Io: a new kind of upstream consultancy?
At a trying time for the oil and gas industry Io Oil and Gas Consultancy believes it can offer a new kind of upstream consultancy service – but can it make a difference? Molly Lempriere takes a look.
Io Oil and Gas Consultancy was set up and is flourishing amidst a mass of challenges. Since the crash in oil prices in mid-2014, exploration has plummeted with only six new wells spudded in the UK in 2016. Expenditure since the crash is down by 30% and many remain dubious as to its ability to bounce back. Many companies have been championing reductions in expenditure to try and counteract this dilemma, but Io believes in a different approach.
New CEO of Io Richard Dyson explains that the company’s innovative approach has allowed it to grow, build partnerships and succeed. But can this approach of “starting with the end in mind” really counteract the depressed oil prices?
A new approach
Established in 2015 Io appears to have gone from strength to strength, and in September the consultancy announced the appointment of Dyson as the new CEO. Dyson says he was “delighted to join Io, as like my new colleagues, doing things differently and innovatively to enable projects to move forward and transform the industry is one of my passions”.
He is looking to continue the success already seen by the company, which has grown in size tenfold and taken on four major projects already, saying: “I will be drawing on my extensive experience in project leadership to spearhead the business in delivering much-needed certainty for clients in the design, planning and execution of their upstream oil and gas developments.”
When asked about Io’s previous growth Dyson attributes it “simply [to] our messaging resonating with operators and non-operators alike.” Certainly Io has seen a great deal of success since its creation by its parent companies GE Oil and Gas and McDermott. Working as a standalone, independent joint venture it is already “operating across a broad cross-section of geographies and projects with offices now in Houston, Texas and Perth, Western Australia”, with a main office in the Shard in London.
“Our main goal is to deliver greater certainty to our clients on cost, schedule and budget and, to do so, we look at a project from every angle,” Dyson says of the company’s approach. “We can manage the intricacies of each part of a project by blending the right people with broad experience and domain expertise and deep commercial knowledge and can tailor all of our work to ensure we fully understand a client’s needs.”
It is this holistic view which has allowed the company to grow during a period where, in the UK alone, employment in the oil industry has dropped by 27%. “This approach has meant that we have a close and trusted relationship with clients as we are supporting them from the very start,” says Dyson. “At Io we think and act like an operator, we have all the relevant technical, commercial and business skillsets under one roof, so we can act for our clients whatever their upstream oil and gas challenge.”
An all-consuming approach to projects, which sees them from start to finish, allows a close partnership between Io and their clients and equates to success for all, he argues.
Io’s approach to surviving low oil prices
But Io is not exempt from the many challenges facing the oil industry currently. Dyson believes that “as an industry we need to take a longer-term view and change the fundamentals of the way we operate today” if an oil company is to succeed. He is quick to disregard the cost-effective approach many have adopted over the last two years despite improvements such as lowering the average cost of extracting a barrel of oil to just $16, compared to a previous average of $29.
Dyson is not alone in pursuing a longer-term approach. “While cost-cutting has been an effective tool in the short term, the days of triple-digit oil prices appear well and truly over, with the World Bank estimating that a barrel of oil will only rise to $60 by 2020,” he says. The oil industry is going to move away from its “lower for longer” stance, and accept that this may be a persistent challenge, that it may in fact be “lower forever”, he adds.
In order to take on the challenge of the low oil prices, more exploration is required. Oil and Gas UK recommended as much in its 2016 report, warning against a production decline similar to the one seen at the beginning of the decade. New developments are at a record low, with four barrels of gas extracted for every one new barrel found. Io is aiming to overcome such a shortfall. “Even the most bullish oil analyst will concede that the golden days of $100 oil are over for now, and companies need to focus on enabling projects whatever the level of the oil price might be. The days of waiting for the oil price to rise or relying on further supply chain cost reductions are over,” Dyson explains.
Therefore, Dyson believes, “the upstream oil and gas industry needs to fundamentally transform the way it works to survive and thrive,” he says, adding that “regardless of where the oil price and output amount sit in 2017 and beyond, the industry will only truly begin to thrive again when it transforms its collective ways of working that can be successfully adapted regardless of market conditions.”
Io is confident about this approach of encouraging a ‘starting with the end in mind’ philosophy, working in direct partnership with operators in a holistic, full-field fashion to understand their key business drivers and specific objectives from a project, Dyson says. In this way he hopes Io will conquer the problems that are plaguing even the largest oil companies.
Plans for growth: the Middle East and beyond
With Io’s integrated asset approach proving successful it is unsurprising that the company is looking to expand over the next few years. Dyson says that he is “looking forward to building on this momentum and international expansion, and driving the business forward into its next phase of development as we approach our second anniversary in January 2017”.
In particular, Dyson has already expressed an interest in expanding into the Middle East. “With 810 billion barrels in proven reserves (50% of global total) and 28 million b/d in production (30% of global total), the Middle East has long been the centre of the global oil market,” Dyson says, explaining that the Middle East has been hampered by “the issues of project delays and cost overruns [that] are equally as rife in this region as they are globally”. These are issues Io has already proven a match for in tackling projects for the likes of BP. “We are keen to play a role in helping to transform the industry there, get projects moving in a timely and cost-efficient manner, and ensure that we learn from and apply lessons from the recent past to encourage sustainable growth for the long-term,” Dyson adds.
It is hard for many, however, to see the need for such a drive towards oil and gas given the increasing global agreements geared towards lower CO2 emissions. This is a move Io is clearly aware of, as Dyson admits. “The industry is transforming like any other industry, with sustainability as a priority moving forward,” he says. “As companies are collaborating to end gas flaring, similar practices will evolve with carbon trading as the industry moves toward more sustainable practices.”
Dyson believes there is still a need to focus of oil and gas. “The International Energy Agency states that world energy demand is likely to grow by some 35% by 2035,” he says. “Alternative energy sources (solar, wind and so on) are playing a growing role but do not address the primary transportation market where oil is an essential component.”
This increased demand for energy will necessitate the continued use of offshore resources, Dyson believes, although he does highlight that the company strives “to provide more environmentally and economically sustainable solutions for our clients in our project work.”
Io is tackling an industry at its most trying time, and coming out on top. The company’s holistic approach already has already proved a success in less than two years. But with the oil industry continuing to suffer from low prices, and an increasing away move from fossil fuels to renewables, one consultancy’s innovative approach will not be enough to turn around the industry’s fortunes. It remains to be seen whether Io can start a trend that will make waves across the offshore oil and gas sector.