Darius Snieckus
OGJ Online
By the time Malcolm Brinded succeeded Heinz Rothermund as managing director of Shell Expro, the UK E&P arm of the Royal / Dutch Shell Group, in mid-1998, business looked to be getting back to normal after Brent Spar's very public decommissioning. The last 2 years-two of the hardest witnessed by the oil business globally-have proved otherwise.
Yet, under Brinded's leadership, Shell has come through some of the leanest times in the North Sea's history to unveil $1.2 billion plans to develop as many as half-a-dozen new fields on the UKCS. Brinded has climbed steadily through the corporate ranks at the Anglo-Dutch oil giant from the time he joined Shell International Petroleum Co. in 1974 as an engineer straight out of Cambridge University to a post where he is de facto responsible for 15-20% of UK oil and gas production.
Still little could have prepared him for the collapse of the oil price, occurring just months after he stepped into Rothermund's shoes.
Having been an Expro director since 1995, and in charge of its central and northern North Sea operations between 1996-1998, Brinded does not look back on "the step up [to managing director] as a radical change." The challenge, he said, came from his promotion "coincid[ing] with the recognition that [Shell] had to take some significant action" if it aimed to offset the looming reality of a long-term low oil price scenario.
For the oil price crash had revealed organizational cracks in Expro-and the Shell group as a whole-which showed it was "not a particularly strong company at low oil prices."
Judging itself against the 'Shell Road Map' template with its "cost leadership, portfolio management, and robustness to low oil prices," said Brinded, "made it clear Shell Expro was not particularly well-positioned to win capital and be robust at low oil prices."
"We did two things in the first 6 months [I was managing director] to try and signal the change in pace," he explained. "The first was the closure of [Expro's London headquarters] Shell-Mex House and the move of Expro people up to Aberdeen-recognizing that a lot of people would not make that move. The other thing was to increase the focus on strategic cost leadership by making a really tough pitch on cost reduction in terms of our operating costs."
Hard decisions
The bottom line was that Expro had to cut costs by some �50 million in 1999-and a further �150 million the year after-for the company to stay globally competitive. In a progressive move, Brinded assembled 300 of its personnel at Expro's sports hall at Woodbank for a day-and-half "leadership conference" to work out just how such cost reductions could be achieved without undermining the company.
"We didn't go in with answers. We went in with questions and involved the whole of an organization in coming up with the answers to those questions," stressed Brinded. "And [this approach] created the boost and the acceleration needed to achieve the pace of change we felt we needed."
Brinded credits his predecessor, Rothermund, for laying the groundwork for the "strong team leadership cohesion" he was to build on. Downsizing Expro by almost one-fifth would have been simply inconceivable, he noted, without broad support from within the company.
"We weren't going to be able to do it as just a group of 10 or 12 of us," he noted. "We needed several hundred people who really understood why they were having to make such tough decisions locally to achieve a company-wide improvement.
"And the result was that Expro reduced its staff by 18% without a major pushback from the organization because everyone understood that this was vital for our survival, and that we were not going to win capex unless we took some very big strides."
New projects
Though Brinded is quick to emphasize that the $1.2 billion earmarked for the development of these new, "technologically tricky" fields is "not a done deal," it does denote that Expro has moved the UK Continental Shelf (UKCS) forward as one of the prime areas for investment by the group.
"There are still many hurdles to cross with these projects," he stressed, "and we have to go on demonstrating our credibility in saying [the UKCS] is a good place to invest-so there is no way we can afford to sit back and say: 'There, we've done it.'"
If all goes according to plan, however, $900 million of the total outlay-up 50% on the "original plan" for this year and a 20% hike on the company's 1999 spend-will be used to develop Shell's highly prospective Outer Moray Firth Goldeneye field and the cluster of five accumulations in the East Shetland basin known as Penguins.
The other developments slated for new funds are "projects that have been around for a long time and [are] hard to commercialize." They are the central North Sea fields dubbed Mandarin and Goosander, as well as two further commercially sensitive prospects which are not being named by Expro at this time. "The plan can look good," he cautioned, "but it doesn't mean it's going to happen without further actions. Keeping the pace of improvement up is going to be absolutely crucial."
This statement will likely be as true for Expro as it is for the UK North Sea as a whole, as the province enters its much-discussed 'Third Age.' Though the UKCS's recovery from what Expro Oil Director Chris Finlayson once called the "triple whammy" of "sustained low prices, a complicated tax regime, and aging fields," is now underway, Brinded believes that the region will "never feel the same sense of [economic] security again."
"Modern business," he said, "is about coping with continuous change and building an organization that is capable of fast, almost real-time improvement. In the early-1990s we used to talk about making a change and then being in 'steady state'. What we now realize is you've got to create a organization that is capable of continuous change-and I know it sounds a clich�ut is genuinely saying, 'Alright we've done that, now what's the next step, what's the next 'S' curve?'"
The future
Rothermund once said the North Sea had evolved through three ages: the "technical admiration phase" of first-time engineering achievements; "post-Piper Alpha," when integrity and safety came to be factored into investment in a new way; and "Brent Spar," which came to symbolize the need to bridge industrial and public interests.
The region's fourth age, to Rothermund's mind, will be the "integrated energy" era. Setting aside BP's attempt to recreate itself as an integrated company through its "beyond petroleum" rebranding, Brinded does not see industry evolving in that direction in the short term, nor is that direction aligned with Expro's present business model.
"The vision of a company-like Expro-changing into a more integrated energy company with downstream gas, renewables and so forth is not keeping with the business model we have been following in Shell," stated Brinded. "We have kept our focus on being an upstream oil and gas company."
Nevertheless, Shell was first to market in the "alternative" offshore wind sector, with the Blyth Offshore Wind Ltd. development on the north-east coast of England.
"We led on getting that project to market-getting it sanctioned, getting it approved, and actually project managing it," said Brinded, "although all future projects will be managed by our international renewables organization, Shell Renewables."
Expro has also been "extremely successful," he added, at growing another sub-sector-its downstream industrial and commercial natural gas division, Shell Gas Direct.
The next era for Expro, Brinded believes, will see the company continue its rapid redefinition as a "group of small businesses."
"One of the changes that started in 1995 with Heinz [Rothermund] here was that of changing Expro from an organization had become something of an institution into a group of small businesses by re-enforcing a bottom-line focus and business mentality in the sub-sectors of the company," he explained. "This means that service-line units have to win business from the business units, and the business units have to keep a tight focus on their bottom lines.
"That has-and will continue to-change the behavior at Expro by stimulating an entrepreneurial, value-generating performance from our people," Brinded concluded.
