Keywords

1 Introduction

Organisational structures support the industries to effectively allocate all required activities, roles, and responsibilities to dedicated resources and the workforce to undertake their duties to meet the objectives and achieve the set targets.

The oil and gas business has significant concessions, including upstream, midstream, and downstream developments. These investments cover production facilities, widely spread pipeline networks, producing wells, refineries, and gas plants, and launching megaprojects and programs to deliver these facilities. However, all projects face risks and challenges in subsurface uncertainty, resource shortages, poor scope definition, procurement implications, logistics constraints, and construction challenges (Miller and Lessard 2001).

Agility is another critical dimension of organisational culture. An agile organisation is the ability of the firm to establish an adjustable system to respond actively and on the fast track to any external or internal changes. In this paper, we will study the impact of organisational structure on projects’ performance in the energy sector in achieving companies’ objectives.

2 Literature Review

2.1 Organisation Concept and Theory

The organisational concept is defined as the analysis of generated functions interlinkage internally and externally with emphasis on setup response to all associated factors within the environment in the organisation. The three main pillars of any effective organisation are structure, culture, and change (Jones 2013). Organisational structure is the official setup that defines the roles and responsibilities, workflow, level of authority, and decision control among the people to achieve set goals and targets.

Regarding organisational culture, several definitions are highlighted in the literature. For example, Schein (1990) emphasized the importance of integrating central values, norms, best practices, engagement, and ethics to be embedded with the organisational environment.

Organisational change is a transformation process in which the firm and business unit exert alteration (major or minor) to an existing organisation, covering the other two parts in terms of culture and structure. Modifications involve changes in the internal process, procedures, reporting mechanism, objectives, production line, people, and functions. The organisational theory emphasizes studying the merits of implemented structures and functions in an organisation with the primary objective of problem-solving, improving performance, increasing productivity, and exceeding customer and stakeholders’ expectations. Their several theories are considered the main contributors to the development of organisational structure basis.

Institutional theory is one of the fundamental theories in organisational research and can be correlated to the oil and gas sector. The main characteristic of an institutional theory is that it has a combination of theoretical and practical drivers with a significant focus on the cultural values environment. In addition, it embraces implementing a range of formal procedures, standards, regulations, and defined policies (DiMaggio and Powell 1983.)

Contingency theory is another critical theory that can also be correlated to oil and gas organisational structure. Contingency theory is a tactic to ensure the presence of possible contingent drivers in any organisation to compensate for any embedded risks, such as culture, technology, authority, and external factors that could affect the formation and function of the organisation. (Hamann, P. M. 2017).

2.2 Organisation Structures Styles

With consideration of most companies and associated businesses, the projects have always been considered as “Supporting Tools” providing services in the short term. The project organisation in this model is considered a secondary contributor and not part of the central core operation. The project team will be out of the main operation structure functional organisation since the team is not directly influencing the return values to the firms. (Lundin and Soderholm 1995).

There is added value and risks in allocating the projects within a functional organisation. The ultimate authority and decision-making process will be under the function manager with minimum or no delegation to the project manager or within a hybrid structure called a “Matrix Organisation.” In this section, we will briefly highlight the literature’s past views on three main types of organisational structure: functional organisation, project-based (Projected) organisation, and matrix organisation. (Cristobal, Fernandez, and Diaz 2018).

2.2.1 Functional Organisation

The functional organisation structure divides the company into different functions based on the product that the firm is managing. For example, any food-producing company has production, marketing, quality, Human resources…etc. as functions with independent roles and responsibilities.

In the project management context, a Project manager has no significant influence on the decision-making process, which is laid mainly with the functional manager. So, the project manager performs his duties under the authority of the functional manager. The function manager provides all resources and technical engineering support to support the project manager (Lichtarski 2008). Figure 1 demonstrates an example of a functional project structure.

Fig. 1.
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Functional Project Structure (Cristobal et al., 2018)

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2.2.2 Project-Based Organisation (Projectized)

This structure provides project managers with all the required resources and workforce to effectively allow them to control the project better and make the proper decisions. In addition, the project manager has the delegation of authority to communicate with his subordinates in achieving project goals with the proper performance.

The project-based organisation is often found in big organisations that recognize long-term projects strategy can add value and deliver the targets as planned. Examples of projectized structures are construction contractors, real-estate companies, and many government authorities related to infrastructure, transportation, housing…etc. Figure 2 shows a classic example of a projected structure. (Kerzner 2017).

Fig. 2.
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Projectized Structure (Cristobal et al.. 2018)

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2.2.3 Matrix Organisation

The matrix organisational structure is a combination of functional and projected structures. It balances the delegation of authority between the functional manager and several project managers assigned to different projects at both vertical and horizontal levels. The functional manager provides all required technical resources to different projects. However, the ultimate responsibilities of managing resources and delivering the projects are within project managers, but the technical authorities remain under the functional manager (Villanova 2014). Figure 3 shows a typical matrix organisation. Matrix organisation is divided into three main categories, weak matrix, balanced matrix, and strong matrix, concerning project manager engagement level and his coordination with function manager in the context of organisation structure as illustrated in Fig. 4

Fig. 3.
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Matrix Structure (Cristobal et al. 2018)

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Fig. 4.
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Comparison between structures types with PM/FM influence (Gobeli and Larson, 1987)

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2.3 Relationship Between Organisation Structure and Project Performance

Martinelli (2001) defined the performance of any organisation as the outcomes resulting from decision-making by the employees following the defined organisation values, culture, systems, and processes. Key Performance Indicators (KPIs) are sets of financial and non-financial parameters the senior management defines to measure achievements and results according to predefined targets and objectives.

According to several researchers, there is a general commonality that organisational performance is a general term and could include several aspects such as profitability, return on investment, net present value (NPV), production growth, and market share (Gimenez 2000). Other researchers suggested that performance could be subjective and measured in terms of the amount of savings, safety records, technology adoption, training provided, social responsibility contribution, environmental development, and government-added value (Hodge and William 2004).

2.4 Challenges and Risks Concerning Organisation Structure in the Oil and Gas Sector

Significant projects and Programmes in the oil and gas industry face several challenges. These are related to the complications of these projects and the harsh environment in which the projects are implemented. Most of the literature papers addressed the barriers in terms of the project control system and the management control system and the effect of these control mechanisms on project management processes—furthermore, the organisational performance to deliver targets and objectives.

The challenges of the project control system are related to the planning and control process, competency and experience of staff, senior management commitment, and execution strategies. Planning and control are considered the main barriers to project performance (Jiang et al. 2001).

Another challenge in the oil & gas industry is the level of interfaces due to the enormous organisation setup that involves a considerable number of the leading organisation, sub-organisation, stakeholders, Concession holders, shareholders, owners, contractors, customers, and governmental authorities (Jawad et al. 2018).

2.5 Enablers and Mitigation Measures

Leadership engagement is a significant influence in setting the scene. It sends a positive signal about the importance of the project and encourages the project team to perform and deliver as per plan. Establishing attractive incentive and reward schemes for involved stakeholders, especially Selecting an appropriate project organisation structure, is essential to the success of projects. In many oil and gas companies, the matrix organisation structure is adopted with a significant focus on core business in hydrocarbon facilities, including oil and gas production, drilling, operation, refining, oil movement, transportation, storage, and export functions. Projects, engineering, and construction remain support services to the main oil business. However, centralizing the project’s portfolio with one function associated with support tools in terms of technical engineering, construction team, and project management process will strengthen the role of the project function to support the company’s overall vision. Considering matrix structure in energy business provides excellent flexibility, optimisation, and opportunity that all employees under functions can be assigned to projects to support the project manager.

One contributing element to the success of organisation structure performance is implementing an effective governance process. Since the oil and gas industry is contributing massively to the economics of nations, it is essential to have a sound and solid governance process to ensure compliance with all set guidelines and rules. This will result in safe end projects and facilities to avoid catastrophic accidents (Asadullah Khan et al. 2019).

Critical major decision-making that could positively enable the project performance and enforce the project organisational structure within the oil and gas industry is establishing a Project Management Office (PMO). Project Management Office is an organisational setup established to take the responsibilities of the substantial portfolio of projects in central mechanism and providing support and improvement of existing functions to deliver their programs according to best project management practices” (PMI 2008, p. 25).

3 Research Methodology

3.1 Data Collection

The methodology to complete this research is first to define the problem statement and specific topic on which to build my research. Second, to start a literature review about this topic to be studied. This required an extensive search process based on the secondary data literature search.

Fig. 5.
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Research Methodology Process

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Several survey engines were used, such as The British University in Dubai (BUiD) effective library database, which contains extensive articles, journals, papers, and e-books relevant to risk subjects in project management and my topic of organisational structure, challenges, barriers, and enablers in oil and gas. In addition, access to the PMI database and articles helped me to have additional sources. The search used keywords such as organisational structure, oil and gas, theory, challenges, barriers, energy, enablers,…etc. focusing on the past ten years before that for some theoretical background. The survey resulted in around 125 publications. The screening stage has around 35 references, as illustrated in Figs. 5 and 6.

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Systematic process for paper development

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3.2 Data Analysis

In order to answer the two research questions indicated in the introduction section, a detailed literature review was conducted on previous works interrelated to organisational structure analysis. Several theories were tested and found relevant to the research topic. However, three theories were selected to base my research on institutional, contingency, and transformation theory. Filtration and citation were then carried out to find the most relevant articles to respond to questions on the relationship between structure and performance in oil and gas, as well as the barriers and enablers facing organisational performance in project management.

4 Discussion and Analysis

In this section and view of the literature review conducted in Sects. 2.1 and 2.2, we will analyze several organisation structures within the local energy sector, reflecting the merits of organisation structure, advantages, disadvantages, and the strength of project management within this organisation structure. As highlighted earlier, using a solid matrix organisation is the most suitable type of structure implemented in the energy business for several reasons. This includes effective distribution of resources, better utilisation of project managers allocating to several projects, flexibility in terms of cross-posting staff among different functions for exchanging experience, clear delegation of authority, smooth flow of information and directives, and efficient project management process. Figure 7 illustrates the organisational structure of a local onshore oil Production Company. Based on the company’s business nature, the organisation structure is divided into a hybrid model of asset-based in terms of different fields/assets (Field 1 – F1, Field 2 – F2…etc.) and supporting function in terms of drilling function Terminal for oil export, Projects & Technical Center function, Asset function, human function, and other functions like HSE, finance, legal and audit. This includes the drilling function, looking after all drilling activities, production function, and terminal for exporting oil. Organisation structure is a matrix with solid and well-established processes and procedures to manage the set objectives. The advantage of this strudel is that the project management function is considered a standalone entity with a vertical hierarchy to top management Chief Officer Executive (CEO). All projects initiated as per the business plan to meet the company objective (vision and mission) are managed with the full power of the Senior Vice President of the Projects function. The second advantage is that this project function also has a technical support arm where all engineering disciplines support project managers in delivering all project stages, such as concept, Front End Engineering Design (FEED), and detailed engineering, as well as during the construction phase. This is considered a small projectized structure embedded within the overall function organisation. The organisation shows that vice president projects are fully responsible for filed 1 (F1) projects and all associated modifications in the field.

Fig. 7.
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Onshore oil production Organisational structure (Local oil company, 2021)

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All concept, FEED, and engineering reviews are carried under the responsibility of the vice president’s technical center. Standardisation, procedures, and technical specifications are the main deliverables the engineering team produces to support projects. Several engineering groups are dedicated to supporting individual projects with the support of external project management consultants (PMC). However, some specialists, such as corrosion, integrity, and stress analysis experts, are shared across all projects due to the scarcity of these experts and the difficulties in securing such resources on a large scale. Also, cost reduction plays a role in optimizing direct technical support and promoting outsourcing in some significant projects where external aids are a more efficient solution.

On the other hand, offshore organisational structures adopt different models similar to asset-based organisations. However, the project management role is embedded to be part of an individual asset. Figure 8 illustrates the organisational structure of an offshore company.

Based on the literature review, this type of structure is a balanced matrix. This consideration is because there is a balanced level of authority between the project focal point and the Asset owner. The Vice president of Projects is still responsible for delivering the assigned projects and tasks.

Fig. 8.
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Offshore oil production Organisational structure (Local oil company, 2021)

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Figure 8 demonstrates that project focal points are scattered in several assets, reporting directly to the senior vice president of an individual asset. One advantage of this setup is that accountability of the whole asset, including operation performance, drilling, project delivery, and completion, remains under the accountability of one person, the SVP. In comparison to the onshore organisational structure, the ultimate responsibility is held by the SVP (Technical Center and Projects). In contrast, other SVPs (Assets) should extend the needed support to deliver this support from an operation and drilling acceleration plan point of view.

Also, the overall offshore company structure is divided into several assets with dedicated concession holders for each asset, who dedicate specific resources and cost allocation to each asset based on the workload portfolio. Moving to other Gulf state countries, some similarity was found in having a solid matrix organisational structure with primary power engineering and project functions.

5 Conclusion and Recommendation

Oil and gas are considered critical industries and require a stabilized and effective organisational structure to meet their ambitious plan for growth and sustainability. Due to the continuous fluctuation in the market condition, political instability, logistics challenges, and commodities limitations, energy firms should establish agile processes to face all these challenges to ensure business continuity. The improvement in project performance and companies’ productivity is highly linked to the success of the established organisation structure, efficient processes, timely decision-making, and motivational culture environment.

It is to be concluded that there is no “best Organisation structure” as this depends on internal and external factors in which the organisation operates. However, in the oil and gas industry, a hybrid solid matrix structure proved to work effectively to meet the industry objectives. On the other hand, additional research could be established to explore additional enablers to improve the performance of the organisation’s capabilities. One of the areas that could be proposed for further research is the sustainability and agility of organisational structure in responding to continuous market variances, digitalisation impact on organisational structure and performance, maximizing virtual management, and adopting green organisational structure / PMO in oil and gas companies.