Past Messages


Tony D'Agostino, Summer 2002

d'agostinoIn the spring newsletter I wrote an opinion piece on my view of the evolving state of employee training and continuing education in our industry. Downsizing and outsourcing have shifted much of that responsibility out of the upstream companies and into the professional societies and service companies. In this newsletter I'm going to climb a bit further out on that limb and relate my views on the evolving nature of the organic relationship between upstream companies, Research and Development groups, and technology service providers. This strikes me as a pertinent newsletter subject for two reasons. Approximately 37% of the GCSSEPM membership is employed by an upstream E&P company while approximately 29% of the membership works for a service company or makes a living as a consultant. In my 22-year career I've spent nearly 14 with a major (operations and research), 4 as a sole proprietor/consultant and 5+ with an integrated service company. If nothing else, you can say I have a well-rounded perspective on this subject.

Regardless of the era or economic climate both client companies and service providers have a relatively constant set of expectations and issues in regard to dealing with one another. Underlying the entire relationship is the premise that a client company has cash flow due to exploration success and profits from production or downstream operations. Client companies have every right to their expectations and need to hold service companies and consultants to their commitments.

Client Company Expectations

Client Company Fears/Concerns

Upstream companies, and by extension the managers and technology coordinators that negotiate with service providers, are under considerable pressure to keep costs low. The 80% solution has become the norm such that when compromises are made the real results may represent a 60% or 70% solution or worse. Another cost saving has come from the dramatic reduction in R & D budgets, staff and labs. R & D efforts have been shifted to the integrated service companies and software developers. Short-term savings are achieved but could this not be viewed as a false economy when multi-million dollar, or even billion dollar decisions are based on less than the best information?

Service providers have their own unique set of expectations and issues. They also have every right to expect clients to negotiate in good faith, meet commitments, and cooperate in all ways to make the project or research successful. In an effort to meet client expectations and address client issues, many, if not most, service companies are staffed with a proportionally large population of senior-level technologists and geoscientists. Many of whom come straight from the downsized R&D divisions of the upstream companies. To the clients' benefit, those senior staffers bring a vast cumulative knowledge base to the table. Service companies are also expected to utilize the latest technologies in the form of software, hardware, and data acquisition techniques. That knowledge base and infrastructure must be supported with state-of-the-art resources, salaries, benefits etc. in order to be readily available to the client companies. The cash flow of the consultant or service company doesn't come from the ground but rather comes from a steady stream of projects sourced from the upstream companies. If that flow is erratic, unpredictable, or ceases entirely, the ability of the service providers to support that valuable knowledge base is greatly hampered. The lone consultant simply leaves the industry altogether and those skills are permanently lost.

Service Provider Expectations

Service Provider Fears/Concerns

The business world is tough and competitive, as it should be in a capitalistic economy, and our business may be viewed as tougher than most. Nonetheless, it appears to me that some current trends are disturbing. Intense pressure for short-term profits and low costs has eroded the ability of the industry to have a long term view and support the technological infrastructure that is so critical to success. One result of 15+ years of downsizing, is that upstream companies no longer support the same degree of internal technological research and development they once did, supported by a fraction of those production profits. The organic relationship between the internal researchers and technology providers has shifted outward without the support of a steady budget. More and more, the R & D and technological advancements are demanded from the service companies, and even consultants, yet the steady flow of profitable contracts and projects is diminishing. I fear the end result will be two-fold. First, the formerly large population of highly skilled technologists will steadily shrink. Second, we are in danger of experiencing a slow-down in technology development or even stagnation without the cash available to support R & D in its new environment.

The next time you are negotiating with a service company or consultant over the costs of that next field study or your share of a research consortium to develop the latest black box device, take pause and give some thought to all the behind-the-scenes activity connected to that effort. What would you do if that person or that service company was not even in business the next time you needed them? Is it worth your while as a manager or company representative to foster their continued success? If the answer is yes, deal accordingly and in a fashion that breeds continuing success for both parties.