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 Reporter February 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Barril Appointed COO of SBM Offshore

SBM Offshore is pleased to announce the appointment of Philippe Barril as Chief Operating Officer (COO) effective March 1, 2015.  Philippe's appointment as a

Zamakona, Finnish GS-Hydro Ink Deal

The presentation ceremony of the Finnish multinational leader in water services GS-Hydro, new partner of Zamakona Yards in Canarias was held yesterday (January 29th at 7 p.

Naval EXPO Coming to Washington

For the first time ever, the general public will be admitted free to the Naval Future Force Science and Technology EXPO general exhibit hall Feb. 4-5 where they

Environmental

Congestion is Port of Long Beach’s Toughest Issue

Slangerup’s State of the Port address outlines goals for Energy Island, smarter supply chain   In his first-ever State of the Port address, Port of Long Beach

BOEM Issues Supplemental Environmental Impact Statement

The U.S. Department of the Interior, Bureau of Ocean Energy Management (BOEM), announces the availability of the Draft Supplemental Environmental Impact Statement

European Shipping Week Announces Speakers

Adam Goldstein, President and COO of Royal Caribbean Cruises, Pierfrancesco Vago, Chairman of CLIA Europe and Executive Chairman of MSC Cruises, and Paolo Tonon,

News

5 Rescued from Sinking Vessel off Monterey Coast

Coast Guard rescued five people from a sinking 65-foot sailing vessel approximately 120 miles off the Monterey coast, Saturday. At approximately 8 a.m. Saturday,

CMA CGM Opens Two Offices

CMA CGM Opens a new branch in Constantine, (Algeria) and an agency in Sihanoukville, (Combodia) Following are the addresses in the respective countries: CMA CGM Algérie,

Barril Appointed COO of SBM Offshore

SBM Offshore is pleased to announce the appointment of Philippe Barril as Chief Operating Officer (COO) effective March 1, 2015.  Philippe's appointment as a

People in the News

Barril Appointed COO of SBM Offshore

SBM Offshore is pleased to announce the appointment of Philippe Barril as Chief Operating Officer (COO) effective March 1, 2015.  Philippe's appointment as a

Zamakona, Finnish GS-Hydro Ink Deal

The presentation ceremony of the Finnish multinational leader in water services GS-Hydro, new partner of Zamakona Yards in Canarias was held yesterday (January 29th at 7 p.

Naval EXPO Coming to Washington

For the first time ever, the general public will be admitted free to the Naval Future Force Science and Technology EXPO general exhibit hall Feb. 4-5 where they

Arctic Operations

Shell: UK Should Reduce North Sea Oil Tax

The British government should review a supplementary tax charge on North Sea oil producers as it has made the operation of some fields unrealistic, Shell Chief

Shell Eyes Arctic Drilling this Summer

Oil major Shell wants to revive its Arctic oil drilling programme this year after a near two-year suspension, angering environmentalists who say the risk of an oil spill is too high.

‘Landmark Year’ for RS in 2014

For Russian Maritime Register of Shipping (RS), 2014 marked the 101st year of its activities. The classification society said 2014 also marked a landmark year,

Classification Societies

ClassNK Reports Record 2014

Announcing its registration totals for 2014, ClassNK said 833 new vessels with a combined total of 21,466,272 gt joined its register over the course of the year,

Damen Delivers Custom-Made Offshore Winches to Fugro

Damen Maaskant Shipyards, part of Damen Shipyards Group, has delivered two dedicated offshore winches to Fugro. The Dutch shipyard was responsible for the design,

Liberian Registry Launches Green Ship Initiative

“We have launched a new initiative to help shipowners improve their green credentials and meet other corporate social responsibilities," said Scott Bergeron, CEO

Underwater Engineering

Zamakona, Finnish GS-Hydro Ink Deal

The presentation ceremony of the Finnish multinational leader in water services GS-Hydro, new partner of Zamakona Yards in Canarias was held yesterday (January 29th at 7 p.

South Korea Mulls Maritime Study with North Korea

South Korea would propose a joint research with North Korea to develop marine resources and ocean tourism, reports Korea Herald.  South Korea’s Maritime Affairs

InterMoor Completes Juniper Mooring Installation Contract

InterMoor has completed a mooring and foundation installation campaign for bpTT’s Juniper gas project offshore Trinidad and Tobago, reportedly the largest foundation

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Navigation Offshore Oil Pod Propulsion Port Authority Salvage Ship Repair Winch
rss | archive | history | articles | privacy | terms and conditions | 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: 0.3161 sec (3 req/sec)