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Shell’s claimed high level of drilling expertise – absolute phooey?

Screen Shot 2013-01-11 at 20.09.51It amuses me to read articles in the press about Shell’s high level of drilling expertise – typical comments regarding Alaska are along the lines of “if Shell cannot do it then nobody can…” I’m sorry, but this is a very long way off the mark.

EXPERT COMMENT RECEIVED FROM A SHELL RELATED SOURCE

John

It amuses me to read articles in the press about Shell’s high level of drilling expertise – typical comments regarding Alaska are along the lines of “if Shell cannot do it then nobody can…”

I’m sorry, but this is a very long way off the mark. Until the 1990s Shell trained and maintained a large international drilling group, whose expertise was unquestionably of the highest standard. For the past 20 years this has not been the case.

In the 1990s it was decided that drilling was not a core business, and was better left to sub-contractors, following the example of BP. This was seen as an efficient way to reduce drilling costs, as many of the overheads could be transferred to the sub-contractors. It also meant that the recruiting and technical development of drilling staff, which had involved sending engineering graduates to the well site to learn about and then supervise drilling operations, effectively came to an end.

Managers would not get their hands dirty on the rig, but would instead focus on reducing costs from behind their desks in their airconditioned offices thousands of miles away. Twenty years later the last of the trained drillers have retired, and the managers have never been closer to the rig floor than permitted during a fleeting rig inspection. They have never worked as drillers or derrickmen, let alone drilling supervisors, and have a very poor understanding of what is really involved in actually constructing a well. An office based exercise known as “Drilling the well on paper” is the nearest they have ever come to real life.

BP should have learned from Macondo that there is no substitute for in-house expertise. Shell should learn the same lesson from the Arctic.

Other companies have not followed Shell and BP down the path of subcontracting their drilling activities and expertise. With the benefit of their employees’ hands-on experience other companies might have been able to foresee the likely consequences of sending outdated “lowest cost” equipment to the Arctic. It is unreasonable and unfair to assume that other companies would not have been able to do a better job.

(Tabloid type headline by John Donovan as promoted by LondonLad)

COMMENT RECEIVED FROM “AN OLD EP HAND”

Completely agree.
 
But the whole drilling community in Shell and many others knew that DITN (Drilling in the Nineties) was a complete disaster. But it was suicide for your career to voice criticism. The pointy haired bosses all knew this was good for their bonusses. They had promised millions to the chiefs. The slogan that summed it all up was ‘When the rig goes, so does the overhead’. Shell has paid dearly for all this mismanagement. The costs went up, the overhead remained and control reduced because very few knew how things really worked. And it had been said bij Philips (the electronics giant) ‘if you cannot make it, you cannot manage it’. This is also true for drilling. But it was in the glory days of ENRON. Our pointy haired bosses were shouting at us: ‘They just put a load of engineers with laptops on a plane to India and 2 weeks later they come back with a 200 million dollar project. Easy. No overhead. Big profit. We want more! Why don’t you do this too?’
 
We would ‘manage the contractors’. But the contractors are far too clever to be managed by a bunch of EP guys. (EP stands for Excel and Powerpoint…)
 
Alaska is a prime example that Shell has lost its ability in this business. We were the best and most innovative, now we are straggling behind.
 
Sad sad sad.

Posted on Shell Blog by “Relieved” on 2013/06/06 at 22:45

To Old EP Hand: I consulted for Enron on that India project and those damned fools negotiated themselves into bankruptcy on that deal. To break even on their power plant project Enron needed 10 cents a kilowatt hour for their power. In India ??? There was no way the government was going to allow Enron to charge those rates for power. Enron got taken to the cleaners by what they considered 3rd world fools.

Posted on Shell Blog by “an old EP hand” on 2013/06/07 at 06:47

Relieved: I know and you are completely correct. But our politically correct pointy haired bosses had lost all rationality in the transformation process. I fear this happens in most big processes.

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