy for service companies

Vol. 228 No. 12  


Service companies must adapt to changing IOC and NOC needs

Galen Cobb, Director of Industry Relations, Halliburton, and Chairman, Petroleum Equipment Suppliers Association, Houston

High oil prices and high demand for energy services do not make life easy for service companies-they make it challenging in new ways. Adaptability and flexibility in the pursuit of efficiency will be the keys to service company success in the environment we expect in 2008. Working near capacity and producing margins that were out of reach a few years ago is sweet-but it’s not enough to win new customers, attract investors or gain market share.

Moving with work. Service companies go where the work is found. High prices do not mean work is anywhere and everywhere. Growth in exploration and development is taking place where operators have access to reservoirs.

Access is the force behind the shift toward the Eastern Hemisphere and Latin America. There is still a robust market in the US, but demand for services is higher in places like the Middle East, Russia and Mexico because customers have greater access to new properties for exploration.

Going where the work is demands flexibility and quick adjustment. Even a slight change in the relative attractiveness of a regional market will cause service companies to redeploy their assets. This year, Canada has been a case in point. When the tax environment changed and drilling activity slowed, service companies started sending trucks and tools to Russia or Saudi Arabia. Those who moved to new job sites first had the best earnings. This need for quick re-allocation of equipment and people will likely become even more important as long as capacity is constrained. Resources have to be where returns are highest, which can change quickly.

IOCs and NOCs. Another challenge for service companies is the evolving nature of their customers. The larger independents now explore all over the world. The IOCs are integrating and managing huge projects that require great financial sophistication and management depth. NOCs are perhaps changing the most by taking on development functions previously left to others, and taking greater responsibility for the development of their countries.

Service companies are responding by placing emphasis on what customers need most. For independents doing business in new regions, the service company infrastructure is key. Operators will want to do business with an organization that has worked well for them in the past, and with a company who has a long-standing presence in the new area. Perfecting the combination of global standards and local expertise is part of the competition among service companies.

Technology portfolios are key for service companies dealing with IOCs. Service companies are now the primary source of new oilfield technologies, and the most important technologies coming out of the service companies are the ones that help IOCs integrate and manage mega-projects in challenging environments. Holistic development and life-cycle management are the frontiers of value creation for the IOCs, and service companies that provide the most assistance with this integration process will win the major share of the big projects in 2008 and beyond.

NOCs offer the greatest opportunities for service companies, because their needs are expanding along with the scope of their ambitions. As NOCs take a greater role in field planning and development, they are looking to service companies to provide both downhole technology and project management that add value to the life of reservoirs.

The NOCs have even greater needs coming from their dual role as business and political organizations. Their countries look to them to provide sustainable development and help build the country’s economy. NOCs, in turn, look to service companies that can contribute to these goals. The imperatives for service companies are:

  • Leadership in worker safety and community health
  • Nationalization of workforce, especially in development of local management
  • Investment in local infrastructure contributing to long-term growth
  • Development of local supplier network.

Service companies that are completing these objectives in 2008 will have the best chance of becoming trusted business partners with NOCs.

Talent shortage. Finally, service companies are implementing innovative ideas to solve the human resource problem-the growing shortage of skilled and experienced professionals. The two available solutions that are under-appreciated are tapping the talent pool outside of North America, and using technology to make existing talent more productive and to accelerate the development of future generations.

Making better use of global talent includes working with universities and professional associations, establishing manufacturing and research facilities on every continent, and investing in regional training centers. There are bright, educated and ambitious young people everywhere we operate who see a career in the energy industry as a great opportunity. They can make the service industry strong for the next generation, and make us more successful in emerging regions at the same time.

No matter what surprises 2008 has in store for energy services companies, there will always be a need for imagination, innovation and flexibility-the qualities behind the industry’s success for 100 years, whether oil prices are going up or going down. WO



Galen Cobb is Director of Industry Relations for Halliburton and is responsible for the company’s industry relations global activities. He has worked for Halliburton for over 32 years, serving in various executive management positions in operations, marketing, sales and business development. Mr. Cobb is the Chairman of the Petroleum Equipment Suppliers Board, and the 2007-8 World Petroleum Congress US National Committee Chairman. Mr. Cobb is a graduate of Oklahoma Christian University, and a member of SPE, API, NOMADS and many other organizations.


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