Drillers and explorationists have co-existed for over a century in one of the longest running odd-couple relationships in industry.

Finding oil through the drill bit is the central competency upon which the oil and gas industry has been built. The scientific disciplines of geology and geophysics have enabled exploration professionals to carry out analysis and design of subsurface hydrocarbons at levels of sophistication unimaginable only a few decades ago.

Exploration, as a professional activity, has without question contributed to the economic and social development of the modern world. Although much maligned for environmental reasons, we literally could not function as a society without fossil fuels and oil and gas in particular.

From the earliest days of the industry, any man or woman who could find oil was viewed as something akin to the crown jewel in any company's crown. Not unlike Indiana Jones searching for long-lost archeological treasures, these intrepid souls combed the earth for likely hydrocarbon deposits.

It would seem to sound cliché to simply say that explorationists have always shouldered extraordinary pressure and stress that is associated with searching for hydrocarbons. But scratch the surface on any exploration organization and you'll be able to experience a palpable tension.

Explorationists must locate the hydrocarbons and provide some indication of the likely recoverable volumes. No small task, indeed, especially if Hubbert's analysis proves to be correct.

Drillers, on the other hand, have equally critical and stressful but different challenges. Drillers must put the exploration professional's concept into practice - turn the vision into reality.

Our experience shows that most exploration wells have a type of inefficiency tax built into the overall cost of the well. This tax is completely voluntary and represents the costs of the dysfunctional working relationship between the exploration functional organizations and the drilling organization of larger upstream organizations. It's not that all wells that are drilled are inefficient or that all interfaces between the exploration personnel and the drilling personnel are dysfunctional, but there are common issues that exist that seem to occur over and over again despite the best efforts of everyone involved.

The exploration well tax typically approaches 10% to as much as 100% of the authority for expenditure budgetary cost estimate. It's never made much sense for upstream companies to continue to pay this tax. However, when the cost of a well was once only several hundred thousand dollars, paying this pain tax wasn't as critical an issue as it is when the cost of an individual rank wildcat well can approach US $50 million.

After hundreds of thousands of wells, the industry should know that a one-size-fits-all mentality that puts all of the exploration well development decisions squarely in the hands of the exploration professionals is a recipe for higher tax rates.

The basic issue has to do with the continuing confusion over concept design - an ultra-critical requirement and execution, and yet another very different type of activity.

Sloppy execution abounds in exploration well development. The first dry hole is often followed by two, three or more dry holes drilled in double-down frenzy with the same chaotic approach and with the same predictable outcomes. And when all is said and done, the tab can be astronomical - not to mention the cost of not finding the oil or gas that was expected.

Among the problems that contribute to the higher cost performance is the lack of integration among the drilling and exploration organizations. Too many companies still persist in using the old industrial-era organization structure that features discrete exploration departments handing over the drill-well project (usually too late in the cycle) to the drilling department for execution. This handoff is rife with emotional, political and rational issues due to the linear, sequential nature of most handoff activities. Similar integration issues are seen among exploration units and supply chain, legal, health-safety-environment and business units.

Since exploration wells are expensive, the rig selection, materials, supplies and other spending decisions must be made by personnel who are most clearly capable of understanding the tradeoffs and capabilities of the various suppliers. Typically, this knowledge is not held closely by the exploration professionals but instead by drillers and supply chain personnel and by the engineers in the specific business units where the drilling is to take place.

Spending decisions take place continuously over the life of the drill-well project. Effective spending takes place only in the context of a capable project management or implementation environment. It is very, very rare to find the exploration organization that relates well to implementation disciplines such as Six Sigma, Lean Manufacturing or even the less well-structured approaches more commonly seen in experience-based project management. Implementation competencies include an entirely different set of competencies than those required to create the geological analysis needed to develop the exploration project concept.

Companies that do not stop and think about these issues are paying significantly higher tax rates on their projects. At $50 oil, this tax is harder to see, but it's there. At $15 oil that same tax will be present, and it will be glaringly obvious to the informed observer.

Upstream companies have tried hard to fix this problem over the years by using the equivalent of placing a Band-Aid on it. This consists of an organization structure solution such as putting the accountability for exploration well development exclusively in the exploration unit. Another well-tried solution involves putting it under the control of a business unit, or under the control of a "business development" unit or a "commercial development" unit - each of which is nothing more than a rearrangement of the deck chairs and amounts to only a superficial solution.

A better type of approach is to move from "either-or" solutions that seem to characterize an industry that continues to insist on giving us "centralize or decentralize" solutions to more of a "both-and" approach that blends the capabilities needed to create better decisions. This means designing for implementation excellence, including the management of all critical spending and ancillary development requirements. It's not just a matter of starting to plan early. It's not a matter of putting the drillers in charge - that's not the right idea. It's not going to get better by imposing a new set of performance measures. It's not going to fix things by reducing the issue to one of project management. In other words, either-or solutions will not work. They have never worked, and they will not work any better in the future.

Rather, it is the integration of the art and the business of developing wells to create an implementation-centric culture that is capable of operating at a "zero-tax" rate on the drill-well project. This will entail addressing a number of factors, including developing a design for the business that increases the odds for excellent outcomes. It will also require the use of implementation/process methodologies - something of an anathema for many upstream organizations. And it will require the use of much more advanced collaboration technologies that extend well past the geological models and far into well development design and execution.

But before anything can be done to reduce dramatically the exploration well tax burden, executive leadership must be educated to see the problems inherent in their present approaches to organization structure, reward and recognition, business process, and decision authority - to name but a few factors. With the risks and costs so high in today's environment, executive leadership can play a central role in achieving new levels of excellence in the upstream industry.