Positioning Midstream companies for success

Companies that connect producers of hydrocarbons with refineries, petrochemical plants and other markets that comprise the Midstream segment are facing ever-increasing pressure to sustain their performance. The traditional formula for success has been to build infrastructure serving attractive markets and manage a low-margin, low-risk business for long-term steady, growing returns to shareholders. This formula now faces increasing threat from new business models with more risk and less certainty, to uncertain volumes from producers, low commodity prices and industry instability and challenges to the industry’s operations from environmental and community organizations. The entire basis of competition is shifting.

New opportunities also arise within a shifting environment. The question we hear from many leaders in the industry is; “How do I position my company to succeed in the new environment?” They see some fundamental shifts as important:

  • Executives want a performance culture – they want everyone in their organization to have clear goals and behave in ways that demonstrate accountability. This means operations being accountable for HSE and cost reduction, as well as product quality and accurate measurement and reporting. For Business Development, it means finding opportunities (not waiting) and driving to close. For Corporate functions, it means aggressively managing results-driven programs that improve business performance rather than working on compliance. What is in the way is the legacy utility culture, rooted in the perspective that “we do the best we can to keep the product flowing.”
  • Executives want an organization that anticipates and when that fails, responds nimbly. This requires a willingness to question the status quo and be ready to listen to the market. It means being flexible while retaining the fundamentals of the business.
  • Executives want innovation. Creativity has not been a hallmark of the industry. Creating new ways of doing business rather than defending the old ways is essential in an environment of change. Most midstream companies were built for stability and control and are not effective at innovating, especially when dealing with unfamiliar commercial arrangements and challenges to the social license to operate.

The most significant hurdle in achieving these new ways of operating are the actions people are taking (and not taking) that are consistent with a now outdated view of the industry, the current environment, and what is possible. What views do people have that are consistent with bureaucracy, siloed behavior, and a general lack of urgency? What are the views of the leadership team? Are they all looking at the same business, the same issues, and pulling the same levers?

A new level of sustainable performance and responsiveness to the market requires people at all levels to adopt a new view both of what the business is about (what they are there for) and how they view all that, how they relate to it. The only sustainable and reliable access to a true performance culture is to alter the way people see things, starting with the leadership and working all the way through the organization.