LR Focus on 5 Issues Worrying Oil Executives in North Sea

By Joseph R. Fonseca
Sunday, August 24, 2014
Energy Inforgraphic operating expenditure is going up while production forecasts are going down

 

On the 50th anniversary of the issuing of the first licenses for the extraction of oil and gas from the UK continental shelf (UKCS), Lloyd’s Register asked oil executives what their main concerns were in an increasingly challenging period in the sector’s turbulent history.

The consensus was that the industry needs to learn to collaborate if it is to survive these challenges.

Issue 1: Operating expenditure is going up while production forecasts are going down

Production from assets fell by 38 per cent between 2010 and 2013, equating to a drop of around 500 million barrels of oil equivalent (boe) and a drop in tax receipts of approximately £6 billion.

In exploration, just 15 wells were drilled on the UKCS last year, compared to 44 in 2008, while operating expenditure rose to a record level of £8.9 billion, and is expected to increase further to about £9.6 billion this year.

But there are reasons for optimism: while approximately 42 billion boe have been produced from the UKCS to date, it is estimated that a further 24 billion boe could remain.

Issue 2: The contracting model is failing from the cost base perspective

Attendees at an executive briefing noted that the supply chain had received little mention in the Wood Review. Significant sums were being spent on ‘low value-high volume’ work, leading the executives to consider the question: is there a genuine appetite within the industry to look at a transitional approach to costs in terms of fixed price agreements?

One executive commented “We’re not talking about the 2009 solution of going in and saying rates have gone down by 10%. That’s not going to work. We have got to see cleverer business models. That may include more remote location working not just in Manchester … but going much further, to India or China for example, to try and get services from there.”

Issue 3: The industry is not planning for decommissioning

Oil executives in the North Sea recognise that the industry needs to plan more effectively now for end of life assets, or face potentially catastrophic consequences down the line.

“The industry is not planning for decommissioning, we are just hoping (an incident) won’t happen, then when something does we will cope with the crisis and everybody will jump into action. But nobody is willing to take that first step,” the head of one company said.

It has been suggested that decommissioning costs should be included in the design stage to offset their impact.

Issue 4: A new regulator will not change anything

While the Wood Review’s approach to regulation is welcomed, many executives are questioning what we can expect to be different this time around.  “Why should we expect a new nirvana with the Regulator?” asked one operator, while others expressed doubt as to whether the Regulator would be able to push back against future treasury demands.

Issue 5: The industry is facing a knowledge shortage, not a skills shortage

While much has been made about the shortage of skilled people in the oil and gas industry, not enough is made of the importance of knowledge transfer, which requires greater collaboration within the industry. 

“Working on a brownfield site can give you the ability to learn the skills to work on a greenfield site, but you need to have gained that experience beforehand to make that change,” said one director. 

All these issues require collaboration in an industry in which, as one operator said, “competition is bred into you”.

These concerns are just some of the key points raised at an executive briefing we held with executives from across the industry. 

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Allcargo Groups Subsidiaries as ECU Worldwide

ECU Line, Econocaribe and China Consolidators undergoes rebranding to build a Global Brand Connect   India’s integrated logistics solution provider Allcargo Logistics

Damen Opens US Office

Damen Shipyards Group has announced the opening of a new branch office in Houston, Texas. This expansion, under the name of Damen North America, meets the increasing

French PM: Aussie Subs to be built in Australia

French Prime Minister Manuel Valls said on Monday he was committed to building all of a new Australian submarine fleet in Australia, apparently contradicting the

Energy

Transport via Northern European ports more sustainable

On the European continent, the Alps form a natural barrier for international transport. Containers can be transported to Southern Germany, the Czech Republic or

MOL's LNG Carrier KUMUL Delivered

Mitsui O.S.K. Lines, Ltd. (MOL; President & CEO: Junichiro Ikeda) announced the delivery of the LNG carrier KUMUL at Hudong-Zhonghua Shipbuilding (Group) Co.

NAT Acquires Four 150,000dwt Tankers

Nordic American Tankers Limited ("NAT" or the "Company") announced today that it has entered into an agreement to acquire four existing Suezmax sister vessels built in Japan at a world-class shipyard.

News

Cruise Ship Makes Historic Trip from US to Cuba

Cruise ship MV Adonia sailed into Havana this morning, completing the first leg of its historic inaugural voyage to Cuba that began on May 1, 2016, from Miami,

Allcargo Groups Subsidiaries as ECU Worldwide

ECU Line, Econocaribe and China Consolidators undergoes rebranding to build a Global Brand Connect   India’s integrated logistics solution provider Allcargo Logistics

Northwest Seaport Alliance Joins Green Marine

The Northwest Seaport Alliance has signed on to participate in Green Marine, North America’s largest voluntary environmental certification program for the maritime industry.

People in the News

MOL's LNG Carrier KUMUL Delivered

Mitsui O.S.K. Lines, Ltd. (MOL; President & CEO: Junichiro Ikeda) announced the delivery of the LNG carrier KUMUL at Hudong-Zhonghua Shipbuilding (Group) Co.

Highest-Pull Wireline Conveyance System from Schlumberger

Schlumberger announced today the launch of the MaxPull high-pull wireline conveyance system that can pull from 18,000 lbf to 30,000 lbf in wells 40,000 ft [12,192 m] deep or more.

SPE Aberdeen Awards Students Bursaries

The Society of Petroleum Engineers (SPE) Aberdeen Section has announced the recipients of its annual student bursaries programme for 2015-2016.   In total, £7,

Arctic Operations

DNS Appoints Esson, Chief Executive

Decom North Sea (DNS), the representative body for the offshore decommissioning industry, which promotes and facilitates collaboration and cost reduction, today appointed a new chief executive.

Damen, Expedition Voyage Consultants Join Forces

Damen and Expedition Voyage Consultants team up to develop globally capable expedition ship. In response to interest from clients in the fast-growing expedition cruise market,

ECSA Looks Forward to Improvement of Shipping Conditions in Arctic

European shipowners believe that the three priority areas of the new EU Arctic Policy Communication published by the Commission this week address all topical Arctic matters.

Classification Societies

Saga Shipholding’s Optimarin Experience Drives BWT Orders

Ballast water treatment (BWT) specialist Optimarin has signed a contract with Saga Shipholding for the provision of three of its Optimarin Ballast Systems (OBS).

ABS Reflects on Strong 2015 Performance

153rd meeting of the classification society highlights class-centric strategy and vision for the future of class   ABS held its Annual Meeting on April 26, 2016 in New York,

New ClassNK Guidelines for Gas-fueled Ships

Classification society ClassNK has released the fourth version of its Guidelines for Gas Fueled Ships.   With the introduction of increasingly strict environmental regulations,

Underwater Engineering

Highest-Pull Wireline Conveyance System from Schlumberger

Schlumberger announced today the launch of the MaxPull high-pull wireline conveyance system that can pull from 18,000 lbf to 30,000 lbf in wells 40,000 ft [12,192 m] deep or more.

TGS, PGS Team Up on Eastern Canada Seismic

TGS announces the expansion of its multi-client library offshore Eastern Canada with plans to acquire more than 36,000 km of 2D seismic data, in partnership with PGS,

Lerwick Harbor sees Seasonal Boost

The opening of the offshore season in northern waters has seen specialist oil industry vessels return to Lerwick Harbor during April to support subsea development projects.

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1394 sec (7 req/sec)