© 2020 CMC-Global Directory, Dr Leesi Gborogbosi, CMC
How collaboration can be a winning strategy in the oil and gas industry is of keen interest to Gabriel Domale Consulting, a management consulting that help oil and gas firms to grow.
Increasing competition, increased risks, market instability, global threats like the current pandemic (COVID 19), and economic fluctuations have pressurized many business leaders including those in the oil and gas sector to seek for solutions
Oil and gas industry business leaders are now asking questions and searching for ways to intensify their competitive advantages. The focus is on taking or retaining their companies’ desired positions in the global oil and gas market.
Oil and gas companies, especially the marginal oil field operator, should adopt collaboration as a winning strategy. Collaboration among operators will enable cluster of contiguous fields to achieve the synergetic benefits.
With increasing oil price volatility, there is increased pressure for cost reduction and more push for collaboration, restructuring, and merger and acquisition. The Nigeria national Petroleum corporation on behalf of the Federal Government of Nigeria is leading the initiative to get the oil and gas companies to achieve $10 unit operating cost.
This initiative now calls for collaboration across the entire oil and gas industry value chain. We are now seeing technology companies and consulting firm stepping forward to leverage technological capabilities and management insights to support lower operating cost.
Collaboration among industry players and government to develop innovative solutions to industry problems is taking new dimensions. As more business leaders are beginning to appreciate the ample impacts and the uncontested benefits of co-created values.
It is pertinent to say, that an individual investor/company could face several limitations in trying to compete solely in the global market. However, with collaboration, which may involve a complementary specialization, their competitive advantage could be well enhanced such that they can compete in markets usually beyond their individual reach.
Furthermore, it can be observed that successful business leaders have a common interest in building networks - meeting new people and renewing relationship with colleagues. Recent trends show that it is a good strategic move for investors and/or business leaders to connect to and synergize with a variety of other collaborators in the oil and gas sector.
Collaboration in the oil and gas industry can take the shape of close-working relationships between the operators and government, operators and contractors, operators and host communities, or between operators themselves. The collaborative relationship may be described as partnering, alliancing, performance-driven relationships, and collaborative contracting.
Adversarial relationships in the Nigeria oil and gas industry especially relationship with host communities has led to increased inefficiencies, high costs of operations and pushing some oil and gas companies into divestment.
Collaboration with other networks (companies, government and host communities) evolves through the following stages:
Exploration - Looking at the possible benefits and ways of collaborating
Assimilation -Transferring the ideas into a working collaboration
Exploitation - Pooling resources and knowledge/skills to create a new process, or new product/services.
The Golden question you should decide on before collaborating is: Which form of collaboration will lead to the most success?
There are various forms of business collaboration:
1. Alliances
A strategic alliance is an agreement between two or more independent firms, which combine resources and efforts on a temporary basis to reach a common strategic goal, which is always to establish new product lines or to successfully enter new market among others
The strategic alliance is the most sustainable form of collaboration for innovation. Alliances made headlines in the 1970s and 1980s as multinationals began sourcing external assets to increase their competitiveness and reach their goals.
2. Strategic co-funding
This is otherwise known as funder collaboration, where collaborators can agree to syndicate their funds to execute unitized assets while the funders still maintain their individual company identities. Oil and gas investors embark on this form of collaboration when raw materials (crude) are acquired in excess and need limited time to process.
This form of collaboration is useful for huge projects or investments where two firms with a common interest come together to fund a particular process or investment plan, which may not be well funded or executed by a single party based on capacity.
3. Ecosystems
This explains a loosely interconnected network of companies and other entities that work cooperatively and competitively to develop new products. This form of collaboration includes the exchange of service just to create a mutual value. This can only exist between firms who offer the same services.
Ecosystem form of collaboration is characterized by a shared set of complementary knowledge and skills and strong dependences among members.
In the oil and gas sector, this land of collaboration is usually between upstream-to-upstream companies or downstream-to-downstream companies, as the essence is to share complementary knowledge and skills and pursue jointly formulated strategies just to create new and highly competitive products or services.
4. Network
This kind of collaboration described the coming together of two or more firms based around the same geographical location and having a common labour market or shared economical unit. The firms that come together under this form of collaboration are firms who share common goals related to products, services, processes or business models.
In selecting the form for collaboration, it is critical to seek the following organizational alignment:
Some pre-collaboration questions
Before you start to collaborate, ask yourself as a firm the following questions:
There should be a formal agreement that will establish clear roles and responsibilities including the benefits.
Formalising the collaboration and communicating publicly helps to bring greater visibility - to attract patronage and build a greater customer base.
To achieve success in collaboration, the various parties to the collaboration should understand and implement critical success factors as highlighted below. Gabriel Domale Consulting has the expertise to work with organisations to detail out and implement these success factors.
Gabriel Domale Consulting provides external coaching and guidance necessary to assist companies to explore the potentials of collaboration and achieve performance breakthroughs.
Gabriel Domale Consulting can provide advisory to your firm on the collaboration processes and also help with the following documentations:
Letter of intent: The letter of intent should provide an overview of the goals and objectives of the proposed collaboration. It should include how long it would last; the expected benefits and the points of contact for the collaboration
Memorandum of understanding: This is a document describing a bilateral or multilateral agreement between members of the collaboration. It outlines the terms and intents of the collaboration.
Consortium agreement: This is a document for sharing information; the details of property management are also contained in this agreement. It also contains boundaries for key issues.
Collaborative partnership ground rules: These are mutual rules from the beginning of the collaboration this gives a non-legally binding way for members (current and future) to agree to a minimum set of acceptable behaviours and processes.
Roles of network facilitator: This document outlines the essential and desired skills required by the facilitator and an indication of the key tasks expected of them.
Handling new network member enquiries: Consider creating a workflow tool for existing members to evaluate requests from potential new network members if the agreement allows for such.
A successful business collaboration is achieved with transparency and trust between different members working as one, with good mutual and solidarity intentions. Communicating openly about challenges and ways of mitigation also enhance a successful collaboration.
Through collaboration, oil and gas investors often complement each other and specialize in different areas of the value chain which enhances efficiency and productivity.
The foundation of any collaboration is establishing a clear purpose, agreed opportunities and strategies, clear rules of engagement and risk shearing formulas
Discuss with us at Gabriel Domale Consulting if your company needs expert support as you implement your collaboration strategy.
Our team of experts led by Dr Leesi Gborogbosi is known as “a team of solutions looking for problems”. We offer exceptional services in collaboration-based performance.
If you need help, please talk to us at Gabriel Domale Consulting:
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As a management consulting firm, we help companies in Africa to grow by providing expertise in the areas of finance, strategy, corporate governance, transformation, cost reduction and risk management.
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