Your Say: KM in the energy industry

Many firms in the energy industry were early adopters of knowledge management, and have since led the way in terms of KM implementation. Simon Lelic talks to some of the leading practitioners in the field to gauge the current state of the art, and to highlight the ongoing challenges for the industry.

The energy sector incorporates a huge variety of organisations, from oil and gas majors, to conventional, renewable and nuclear power companies, to specialist drilling and mining firms. It is an industry dominated by vast, multinational organisations, each of which must contend with the difficulties of maintaining a geographically dispersed workforce and functioning according to clearly defined operational procedures. At the same time, they must cope with external pressures relating to deregulation, growing environmental concerns and strict health and safety guidelines. It is therefore not surprising that some of the world’s biggest energy companies were early pioneers of the principles and working practices of knowledge management and, indeed, still lead the way on a global scale. That said, most energy companies are still to realise the full potential of the resources at their disposal, and KM represents a powerful means for these firms to deal with the challenges that lie ahead.

When Marcus Birkenkrahe, former knowledge manager at Shell International, joined the company in 1997, many senior managers had not even heard of knowledge management. Nevertheless, as Birkenkrahe says, it was clear that the discipline was being practised, if not preached, in isolated pockets across the organisation. “Shell had already run a KM initiative under a different name – the Global Office – with a strong emphasis on collaborative technologies and knowledge sharing,” he says. “At around the same time as I joined Shell, BP was experimenting very successfully with a number of peer-to-peer methodologies and also with video technology to enable experts to share their knowledge at a distance.” In all but name, KM had clearly made an early impression in the sector. As Birkenkrahe says, the very nature of the industry necessitated that this was the case. And yet, in the opinion of David Lecore, KM solutions champion at Schlumberger Information Systems, “The greatest impact on the industry is still to come.”

Shell and BP[1] are the industry’s most commonly cited examples of good KM practice, although Birkenkrahe also points to Amerada Hess as being a leading exponent of the discipline. Brian Bailey, national knowledge and technology manager for Ernst & Young Australia, has been impressed by the level of KM activity underway at companies like Woodside Energy and Brunei Shell Petroleum. “At Ark Group’s ‘KM in the oil, gas and power industry’ conference, which took place in Singapore earlier this year, Khaled Chiri from Woodside gave as good account of the role and nature of communities of interest as I have seen at an industry gathering.”[2] Similarly, he adds, Brunei Shell Petroleum demonstrated an innovative, market-style approach to sharing expert queries across the firm’s intranet, and a deep understanding of the value of peer-assist and collaboration techniques and tools.

There seems to be a general consensus that understanding across the industry as a whole has progressed steadily since the mid to late 1990s. “On the evidence I saw at the conference, it is fair to say that many companies have discovered the core palette of KM techniques, including intranets, skills directories, best practice repository systems, team collaboration, community support and customer-knowledge tools,” Bailey says. Birkenkrahe agrees that enormous progress has been made over the past five years or so, partly, as he says, because companies have realised that the KM proposition is largely an improvement on something they were already good at. He nevertheless feels that, in some cases at least, long-term commitment to KM is still lacking, while Martin van Agteren, head of the Energy Knowledge Centre at Gasunie Research, believes a high proportion of energy companies continue to focus heavily on ICT at the expense of cultural and knowledge-creation issues.

These are shortcomings that need to be addressed, for energy firms face a host of challenges that a well structured KM programme could help them overcome. Chief among these, says Bailey, is the broadly publicised Society-for-Petroleum-Engineers statistic that 44 per cent of the experienced knowledge-worker base will leave the industry by 2010. As Lecore says, it is getting to the point now where you hear sighs and see eyes rolling whenever the ‘Big Crew Change’, as the phenomenon is known, is mentioned, but it is a serious problem that has to be tackled. Mastering this transition is a potentially huge payback for a well implemented knowledge-management strategy, although as Bailey says, capturing and effectively sharing the knowledge and experiences of those workers on the verge of retirement constitutes a massive hurdle. But, in Lecore’s words, “The industry leaders of the future will, without a doubt, be the companies that are addressing this issue right now.”

Mergers and acquisitions are also amajor featureinfluencing industry developments – witness, for instance, BP’s current efforts to acquire half of the Tyumen Oil Company, Russia’s fourth-largest oil producer. Again, KM can be invaluable here, helping firms through the transitional process. “Identifying the ‘right’ knowledge, processes and people (on both sides), integrating tools (such as intranets) and developing a common cultural ground are all areas where a mature approach to KM can help,” Bailey says. Energy companies also face ongoing social responsibilities that knowledge management can help them to meet. Financially, for instance, good KM equates with a transparent and well run business, as Birkenkrahe says, while a sense of honesty and accountability is also important in environmental and political terms. “Oil and gas companies in particular are at the very hub of the geopolitical disturbances of our age,” says Birkenkrahe, mindful of the current situation in the Middle East. “The better an energy company manages its knowledge (in terms of corporate memory, in particular), the better it is able to fulfil its part of the social contract that holds our society together.”

In addition, of course, KM offers the usual raft of benefits that improved knowledge sharing, a more motivated workforce, increased efficiency and heightened customer awareness bring to any business. As Lecore says, “Pick any item on an oil executive’s list of objectives, or any demand from the shareholders (reserves replacement, increase production, return on capital, earnings per share, environmental responsibility, etc), and I believe that knowledge management will help achieve that objective.” On the flip-side, KM practitioners in the energy sector face the same sort of barriers they would in any other industry, primarily those relating to investment, leadership and employee buy-in. And inevitably, the sector presents its own set of obstacles that knowledge managers have to overcome if KM is to prove its worth.

Specifically, according to Birkenkrahe and as already alluded to, the industry’s large engineering population demonstrates an unhealthy faith in the power of technology to work miracles. This misplaced sense of trust may be fadingbut in many companies the damage has already been done. Recent efforts to liberalise energy markets have also driven cost-cutting exercises, as Van Agteren points out, and practitioners face added, and often unreasonable, pressure to demonstrate early returns. Above all, and perhaps more than in any other industrial sector, energy companies usually operate across huge geographical areas and with numerous remote platforms and disparate teams and installations. The challenges this presents to the KM function are obvious, particularly in terms of connectivity and engendering a pervasive company culture.

Technology can certainly help in this respect. “Knowledge-sharing databases are hugely valuable,” says Birkenkrahe, “as are distributed newsgroups and discussion forums, because the industry operates globally. Shell has had great successes in bundling the knowledge from several continents to optimise trading operations.” Similarly, the Energy Knowledge Centre at Gasunie Research has implemented a portal application that has proven its worth many times over, as Van Agteren explains. “Within the portal, information, knowledge and individual experts are easily found. In particular, experts can be located rapidly, as their knowledge is indexed according to specific keywords. In turn, these keywords come from a tailor-made taxonomy of 2,500 controlled terms, which are used specifically in the energy and natural gas sector. Thanks to this application, our employees are able to find information more easily, and gain, share and create knowledge far more quickly, resulting in the faster completion of projects.”

Of course, effective knowledge management depends on far more than a swanky ‘knowledge’ system, but the success stories the industry has already generated should help to ensure that the number of energy companies looking to experiment with KM continues to rise. As Lecore says, “Early adopters have demonstrated true value and others now have access to the knowledge and methodologies needed to repeat this success.” Already there is evidence that this process is underway. According to Van Agteren, for instance, the International Gas Union, whose objective it is to promote the technical and economic progress of the gas industry, is planning to add knowledge management to the programme of its forthcoming World Gas Conference. “Understanding of the importance of knowledge management is certainly rising,” he says.

The energy sector, though, is an unpredictable beast, and external economic pressures have a habit of interrupting the implementation of ideas that in periods of growth would be afforded far more attention and perseverance. And as Bailey says, the presence of so-called ‘best practice’ is not enough by itself to ensure KM will be successful wherever it is tried. There is always a risk that, by seeking to replicate what others have done elsewhere without taking specific organisational factors into account, practitioners will succeed only at locking in past performance and, at worst, mediocrity. Ultimately, however, KM seems likely to become a fundamental part of the way energy companies operate, and the term ‘knowledge management’ itself could well disappear from common parlance, perhaps more rapidly than in any other industry. In a sense, this would represent a return to how such firms operated before they had even heard of the discipline, with several crucial differences: processes will be more efficient, workers more productive and companies as a whole more responsive to the world around them.

References

1. See also Khaled Chiri’s article, ‘The power of people’, beginning on page 12
2. See, for example, Collison, C. & Parcell, G., Learning to Fly: Practical Lessons from One of the World’s Leading Knowledge Companies (Capstone, 2001)

Contact details

Brian Bailey is national knowledge and technology manager at the Centre for Business Knowledge, Ernst & Young Australia. He can be contacted at brian.bailey@ernstyoung.com.au

Marcus Birkenkrahe, former knowledge manager at Shell, is a public speaker, writer and consultant. He can be contacted at birkenkrahe@yahoo.de

David Lecore is knowledge management solutions champion at Schlumberger Information Solutions. He can be contacted at lecored1@slb.com

Martin van Agteren is head of the Energy Knowledge Centre at Gasunie Research. He can be contacted at m.h.van.agteren@gasunie.nl