By Geoffrey Cann
It’s All Hallows’ Eve, that time of the year when demons come assailing your door. In oil and gas demons can visit anytime. Here’s how oil and gas can turn their digital tricksters into digital treats.
Growing up with 4 brothers and a sister in a house that looked like a castle, I celebrated Hallowe’en as a near sacred time, on par with Christmas. We piped spooky music through hidden speakers, decorated the stairs with skeletons, witches, and carved pumpkins. Trick or treaters had to make their way up the cold and scary driveway to the top of the hill, where my Dad waited in the dark dressed as a ghoul (or at least more ghoulish than normal) to leap from the dark and scare the bejesus out of them. Mom answered the bell as the wicked witch of the west, a huge black hairy spider dangling from her wrist.
She made candy apples for the trick or treaters, possibly because candy from the store was too costly, but more likely because it was a hit with the local kids who developed a taste for the treat. 150 visitors made their way from all around Saint John every year for the experience, and not least because little in life is all that viscerally frightening anymore.
Our fears now come from surprise tax bills, medical diagnosis of some hidden illness, the freakish weather, and of course, Facebook.
The oil and gas industry has always had its share of risks, worries, and fears, and for the most part, has done a fine job in keeping the ghouls at bay, the spooks in the barn, and the witches in melt water. But as our industry ramps up its use of vibrant new digital tools, we face a new set of demons to manage, as if the pandemic hasn’t been frightening enough. In the spirit of the times, here are the four frights that we must now confront, or forever doomed shall we be.
By far the most frightening ghost of digital is the cyber criminal. Like ghosts, we don’t even know what they look like, although we’re pretty sure they dress in bunnyhugs (hoodies) live in basements, and don’t bathe. The cyber criminal is devious, silent, shadowy, and relentless. They are swirling around us at all hours, penetrating our walls, and attacking even our most mundane gates. They shape-shift with the same innovations we use, such as artificial intelligence to create life-like imitations of our authorities with which to deceive us.
They steal our identities to carry out crimes, they rob our energy to mine for cryptocurrency, they plant viruses to hold our data to ransom, and they even take over our assets to carry out mayhem and inflict harm.
Much like teaching your kids how to safely go trick or treating, you need to teach your organization to practice safe digital. Cyber awareness training needs constant refreshing to keep up with the latest tactics and threats. Digital innovations under consideration need to be subjected to rigorous black-hat testing. Fire drills that help practice recovery after an attack need frequent exercising. The cyber control team needs investment in the tools and skills to harden, detect, prevent and recover from cyber demons.
The next digital scourge are the project trolls. Much like Dad who steals all the good treats from a great trick or treat run, project trolls destroy a meaningful amount of the shareholder treasure that is poured annually into digital trials. As few as 4% of all digital projects achieve their goals, and of that tiny amount, even fewer eventually scale up to capture enterprise level gains. A battalion of project trolls see to it that your digital projects never achieve their agendas. Some of these trolls are in human form, such as the manager that denies digital training for staff, or refuses to allow a digital trial to proceed because of some phantom reason, or insists on unachievable goals.
But most of the trolls are not characters per se. They include performance metrics that subtly influence employees to avoid change, resource models that direct all funding to the status quo, and organization structures that disembowel the digital champions from making progress.
We know how to deal with the human trolls—teach and motivate them appropriately, or move them to the side, or package them out. Dealing with the structural trolls is harder. Leaders need to paint a compelling vision, change the metrics, and hold managers to account. Digital projects need a clear path to enterprise value at the pilot stage, otherwise they’ll only ever be just that—pilots. Digital projects need to be held to real metrics—they have to make money. Only then can they withstand the knives and hacksaws when commodity markets upend.
Many companies (and countries) have declared their intention to be carbon neutral or carbon negative by some usually distant arbitrary date. Key to these declarations are carbon credits, where some amount of carbon is somehow captured (perhaps in the form of a tree) and not released to the environment or avoided altogether (such as the use of renewable solar power to fuel a process). These credits are used to offset a carbon debit (an unavoidable carbon emission) so that the balance of credits and debits nets to zero.
Here’s the spooky part. How do you know with absolute certainty that the carbon credit you’re claiming for your books, or selling to others so they can be net zero, even exists? How can you prove that the tree you claim isn’t being claimed by some other organization (the double spend problem)? How can you demonstrate over time that the credit hasn’t been reversed because the tree was cut down, or burned in a forest fire? How do you value the carbon in the tree planted a decade ago, growing over that time, so that you can claim to offset an emission today?
Capital markets know how spooky this world is. The price of carbon credits is distorted, the quality of the credits is poor, and the demand for credits is rising. For example, global airlines have announced plans to offset the carbon from flights, relying on bio fuels to replace petroleum jet fuel, or carbon credits from green projects. This will take real carbon work. But solar farms are going to happen anyway because they are now net cheaper than any fossil fuel energy supply. They don’t need financing from carbon credits to make them work.
Companies that are exposed to the carbon spook do not want to find out their credits are valueless or don’t exist. Capital markets will punish them unmercifully, and litigation is sure to follow.
The digital trick is to find ways to make carbon credits immutable, discoverable, reversible, and provable, and the solution lies with blockchain.
The brand bogeymen stalk the oil and gas industry. Young people have been frightened off by the bogeymen and the very best engineers are no longer keen to invest their careers with an industry branded as dirty, technologically sedentary, unfriendly to women and outsiders, closed to new ideas, and stagnant. This brand is thoroughly unappealing relative to the dynamism of a career in many other industries, such as fintech, technology, entertainment, and digital.
Stock options are the traditional favorite compensation mechanism for oil and gas, whose values rise with the constantly rising commodity price. But with much uncertainty about future demand, those options don’t look that valuable. Youth are more impressed with the value of stock in Microsoft, Apple, Alphabet, Amazon, Tesla, and many others, with their youthful leadership.
The early indicators of the brand bogeymen’s impacts are enrolments in university programs for petroleum engineering and geology, and in some countries, these are well down. In the not too distant future, the talent pipeline will have dried up like water in California.
A second more worrisome bogeyman is the inside brand bogeyman. Imagine the young person that joins an oil and gas outfit, and discovers after a few months that most of the technology in use dates back 30 years (yes, Excel), that mobile devices are banned, that social media is blocked, and that change is discouraged. Just this week, I fielded yet another call from a young engineer who is deeply frustrated that her pipeline employer is simply not on board with her interests in data science, and who asked about which companies are leaders. The internal brand bogeyman kills off talent enthusiasm and provokes young people to look elsewhere.
Want to beat the outside brand bogeyman? Good luck. But you can beat the inside bogeyman by progressively upgrading technologies to be at least last decade, and making clear your vision for getting current with this decade.
Hallowe’en means treats for the kids but the demons, trolls, spooks and bogeymen that trouble the oil and gas industry are tricksters to be put in their places. Upgrading and investing for the future is the way forward.
Check out my book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, coming soon in Russian, and available on Amazon and other on-line bookshops.
Look for my next book, ‘Carbon, Capital, and the Cloud: A Playbook for Digital Oil and Gas’, coming next year.
Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course.