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By Paul Charlton, Chairman of NOF Energy and CEO of PDL Solutions (Europe) Ltd

The landscape of the oil & gas industry on the UK Continental Shelf (UKCS) has changed somewhat in the last six to nine months and this has highlighted an overwhelming need for change within the oil & gas sector per se. 

The oil & gas supply chain is very aware of this issue and is aiming to deliver an element of change from within; however, there are factors that can only be influenced by the government and subsequently the operators and the prime contractors.

In recent times, exploration costs and operating costs have increased while production efficiencies have fallen.  Offsetting these three factors against decreasing production volumes and now a falling oil price, due to the softening of demand from the likes of China and an increase in supply from US shale oil, the need for change is inevitable.

These factors also provide some insight into why projects such as Chevron’s Rosebank, BG’s Jackdaw, Statoil’s Bressay and Xcite’s Bentley developments have been put on hold.  These four developments alone amount to an investment of some £10billion – a significant proportion of which would have been spent in the UK supply chain.

The Wood Review sets out what needs to happen to maximise the economic recovery of the remaining 12-24 billion barrels of oil equivalent reserves from the UKCS.   Within the report, Sir Ian Wood highlighted the need for the industry as a whole to make some significant changes and these changes will be driven forward by the new industry regulator, the Oil & Gas Authority.

In short, as an industry, we need to increase exploration well success rates to 35 percent, increase oil recovery rates to 50 percent, increase production efficiency to 80 percent and reduce decommissioning costs.

Another element of change that is needed is a reform of the oil & gas industry’s fiscal regime.  The Chancellor George Osborne will be hoping that the plans he set out in last week’s Autumn Statement will go some way to stimulate investment and production on the UK Continental Shelf (UKCS).

Of course, the industry has its role to play too.  A step change is required in the way the industry works requiring the Operators, the EPIC contractors and the supply chain companies to work together in a different and smarter way.  It will need increased collaboration and the desire to share and to be open to new ideas and new ways of doing things. 

There also needs to be the development and rapid adoption of disruptive technologies which can be deployed on a scale that will have a significant impact on the way the sector operates.

Paul Warwick, CEO of Talisman Sinopec and the Chairman of the newly-formed Technology Leadership Board, summed it up perfectly when, at a recent event, he said that the industry has to reinvent itself now in order to be ready for the next 30 years.

Undeniably, step change is a threat to some, but to others it’s an opportunity.  NOF Energy believes it is an opportunity and it will support the reinvention of the industry by identifying disruptive technologies from within our membership. 

We will then encourage the opening of doors that were once closed to receive these new ideas and then facilitate and promote the adoption and deployment of these new ideas on a regional, national and international basis.

The offshore oil & gas business on the UKCS will change and has to change.  We have to welcome and embrace that change and see it as a means of sustaining our future in the basin for the next 30 years.

PDL CEO Paul Charlton

Posted: 15th Dec 2014

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