Effects of early supplier involvement on the utilization of suppliers´ knowledge: Using the example of field development projects in the Norwegian petroleum industry

Abstract

Integrated oil companies face major challenges in their businesses: While the world s demand for oil is rising, easy and cheap field exploitation is declining. In particular, the average volume of oil from the discovered oil fields in the Norwegian continental shelf is decreasing. To face these challenges, oil companies need to explore inconvenient sources like oil sands, ultra-deep-water fields or fields in arctic conditions by using specialized technology. Innovation and technological development are also necessary to improve oil recovery in maturing fields and more difficult reservoirs and to make these sites profitable. Every new development of an oil field and the activities within present unique difficulties and thus require special know-how and technology. Therefore, integrated operators must develop high levels of technology for the different needs of their field development projects as their area of action becomes even more international, which also demands a greater variety of know-how.This study explores ways that operators can resolve these difficulties by intensifying collaboration with their suppliers. The effects of involving suppliers in the early front-end phase of field development projects on the utilization of suppliers knowledge are analysed in detail. The research results are derived from a literature review on the one hand and analysis of research interviews with industry practitioners on the other.This study provides valuable new insights for both academia and industry practitioners. In particular, it shows that involving key technology suppliers early in the evaluation and concept planning of newly discovered petroleum fields can lead to a more efficient and effective outcome of field development projects because the know-how and expertise of the suppliers is used more efficiently. This study also shows that the concept of early supplier involvement (ESI) currently is not being used in Norwegian field development because of industry-specific factors. In particular, the irregularity and rather short-term cooperation of project-organized industries like the petroleum industry complicate the achievement of the long-term and high-involvement relationships necessary for ESI. Therefore, this study also provides a model for overcoming the industry-specific difficulties and using ESI in field development projects to enhance the utilization of suppliers know-how.