Speaking at an industry exhibition in Aberdeen the day after the UK Oil and Gas association confirmed that the industry has shed 65,000 jobs since the start of the crude price slump, David Lamont said the North Sea has many years of profitable life ahead – if the sector urgently adopts more collaborative and efficient business practices. He said:
“Too many people in this town are still holding their breath for a return to the “good old days of $100 oil” which simply won’t happen. And even if it does, the practices of the recent past are too wasteful to continue with in any case.”
“We must embrace and rekindle the pioneering spirit that made the North Sea great in the past to ensure the North Sea industry doesn’t fade out prematurely, but really flourishes in its latter years.
“Despite talk in recent years of the urgent need to act and collaborate, even before the oil price crash, the industry as a whole still has a long way to go. Everyone knows what needs to be done but the inertia in the industry is of great concern.
“The time is now to put a stop to this and make dynamic changes to the way we act and behave. Changing our approach to how we think and do business will see the industry thrive, rather than simply survive.”
The Proserv chief said the industry must challenge the conventional by looking beyond standard practices of simply challenging the supply chain to trim costs. Any material change will only come by changing the fundamentals in the way we work together.
“As a start, we must stop over-engineering if we are to reset the cost base. Realising the value of the huge number of marginal fields in the UKCS will only be possible if we as an industry collaborate and cooperate to make the most of the existing infrastructure, enhanced only by the most appropriate and efficient technology and engineering know how.
“Applying the same old engineering practice and business model is simply not an option.”
Lamont cited renowned American industrialist, Henry Ford who said: ‘Coming together is a beginning; keeping together is progress; working together is success’.
“While we are seeing real efforts and actions to collaborate, it is still the exception rather than the rule.”
Proserv, which operates worldwide through 29 operating centres based in 11 countries, has a 40-year track record in delivering solutions for the global energy industry, particularly in the drilling, production and subsea market sectors.
Lamont also challenged the industry to change its ‘remove the old and replace with the new’ culture to a ‘brain surgery’ mindset that has underpinned Proserv’s successful growth and track record for doing more with less.
“The challenges and opportunities that the industry faces with brownfield subsea developments are varied but all too often, the industry’s initial response to them is not. The typical reaction to a problem is to undertake a complete system change when sometimes a more flexible and simpler approach may be appropriate, especially in a low commodity price environment.
“After all, you wouldn’t replace your whole car engine just because the windscreen wiper isn’t working.
“For example, “ he added, “we work with our customers to maximise the use of their existing infrastructure and assets by delivering appropriate products and services specifically developed for brownfield application – driving costs down , while providing industry leading reliability and enhanced functionality.
“Often, that may mean focusing on only one aspect of a system that requires attention and layering on, or working alongside the existing system, rather than recommending a complete change out. This minimises any production downtime and maximises the use of existing infrastructure.
“For example, when the electronics in the subsea control module require replacement, either because of reliability issues or changes required elsewhere in the system, we apply subsea system ‘brain surgery’.
Lamont concluded by saying that the industry has both a moral and an economic obligation to work collectively towards maximising total production from difficult reserves.
Oil industry collaborates to pilot new drill string camera with jet blasting function which could slash rig time by 50% – http://goo.gl/zoDI4i
North Sea energy sector forecasts cost-savings of £2bn by end of 2016 – http://goo.gl/IhkggU
ANALYSIS: Can UK oil and gas regulator save N. Sea ‘Jurassic Park’ industry from extinction in $60-barrel climate? – http://goo.gl/Zmm1ZR
“With more than 80% of world energy use still reliant on fossil fuels, the maintenance and optimisation of ageing brownfield subsea fields is critical,” he said.
“On mature brownfield assets with dwindling production, the longer it takes to make the right and cost effective decision to maximise output, the more expensive that decision becomes.
“By not changing its operating model, the industry will risk the future of that asset. A subsea asset which is losing production revenue, against a backdrop of increased operating costs, is only going to become less viable to the point of shut-down and decommissioning – denying the world recovery of a limited and valuable resource.
“No matter what the commodity price is now or in the future, we have it within our power as an industry to control costs, improve efficiencies and prosper. We owe it to ourselves and to the next generation.”
But Deirdre Michie, Chief Executive, Oil and Gas UK – also speaking in Aberdeen – said that the market is already adapting, with companies like Halliburton and Baker Hughes, Shell and BG Group, and Schlumberger and Cameron combining.
She added: “And infrastructure, critical to the sustainable future of this industry, is being acquired by firms focused on providing that service – Antin Infrastructure Partners’ acquisition of the Central Area Transmission System, Total’s disposal of its interest in the Frigg pipeline and North Sea Midstream’s acquisition of the Shetland Island Regional Gas Export System.
“A new business model is emerging in the UKCS, one that is shaping up to tackle the unique challenges a mature basin like ours faces in a cost competitive environment.
“But above and beyond these activities, transformational change is also beginning to emerge – in the shape of evolving business processes, and a push for different culture and behaviours.
“And this dynamic is being strengthened by pan-industry efforts determined to take this industry forward.