KNOWLEDGE MANAGEMENT IMPLEMENTATION IN PETRONAS: A CASE

STUDY

BY

NAGUIB CHOWDHURY

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

2006

KNOWLEDGE MANAGEMENT IMPLEMENTATION IN PETRONAS: A CASE

STUDY

BY

NAGUIB CHOWDHURY

A thesis submitted in fulfilment of the requirement for the degree of Master of Management Information

System

Kulliyyah of Information and Communication Technology

International Islamic University Malaysia

May 2006

ABSTRACT Knowledge management is considered as the key to achieving competitiveness in today’s business world. Companies around the world are now trying to figure out the best knowledge management strategies to maximize their potential. This research explores factors affecting the successful implementation of knowledge management in the workplace. A broad literature review was done emphasizing on the case studies in three oil and gas organizations around the world to find out the major implementation challenges of knowledge management. This study finds that the successful implementation of knowledge management is highly dependent on the willingness of employees’ to share their experiences and/or expertise in the system. Both the qualitative and quantitative approaches were taken to conduct this research. Review of the organizational structure, human resource policies and IT infrastructure of PETRONAS, the national oil and gas company of Malaysia, was done through personal observation and reading materials - articles, reports, publications. To better understand how employees in PETRONAS, perceive sharing of their knowledge with others, a survey was conducted; the results were interpreted by means of multiple statistical analysis. The analysis showed that a sharing culture and recognition for sharing knowledge are essential in initiating an effective knowledge management program. Other factors like modern, easy-operative IT infrastructure, a unit to coordinate overall activities, and proper guidelines, should be developed before introducing any knowledge management program in the organization. Majority of the PETRONAS respondents agreed with the above findings. Based on the study, a knowledge management implementation strategy was proposed, for PETRONAS, which included eight major steps: Analyze the current knowledge management state in PETRONAS, Institutionalize knowledge management and align it with business strategy, design business and division based KM initiatives with central coordination, develop Communities of Practice, introduce a KM unit and select a KM champion, design knowledge management system - develop centralized Knowledge Repository & Expert Directory, design and implement reward system for knowledge sharing, Measure, Track and follow up KM activities.

ملخص البحث

تحاول الشركات عبر العالم . المفتاح لتحقيق التنافس في عالم العمل في عصرنا الحالي) المعلوماتية(تعتبر إدارة المعرفة

تقوم هذه الدراسة باستكشاف . استكشاف أفضل الاسترتيجيات في إدارة المعرفة وذلك لغرض العمل بقدرة عالية

باحث بالإستعانة بدراسات سابقة العوامل المؤثرة في التنفيذ الناجح لإدارة المعرفة في مكان وبيئة العمل حيث قام ال

وذلك بالتركيز على دراسة ثلاث حالات لشركات البترول والغاز في العالم لغرض معرفة العوامل والعوائق الرئيسة

أكدت هذه الدراسة على أن نجاح إدارة المعرفة يعتمد بصورة كبيرة . التي تواجه تطبيق إدارة المعرفة في مكان العمل

فقد اعتمدت الدراسة على . في تبادل خبرام ومهارام بخصوص أنظمة إدارة المعرفة والمعلوماتيةعلى رغبة العمال

) بتروناس(طرائق البحث النوعي والكمي، وتم فيها استعراض ومراجعة البناء التنظيمي لشركة الغاز الوطنية الماليزية

اعتمدت الدراسة أيضا على الملاحظة . نية المعلومات فيهاوسياستها في إدارة الموارد البشرية وكذلك البنية التحتية لتق

الشخصية بالإضافة إلى قراءة بعض المواد والمراجع والتقارير والمطبوعات، ولغرض يئة العمال على تبادل الخبرات،

ئج التحليل أثبت نتا. وقام الباحث بإجراء استبيان تم تحليل نتائجه فيما بعد وتفسيرها باستعمال الإحصاء التحليلي

أن ثقافة المشاركة والاعتراف ا هما عاملان أساسيان في تأسيس برنامج ناجع لإدارة المعرفة، وهناك عوامل أخرى

مساعدة في إنجاح إدارة المعرفة مثل التحديث وسهولة إيجاد بنية تحتية لتقنية المعلومات، ووجود وحدة تنسيق أوجه

وكذلك وجود إرشادات مناسبة متعارف عليها قبل تطبيق نظام إدارة المعلوماتية في النشاط الخاصة بإدارة المعلوماتية،

هذا وقد خلصت الدراسة إلى خطة . معظم المستطلعة آراؤهم من شركة بتروناس أيدوا النتائج أعلاه. أي شركة

ية وهي تحليل نظام مقترحة من ثمان خطوات، والتي بواسطتها يمكن لشركة بتروناس أن تطبق نظام إدارة المعلومات

المعلومات الحالي في شركة بتروناس و تأسيس إدارة معلومات مرتبطة مع استرتيجية العمل و القيام بمبادرات في إدارة

المعلوماتية مبنية على عمل بعينه أو قسم بتنسيق مركزي و يئة كوادر كفوءة للعمل و تصميم نظام لإدارة

للمعلوماتية، وكذلك دليل الخبراء و تصميم وتنفيذ نظام مكافآت لتشجيع المعلوماتية و تطوير مستودع مركزي

. المشاركة بالمعلوماتية، وكذلك لقياس ومتابعة نشاطات إدارة المعلوماتية

APPROVAL PAGE

I certify that I have supervise and read this study and that in my opinion it conforms to acceptable standards of scholarly presentations and if fully adequate, in scope and quality, as a thesis for the degree of Master of Management Information System. _________________________________ Mohiuddin Ahmad Supervisor I certify that I have supervise and read this study and that in my opinion it conforms to acceptable standards of scholarly presentations and if fully adequate, in scope and quality, as a thesis for the degree of Master of Management Information System. _________________________________ Nor Shahriza Abdul Karim Examiner This thesis was submitted to the Department of Information System and is accepted as a fulfilment of the requirement for the degree of Master of Management Information System.

_________________________________

Husnayati Hussin

Head, Department of Information System This thesis was submitted to the Kulliyyah of Information and Communication Technology and is accepted as a fulfilment of the requirement for the degree of Master of Management Information System.

_________________________________ Mohd Adam Suhaimi

Dean, Kulliyyah of Information and Communication Technology

DECLARATION

I hereby, declare that this thesis is the result of my own investigation, except where

otherwise stated. I also declare that it has not been previously or concurrently

submitted as a whole for any other degrees

Name : Naguib Chowdhury Signature : …………………………………………. Date : ………………….

INTERNATIONAL ISLAMIC UNIVERSITY

MALAYSIA

DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF UNPUBLISHED

RESEARCH

Copyright © 2006 by Naguib Chowdhury. All rights reserved.

KNOWLEDGE MANAGEMENT IMPLEMENTATION IN PETRONAS: A CASE STUDY

No part of this unpublished research may be reproduced, stored in a retrieval system, or transmitted, in any form or of by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the copyright holder except as provided below.

1. Any material contained in or described from this unpublished research may only be used by others in their writing with due acknowledgement.

2. IIUM or its library will have the right to make and transmit copies (print or

electronic) for institutional and academic purposes.

3. The IIUM library will have the right to make, store in a retrieval system and supply copies of this unpublished research if requested by other universities and research libraries.

Affirmed by Naguib Chowdhury

……………………………… ………………… Signature Date

DEDICATION To my beloved parents whose continuous prayer, support and encouragement have

been the primary inspiration source of my life and this research.

ACKNOWLEDGEMENTS Praise be to Allah, the Almighty, who has given me the strength, courage and knowledge to carry out this research. I would like to express my sincere appreciation to my supervisor, Dr. Mohiuddin Ahmed for his full support, guidance and time for this research. I would also like to show my gratitude to Dr. Mohamad Fauzan Hj. Noordin for this valuable feedback in this research. Appreciation should also be extended to Dr. Rafikul Islam (IIUM), Dr. Shamsul Haque (IIUM), Mr. Abd. Rahman Ishak (PETRONAS) and Mr. Mohamad Rashdan B. M. Radzi (PETRONAS) for their sincere advice and encouragement.

May Allah bless you all.

Ameen.

TABLE OF CONTENTS

Abstract (English) ………………………………………………………..….……. ii Abstract (Arabic) ……………………………………………………...……..…….. iii Approval Page ……………………………………………………..………..……... iv Declaration ………………………………………………………….......………… vi Dedication ……………………………………………………………….………… vii Acknowledgements …………………………………………………….………….. viii List of Tables …………………………………………………………….………… ix List of Figures ……………………………………………………………..……….. xi List of Charts ………………………………………………………….….……….. xii CHAPTER ONE : INTRODUCTION ……………….………………………… 1

1.1 Background……………………………….………………...................... 1 1.2 Statement of Problem………………………..…………………………. 3 1.3 Research Questions ……………………………..…………..………….. 7 1.4 Research Objectives………………………………………….…….…… 7 1.5 Research Methodology………………………….……………….….….. 9 1.6 Plan and Scope of the Research…………………….…………..…….... 10 1.7 Organization of the Research …………………………….…………..… 11 1.8 Limitations of the Research……………………………….….………… 12 1.9 Definition of Terms…………………………………….……......……... 13

CHAPTER TWO : LITERATURE REVIEW…………………….……………. 16

2.0 Introduction ……………………………………………..……...……... 16 2.1 What is Knowledge? ………………………………………..….…….. 16 2.2 What is Knowledge Management? …………………………….……… 19 2.3 Knowledge Management: Critical Success Factors …………………… 23

2.3.1 4-pillar of knowledge management by Stankosky ……………….. 24 2.3.2 Hasnali’s five success factors…………………….…………….. 26 2.3.3 KM critical success factors by Hsieh & Chen…………………… 27

2.3.4 Bixler’s suggested success factors ………………………..….….. 28 2.3.5 Preferred Critical Success Factors for this research……………… 31

2.4 Knowledge Management: General Strategies…………………..…….... 31 2.4.1 Codification & Personalization Strategy ……………………..…. 32 2.4.2 KM Strategies & Organization’s Nature by Jansen …………..… 33 2.4.3 KM Strategies: Strategies for Knowledge Sharing………………. 35

2.4.3.1 Knowledge sharing strategies by McDermott and O’Dell..... 37 2.4.3.2 Knowledge sharing strategies by Soliman & Spooner …….. 40

2.5 Knowledge Management in the Oil & Gas Industry …………………... 42 2.5.1 KM Implementation in Shell, BP & Chevron considering 4

Critical Success Factors ……………………………. …………... 46

2.5.1.1 Background of KM in the companies……………………..

46

2.5.1.2 KM implementation: Leadership…………………………... 48 2.5.1.3 KM implementation: Organization………………………… 50 2.5.1.4 KM implementation: Organizational Learning …………….

52

2.5.1.5 KM implementation: Technology …………………………. 58 2.5.1.6 Synopsis of KM implementation in the companies………. 62

2.6 Summary …………………………………………….……...……….. 63 CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY …….... 65

3.0 Introduction ………………………………………………………….. 65 3.1 The Research Model ………………………………………………… 65 3.2 Research Approach …………………………………………….…..... 69

3.2.1 Chosen Research Approach …………….………………….……... 71 3.2.2 Chosen Data Collection Method………………………………….. 73 3.2.3 Sampling Procedure…………………..………………………..…. 75

3.3 Questionnaire Development …………………………...….………… 77 3.3.1 Preparation of the Questionnaire…………………………….……. 77 3.3.2 Questionnaire Administration…………………………….…….…. 79

3.4 Data Collection ……………………………………………..…….…... 81 3.5 Data Analysis ………………………………………………..…….…. 82 3.6 Summary ……………………………………………………...……..... 82

CHAPTER FOUR: FACT FINDINGS & CASE STUDY: PETRONAS (PETROLIAM NASIONAL BERHAD) ……………….…

84

4.0 Introduction ……………………………………………..………..…...... 84 4.1 Corporate History ………………………………….……….….…....…. 84 4.2 Business Activities of PETRONAS …………………….……………... 85 4.3 Business Culture and Operations ………………….……….….….…... 86

4.3.1 Vision, Mission and Shared Values ………………………......… 86 4.3.2 Organizational Structure of PETRONAS Group …………….….. 87

4.4 Financial Results of PETRONAS …………………….…………….…. 88 4.5 Training & Development in PETRONAS ………………………..….... 89 4.6 Value Based Management (VBM) at PETRONAS …………..…..…… 91 4.7 Performance Evaluation System in PETRONAS ………………….….. 91 4.8 Current State of Knowledge Management in PETRONAS …………. 94

4.8.1 Corporate Intranet …………………………………………..…… 95 4.8.2 PEXIS: PETRONAS Expertise Information System …………….. 96 4.8.3 Groupware: NADII ……………………………..….…………….. 100 4.8.4 PETRONAS E-Cast …………………………..…………………. 102 4.8.5 Workshop on Knowledge Management …………………………. 103 4.8.6 Usage of Intranet Knowledge sharing: Personal Observation…..... 103

4.9 Case Studies: KM in PETRONAS Subsidiaries ………………….……. 104 4.9.1 Knowledge Management at ASEAN Bintulu Fertilizer ………..... 104

4.9.1.1 ABF’s Knowledge Management Journey ………………….. 107 4.9.2 Knowledge Management at PETRONAS Carigali ……………..... 110

4.9.2.1 Life of Field Management (LOF) ……………….………..... 112 4.9.2.2 Knowledge Management Master Plan for Carigali ……….... 113

4.10 Overview of Knowledge Management in PETRONAS ………..……. 114 4.11 Comparative Analysis: KM Implementation in 4 Oil Companies ….… 116

CHAPTER FIVE: DATA ANALYSIS AND DESIGN ………………............... 118

5.0 Introduction …………………………………………………………….. 118 5.1 Demographic Characteristics of Respondents …………………………. 118

5.1.1 Response Rate …………………………………………...…….…. 118 5.2 Knowledge Management Implementation Factor: Perception of

PETRONAS employees ………………….. ……………………..... 121

5.2.1 Understanding and Awareness of KM……………………...….. .. 122 5.2.1.1 Statistical Analysis: KM: Understanding ……………….…. 122

5.2.2 Knowledge Sharing Attitudes of the Respondents ………………. 125 5.2.3 Perception on Knowledge Sharing: Part Two …………….……… 128

5.2.3.1 Rewards for Knowledge Sharing ………………….….…… 128 5.2.3.2 How often people would like to share? ………………….... 130 5.2.3.3 Community of Practice (CoP) in PETRONAS ……….…... 131 5.2.3.4 Knowledge Sharing Initiatives in Dept./Unit Basis ……..… 132

5.2.4 Respondents’ Perception on KM & Organizational Issues ……..... 133 5.2.4.1 KM Initiator ……………………………………………….. 134 5.2.4.2 Perception on KM Policy & Guidelines……..………...…… 135 5.2.4.3 Perception on various organizational attributes .…….….…. 136

5.2.5 Perception on PETRONAS’ IT Infrastructure …………..……….. 139 5.3 Synopsis of the perception of the respondents on KM ……………..….. 139 5.4 Implications of the survey results ……………………………………... 141

5.5 KM Implementation in PETRONAS: Impediments & Supporting Factors …………………………………………………………………

141

CHAPTER SIX: RECOMMENDATIONS AND CONCLUSION ….……..….. 144

6.0 Introduction ……………………………………………………………. 144 6.1 Answers of Research questions …………………………..………….… 144 6.2 Proposed PETRONAS’ KM Strategy ………………………….….…… 146 6.2 Implications of the research ……………………………………….…… 156 6.3 Conclusion and Recommendations For Further Study…………………. 159

BIBLIOGRAPHY …………………………………………………….……….….. 161

APPENDIX A ………………………………………………………….….………. 167

APPENDIX B …………………………………………………………..…………. 173

LIST OF TABLES

Table No. Page No. 3.1 Type of research components used in this research 75

3.2 Components of data collection

82

4.1 Summary of the current state of KM in PETRONAS

115

4.2 Comparative Analysis of the KM implementation based on 4 success factors

116-117

5.1 Respondents’ Profile: Position & Gender 119

5.2 Respondents’ Profile: Age group 120

5.3 Respondents’ Tenure with PETRONAS 121

5.4 Knowledge Management: Understanding & Awareness 122

5.5 Understanding of KM vs. Awareness of KM 123

5.6 Respondents’ Department vs. Awareness of KM 124

5.7 Respondents’ Age vs. Awareness of KM 124

5.8 Knowledge sharing attitudes of the respondents 126

5.9 Respondents Comments on knowledge sharing 128

5.10 Implementation Consideration: Rewards for sharing 128

5.11 Comments: Rewards for sharing 129

5.12 Implementation Consideration: Lessons Learnt 130

5.13 Comments: Frequency to share 130

5.14 Community of Practices in PETRONAS 131

5.15 Knowledge sharing initiatives in Dept./Unit basis 132

5.16 Knowledge sharing channels on department basis 133

5.17 Knowledge Management initiator 134

5.18 Comments on KM initiator 135 Table No. Page No.

5.19 KM Policy & Guidelines 135

5.20 Comments on KM Policy & Guidelines 136

5.21 Perception on Organizational Perspective of KM in PETRONAS

136

5.22 Chi-square test: KM awareness vs. Culture 138

5.23 Comments on Organizational Perspective of KM in PETRONAS

138

5.24 PETRONAS IT Facilities 139

5.25 Survey findings 140

5.26 KM implementation in PETRONAS: Impediments 142

5.27 KM implementation in PETRONAS: Supporting factors 143

LIST OF FIGURES Figure No. Page No. 2.1 Knowledge conversion process 17

2.2 Knowledge management process-1 19

2.3 Knowledge management process-2 21

2.4 Knowledge Management Pillars 25

3.1 KM Implementation factors 66

3.2 Research Process 73

3.3 Sampling procedure 75

3.4 Questionnaire Screenshot 78

4.1 PETRONAS – An Integrated Company 86

4.2 PETRONAS’ Organizational Structure 87

4.3 PETRONAS manpower growth: 1975-2002 88

4.4 PETRONAS financial performance: 1991-2002 89

4.5 PETRONAS’ Four-Perspectives Balanced Scorecard 93

4.6 How PEXIS works: Graphical presentation 98

4.7 PEXIS : Flow Diagram 98

4.8 PEXIS : Process Flow ( For PETRONAS Staff) 99

4.9 PEXIS : Process Flow ( For External) 99

4.10 KM Projects in Carigali 112

4.11 Life of Field Management 112

4.12 Screenshots of Carigali Database 114

6.1 Proposed KM implementation strategy for PETRONAS 147

6.2 Proposed KM unit in PETRONAS 152

LIST OF CHARTS Chart No. Page No. 5.1 Respondents’ position 118

5.2 Respondents’ gender 118

5.3 Respondent’s Age group 119

5.4 Respondents’ Tenure 120

CHAPTER ONE INTRODUCTION

1.3 BACKGROUND

In the era of knowledge economy, economic power and competitive advantages of any modern organization lie in its intellectual capabilities instead of its fixed assets. Well-managed companies are trying to get the most out of their people. Value of most products and services depends on “knowledge-based intangibles” such as technical know-how, product design, marketing presentation, understanding customers, personal creativity and innovation (Quinn, 1992).

In this very competitive business environment, only the knowledge of an organization can provide the basis for organizational renewal and sustainable competitive advantages. Knowledge is productive only if it is applied to make a difference (rather than simply exists) and suggests that it is this productivity that is going to be the deterministic factor in the competitive position of any company, or industry (Ducker, 1999). The institutional knowledge of an organization may include the databases, documents, policies, procedures, previously un-captured expertise and experiences of individual workers (Gartner Group, 1996). Leveraging the knowledge, an organization can achieve a multitude of business benefits, including faster innovation of new products, reduced duplication of efforts, savings in research and developments costs, transfer of best practices, increased employees capabilities, leveraged business assets, improved customer and market information and enhanced employee satisfaction (Ducker, 1999).

Most of the knowledge exists in the people, processes, products and structure of the organizations. According to Davis and Olson (1985), an information system at its ideal performance requires input, transformation and output processes, requires high user involvement and comprises four levels of knowledge hierarchy, i.e. data, information, knowledge and wisdom. Data are defined as strings of symbols or language and are meaningless. It is simply the facts and figures. Information is constituted through an understanding of the relations between classes of data.

According to Bierly (et.al, 2000), Information is the data that have been processed through adding, subtracting etc. into a meaningful form. Information is transferable and can be communicated in some manner. Knowledge is the next natural progression after information. To have knowledge, information is required in conjunction with patterns between data, information and other knowledge, together with understanding and cognition.

Organizational knowledge can be classified into two categories: Explicit and Tacit knowledge. Explicit knowledge is the fact and can be codified and transmitted in a systematic and formal language. Explicit knowledge is usually data, which is internal to an organization and can be easily collected. Tacit knowledge is the personal experiences, context-specific knowledge that is difficult to formalize, record or articulate. It is actually resides in the heads of the people, behavior and perception (Frid, 2000). Examples of tacit knowledge are intuitions, hunches, insights, beliefs and values (Gore & Gore, 1996).

A knowledge map, which describes how to find, what to find and where to find useful knowledge, both tacit and explicit is needed for an organization to achieve greater performance (Sanchez et. al. 1996). According to Stewart (1997), Knowledge or “intellectual capital” is found in three forms, namely: Human capital, Structural capital and Customer capital. The knowledge map (refer to section 1.9) needs to cover all three areas for both tacit and explicit knowledge.

Joining tacit with explicit knowledge could be a very complex task and in some circumstances may not be possible. In other words, reconciling what is in employees’ minds with what is stored in databases requires extensive research and needs a high level knowledge-based technology (Soliman and Spooner, 2000).

The central theme of knowledge management actually is to leverage and reuse the organizational knowledge resources that exist in the organization. Knowledge management can be defined as “the process of capturing and sharing a community’s collective expertise to fulfill its mission” (Burk, 1999).

Bringing people together (physically or virtually) under one platform is the best means of knowledge sharing (Nonaka, 1998). Sharing information actually comes quite naturally to people in their work. One of the keys to successful knowledge management is to understand the existing relationships and mechanisms of sharing and then develop ways to empower people to scale up what they are already trying to do (Gilbert, 2002).

Implementing a KM system can be complex and dynamic, no matter how well planned and developed as it involves people and other organizational factors (Bixler, 2002).

1.2 STATEMENT OF PROBLEM

Knowledge management (KM) does not only act as a catalyst for innovation and creativity but also provides the means by which 'innovative ideas' can be captured, shared and leveraged, leading to more new ideas (Pederson, 2003). To get the right benefit from a KM system, organizations should embed knowledge management in everyday business processes. They should build a KM strategy, define and communicate knowledge performance, identify key knowledge positions, develop knowledge sharing proficiencies, encourage networking and respect communities, capture best practices, ensure content management and so on (Pederson, 2003).

Knowledge management, then, is the practice of managing an organization's knowledge work and its knowledge base through leadership in an entirely new environment. To successfully mine knowledge, an open environment is necessary to encourage knowledge sharing and the collaborative pursuit of knowledge (Ash, 2000).

Knowledge sharing is not merely a neutral exchange of information- it affects working relationships, distribution of power, patterns of influence and alters how individual define their responsibilities (Willett, 2002). A KM initiative needs motivational and change management in an organization. Therefore when launching a KM initiative, it is critical to identify what is needed to achieve successful outcomes. The organization may need to change employees’ behavior, increase employees’ motivation, redirect attention or build social cohesion and allegiance. In other instances the organization needs to foster a sense of engagement and commitment or influence employees’ attitudes and feelings. One way to foster acceptance of KM initiatives is to examine the rewards and recognition structure to ensure that knowledge-sharing principles and behaviors are aligned (APQC, 2002).

No universal framework or strategy has been developed for effective implementation of knowledge management program in organizations. KM strategies depend on the type of businesses a company is involved with. The successful implementation of knowledge management depends on several factors, which include efficient management of people as well as IT infrastructure.

In a recently organized workshop held at George Washington University, participants concluded that the knowledge management framework needs to be contextually driven, but the basic content structure can work for all types of organizations like government, commercial, non-government organizations and academia (Stankosky, 2004).

Jansen & Jager (2000) says, Organizations in the market can be classified based on their degree of complexity and variability. Knowledge management strategies for the different types of organization also differ.

Maier & Remus (2001) classified KM strategies into several dimensions. They suggested knowledge management strategies could be distinguished according to the type of knowledge, target group, KM systems, Cultural environment, type of knowledge process and processes of the organization.

Oil and Gas companies deal with lots of complex tasks, which deem the necessity of knowledge management system in the company. “The oil and gas industry spends over $150 billion a year drilling and maintaining oil wells. With such large numbers, savings of a few percentage points will make a huge impact on the bottom line. Naturally the biggest savings are to be made in the areas where there is the biggest spend. In the case of oil and gas, this is in the area of 'complex services' ” (McCracken, 2001).

Stephen Birrell, marketing director of Vardus, a KM consultancy focusing on oil and gas said "The way the industry can drive down cost is by attacking the areas of huge cost which are facilities and drilling. And if everyone follows best practice and shares their learning, you won't have people making the same mistakes twice. And that ultimately saves money" (McCracken, 2001).

Tim Burnett, head of energy, Oracle UK consulting services, also said "Knowledge is so important and so valuable in oil and gas 'upstream' (the stages involved between exploration and eventual delivery to the refinery) that as long as what is viewed as an overhead is in fact just the expense of making sure that the corporate knowledge has most value then it pales into complete insignificance compared to the value of that knowledge" (McCracken, 2001).

Michael Yeaman, senior manager, resources, Accenture said, "One of the great challenges of today's professionals is how to take more and more data and turn them into really valuable knowledge for the firm. Most companies are quite concerned that they either are not utilizing all the knowledge that exists within their organization or that within the next 5-10 years, they will lose a great deal of it as their key people retire" (Poruban & Clark, 2001).

What type of KM strategy an Oil & Gas company should adopt or how to motivate employees in such an organization to share their knowledge and expertise is still a fundamental question.

This research firstly deals with the concept of knowledge management, KM strategies and the critical success factors, which includes leadership, organization, technology and organizational learning for knowledge management implementation. The research reviews the previous studies done by researchers and organizations on knowledge sharing strategies in various organizations including some Oil & Gas companies. Study was done on the diverse aspects of knowledge management in Malaysian National Oil & Gas Company named PETRONAS. Survey was done to understand the employees’ perception towards knowledge sharing. At the end, a knowledge management strategy has been suggested for PETRONAS.

1.3 RESEARCH QUESTIONS

Knowledge management requires the participation of employees from all levels. Sharing the experiences is a must to create and apply knowledge in business operations. This research examines the critical success factors for a KM system within an organization which includes organizational culture, performance measurement, IT infrastructure, support of top management, and overall the willingness of people to share knowledge.

Followings are the research questions of this study, which has been conducted in PETRONAS:

• What is the current state of KM in PETRONAS and is the overall environment of PETRONAS favorable for

effective KM implementation?

• What is the perception of employees’ on knowledge sharing and management to initiate effective KM

implementation in PETRONAS?

• What kind of strategies should PETRONAS develop to be a knowledge based company?

1.4 RESEARCH OBJECTIVES

The main purpose of this research is to explore the strategies for implementing knowledge management into the business functions of an Oil & Gas organization like PETRONAS. In order to have a successful knowledge management system, there is a need to understand and suggest an effective organizational environment that would help organization to create/store/access/apply and re-create knowledge.

Knowledge management is a very complex mechanism to define as it contains multiple variables. Davenport and Prusak (1998) noted that knowledge management requires a total organizational transformation including organizational culture, structure and management style.