Shell has recently re-organised its EP Research & Technical Services. This paper describes the philosophy and evolution of the new organisation and its consequences for the generation and application of productivity enhancement technology.
Shell has recently re-organised its technology development structure, grouping all central EP technology activities in a single organisation called Research & Technical Services. I shall describe the philosophy and evolution of the new organisation and its consequences for the generation and application of productivity enhancement technology.
First, a clarification of my own position. After nearly twenty years of working for Shell, in research and operations, I am now seconded from Shell to Delft University of Technology. I still retain my links with Shell, and I am speaking here on behalf of Shell. I was also a member of the Team responsible for the design of the new Research & Technical Services organisation so I have an emotional investment in the new organisation.
Shell cares about technology. The hydrocarbon exploration and production industry has both survived and prospered despite the shocks and discontinuities it has experienced over the past 25 years. This has been due in large measure to the development and application of new technology which has reduced unit life cycle costs of finding and producing hydrocarbons and increased ultimate recoveries. Technology is essential for success and we believe we cannot wait for it to appear on the market; we have to be involved in its generation to be able to apply it effectively. This message, consistent over the years, has been reemphasized by the re-organisation.
Why then did Shell change as a company? We had not had a major change in our corporate centre for the last 40 years. We certainly didn't panic. However overall in Shell there was a need to raise the rate of return on investment. Specifically in EP there was a question as to whether our technology was competitive and whether we could improve its provision and application. In an increasingly competitive world and with an outlook that oil prices will remain within their recent trading range in the medium term, technology was seen to have an even more significant role to play in ensuring profitable growth.
The re-organisation team reviewed the working of the Shell technology organisation compared it with other organisations, took account of outside views of Shell from the industry and consultants, and most importantly consulted customers in Shell operations. The unanimous conclusion was that our technology was professional and valuable, but we had to avoid bureaucracy and risk-aversion, and improve focus, integration, and customer orientation.
In addition, a study with five main Shell operating unit customers showed a benefit/cost ratio of 8 from the application of new technology. The benefit was the client's estimate of the value of application of new technology from both inside and outside Shell, compared with the existing alternative. The costs were the total costs for technology development over the same time period, and therefore did not necessarily relate to the technology being applied; typically there is a time lag of several years.
So, there was clear customer support for focus on new technology provision. But to provide the necessary increasing business impact, we needed to become both smarter and quicker in terms of climbing the learning curve from technology innovation to application. Specifically we identified the following crucial needs:
strong business linkage at all points of the technology life cycle
flexible and responsive research and development organisation
an emphasis on multi-disciplinary teams seeking integrated solutions