Wednesday, 8 July 2009

Knowledge Management in the oil sector

Gas Station Pumps
Originally uploaded by srqpix
My colleague Tom shared a story with me a while back, which I have been pondering on recently. He told me

"I was down in New Zealand talking to a company about knowledge management and the relevance to their service organisation. The meeting organiser was summarising the morning's proceedings and I was sipping my coffee and wondering how we would get back to the airport when the question came. "Why are the oil companies so far ahead in this knowledge management stuff?" Now to be very truthful it wasn't a question I had actually considered before".

You have to wonder of course whether the questioners are right, and whether the oil companies really are so far ahead, but it does seem to be true that knowledge management has found truly fertile ground in the oil and gas industry. We can almost guarantee two or three oil majors in the MAKE awards this year. So why is that?

I think there are a whole number of factors here. Firstly the oil business is a global business, and the elements of the business tend to be the same wherever you go. So an oil platform on the Northwest shelf of Australia is not that different from an oil platform in the North Sea, and a refinery in Singapore is not that different from a refinery in Texas. The challenges that the businesses face are therefore common challenges, and solutions need to be shared and applied around the globe. Knowledge Management can be a real help.

Secondly the oil business is a highly competitive business. There is no true differentiation in product - the tank of petrol that you buy from Texaco is essentially no different from the tank of petrol that you buy from Esso, and the companies are not competing on product quality. And they are not really competing on technology either. Drilling rigs are leased from contractors, refineries are much the same the world over, and so are gas stations. Instead the competition is all about the application of technology, and the use of knowledge.

Then there is a very strong performance drive, and clear metrics. You know when you do a good job, because it is measurable. You can measure how many feet you drilled that day, or how many barrels you produced that month, or how long it took to get the retail station built. And if some other guy did it better and faster, then there’s a real incentive to learn from him.

Hence the focus on KM from the oil companies.

The companies use a variety of approaches. The Community of Practice approach is common, and communities are very active in Conoco Philips, Repsol, Chevron Texaco etc. These are very popular and very effective in the exploration end of the business, in knowledge-intensive areas such as drilling, geology and geophysics.

Another powerful aid to the development of communities is setting up a "people index" or Yellow Pages system. Texaco was a leader in implementing their PeopleNet system, and BP with the Connect system. Chris Collison described Connect as "a new way to access BP's most valuable reservoir -- one million man-years of experience".

Lessons Learned systems are crucial for delivering performance improvement in the risky and expensive world of the international and offshore megaprojects, and these are applied with a rigor seen in few other places.

Discussion forums are vital for connecting people in communities of practice, and these can usefully be supplemented by real-time collaboration technologies. The story of the BP "virtual teamwork" project shows how desktop videoconferencing was used to bring global knowledge and skilled to bear on local problems.

User-populated Knowledge Bases are also proving to be valuable tools here. Schlumberger has implemented a portal strategy embodied in their HUB service on the company Intranet. They use this system both as a virtual workspace for participating teams, as well as a discussion and document forum for their communities of practice. Halliburton has something similar which they say cost them $17.1 million and delivered back $81.9 million in 3.5 years. Shell are developing the Shell Wiki, which is linked to the Shell University, and is rapidly growing to become the one-stop shop for reference material.

The major benefit that knowledge management has given oil companies so far is "protecting the base", which is oil company jargon for maintaining and improving the core business. This focus is on reducing capital and operating costs, increasing utilisation and up time, and improving market positioning. Knowledge is captured and shared about topics such as increasing success in finding oil fields, reducing maintenance down-time in oil refineries, and increasing the speed of build of gas stations. But as oil runs out, and focus turns to renewables, then the oil majors are going to have to turn their KM spotlight on developing new knowledge, on innovation, and on rapid learning of new skills and new business models. That’s when the winners and losers will be determined by their learning speed and by the efficiency of their knowledge management. That's when we will see whether the oil sector really has staked their future on KM.


James Gunn said...

As a KM consultant in many sectors, some organisations are ready for KM and others "have some lower hanging fruit" to pick. Without the foundation of strong process discipline, good people and a healthy focus on performance, it is actually quite hard to implement KM. Oil and aerospace companies can't afford failure as people die - other organisations muddle on. ONe other factor is that the numbers invovled are so large that any KM project has a better looking ROI.

Anonymous said...

We need your help! You KM erperts are an amazing breed! We are working on an interesting KM opportunity in oil/gas and/or continuous manufacturing. Where is the best place to get the word out? Opportunity is in the Midwest. Pay is up to 145K plus bonus. Your thoughts?

Laurie Gunning

Nick Milton said...

email me with some more details, Laurie, and I will respond with some thoughts. My email is

prateek said...

Hello sir,
can you please mail me some more information for knowledge management in oil sector,as i am doing my dissertation on this topic.....i will be also very grateful towards you if you mail me some relevant case studies regarding this issues is

Anonymous said...

Hello sir,

Please, I you help me with some material on Knowledge management in the oil and gas industry to support my dissertatiopn. My email is Thanks for your support.

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