In the good old days life in the upstream oilpatch must have been a lot simpler. There were those that explored and produced and those that provided the parts and pieces along the way. Everyone had investors, and everyone was content with a fair return. The playing field was fairly level, and everyone knew their place in the exploration and production (E&P) food chain. As a contractor, if you did a good job or supplied a good widget, chances are you would get paid for it and the customer would buy more without trying to control your business. Contractors didn't try to find and produce oil, and operators didn't try to design their own tools.
Gradually, demarcation lines got fuzzier. Operators and contractors alike decided that "not invented here" translated into "not worth buying." Then we had "drilling in the '90s." This concept brought the drilling contractors into the center of things to the extent they were led to believe that if they simply kept buying up companies and technologies that did everything they didn't do, they could eventually become the sole service and technology providers to the operators! Operators got into home-grown technology and services, service companies got into technology and properties, technology firms got into project management services, and we all got into a pickle.
Since the late 1990s, the distinction between operator and technology provider, customer and supplier has become even more blurred. A technology and service provider nowadays has to establish at the start of many meetings whether the people on the other side of the table have their customer, competitor, supplier or investor hats on. The problem is that, whatever hat they are wearing that day, the other three hats might only be a short distance away. For a technology company, protecting ideas and intellectual knowledge is the very fabric of its business; while sharing confidential information with customers makes good business sense, sharing it with a competitor makes no sense at all.
We all agree that competition is good, but many operators today provide venture funding to joint ventures and fledgling start-ups in a rush to commoditize new technology ahead of the initial investment recovery by the original inventor. The most blatant case I have seen is when a breakaway group of employees from an innovative technology firm was funded by an operator to defend a proprietary lawsuit against them for taking intellectual property that was not rightfully theirs in the first place.
This industry needs to get with the program and realize that by continually dabbling with the E&P food chain, we will remain technology adoption laggards when compared to other industries. We need more commercial, technical and legal clarity in our business dealings. The technology innovators need to know that their customers are not going to compete with them but rather support them through early adoption, trials and tests on through broad-scale adoption. There needs to be renewed focus on core business. For the operator, that needs to be about finding, producing and selling more hydrocarbons, giving guidance on what the challenges are but leaving technology development to the technology companies who hold much of the technology skill base. For the technology and service companies, it's about being better listeners and giving the operators value all along the way to make sure of a proper return on investment.
We need less conservative behavior, less "reverse Internet bidding," less focus on cost and more focus on value. Without profit for all, there is often little stomach for plowing more into technology development.
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