The Final Frontier: E&P's Low-Cost Operating Model

CHAPTER 3E&P Operating Model Redesign

Over the past several decades, large integrated and national oil companies have reached a general consensus in terms of their organizational architecture and internal operating models, with most evolving toward a matrix organization that combines geographical asset teams with strong centralized functional capabilities. Generations of workers have grown up in this matrix, and industry workflows and talent pools adapted accordingly. One central tenet, or core value, has been the unquestioned benefit of one consistent way of thinking and working. There have been many benefits to this approach—with global exploration, projects, and procurement functions reaping the benefit of efficiencies through economies of scale and enabling lessons to be learned and shared more effectively across the organization. This approach has been especially useful in the delivery and operation of large, expensive mega‐projects.¹

The research on organizational design and operating models is less sanguine. There is a growing body of evidence to suggest that operating model design has been more Darwinian than any conscious, rational efforts toward optimization.² Companies evolved their operating models subconsciously, on the basis of industry convention and the emulation of competitors. Second industrial revolution economy firms use a limited number of different operating models (e.g., functional, holding company, multiproduct‐division, country‐division, split‐business ...