North sea industry is famous for its optimism

On the opening day of Subsea Expo, Editor's Eye interviewed Karl Jeffery of the Digital Energy Journal. Jeffery acknowledged the challenge posed by the oil price but said that the north sea industry is famous for its optimism and people are ready to figure out solutions. He also commented that the subsea community has today called for more proactive work around risk taking to ensure the industry is always looking ahead.

 

Also at Subsea Expo, Editor's Eye attended the plenary session to hear what the key speakers had to say about the state of the industry...

The boss of one of the North Sea’s leading producers told the oil and gas industry “Don’t waste a good crisis”.

Neil McCulloch, North Sea president of EnQuest, said he believed that “crisis creates opportunity” before reiterating long-standing calls for greater collaboration, more emphasis on reducing costs and fundamental changes to UK tax were essential if the industry was to move forward in a meaningful way in the longer term.

He said: “We should see this as an opportunity to redefine how we work individually and collectively.

He was speaking at the plenary session of this year’s major gathering of subsea specialists. Over 6,000 delegates are expected to attend the three-day event showcasing the latest subsea technology which is being held as the industry is reeling from the effects of a crashing oil price, budget cuts and job losses in the North Sea.

Neil Gordon, chief executive of Subsea UK, the industry trade body, which runs the three-day event, said the UK retained the single largest concentration of subsea capability anywhere in the world and that there was no need for panic in a cyclical industry that regularly experiences peaks and troughs.

“We need to maximise recovery and we must be in a position to capitalise on that and not be tempted into retrenching mode,” he added.

Whilst there was an acknowledgement from speakers that there would be pain the short term as the industry recalibrated to a $50 per barrel world, there was also cause for hope, optimism and new opportunities for businesses willing to adapt to a new way of doing things.

All speakers cited the Wood Report – published 12 months ago – as providing the road map to sustainability and maximising the recovery of the 15 billion-plus barrels of oil estimated to remain in the North Sea.

Mr McCulloch said the industry had to show evidence that everyone stood behind Wood’s recommendations adding there was a vital need for collaboration/ interdependence and a need for wholesale tax reform.

And he warned the Chancellor George Osborne that failure to act in the forthcoming Budget would be a “calamitous error”.

Apache North Sea’s projects group manager Mark Richardson said the supply chain had to shift its focus from “gold plating” equipment and projects that led to costs spiralling out of control. He also urged operators to be less risk averse, take responsibility and allow projects to be delivered quicker and cheaper than they currently are.

He said: “This low cost environment will last for some time. It replicates the problems we saw in 1986 and stems from over-supply. We may see [the oil price] creep up to $70 per barrel, but we are not likely to hit $100 for some time.”

He said there was a wealth of talent working in the industry but added “we’re definitely overmanned and overpaid”.

Phil Simons, vice president UK and Canada for Subsea 7, said the industry must adopt an attitude of collaboration, innovation and simplification to halt the unsustainable rise in costs and delays to projects.

“Challenge fosters innovation,” said Mr Simons, adding that didn’t necessarily mean designing new technology from scratch, but of adapting proven technologies to the needs of the end user. He added that businesses reluctant to change were not facing up to reality.

David Lamont, CEO of Proserv, said: “It is most important that we do not stop training and recruiting in this cycle”. He said the industry was experiencing the “oil price blues” and engineering houses had to “design to cost” and reduce duplication in engineering and focus on a greater drive for standardisation.

Mr McCulloch said EnQuest, which owns the Heather and Thistle platforms, two of the oldest operating rigs in the North Sea, were performing extremely efficiently and that the company anticipated both would be operating beyond 2030.

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