When OE turned 10 in 1985, we invited the leading figures in the offshore industry to reflect on highlights from the previous decade. Now that we’re older and wiser, we decided to yet again reach out to some familiar faces to not only reflect on the past, but to ponder the challenges yet to come.
Forty years on: what we have learned
By Professor Alex Kemp, University of Aberdeen
First oil production in the UK Continental Shelf (UKCS) dated from 1975, when the Argyll field, operated by Hamilton Brothers, came on stream. Forty years later, the same field was reopened with a new name (Alma) and a new operator (EnQuest). In the interim the field has been decommissioned not once, but twice, and the current licensees believe that Alma can produce for a significant number of years.
This story illustrates the very substantial technological advances which have taken place in the UKCS over the period, and which are gradually increasing the recovery factor. A key example is horizontal drilling, which, when combined with 3D seismic, has greatly increased productivity in the industry.
The year 1975 also saw first oil from the giant Forties field. In this case, the estimated recoverable reserves have been increased many times since then and the cessation of production date continues to be extended. Technological progress, cost reductions and high operational efficiency combine to generate continued substantial output. Both examples illustrate the importance of technological advances and operational efficiency for the health of the industry.
The 40 period has witnessed several dramatic changes to the operating environment, with periods of steeply rising oil prices being followed by equally dramatic price collapses. In many ways the current period of low prices compares with the 1986-87 period. If this parallel is correct the ensuing recovery will be gradual.
Government policies, particularly in the taxation area, have to adapt to the dramatic changes in oil prices, investment and operating costs, and prospectivity. The fully profit-related system which exists now is conceptually more appropriate than that pertaining in 1975. But, as has happened many times over the years, the adaptations have come with delays in their execution.
Boom and bust – lessons learnt
By John Westwood, Chairman of Douglas-Westwood
In January 1985 my Offshore Engineer piece headline read “the boom and bust cycle continues.” The subject was the impact of the ROV on underwater contracting. Today, we are experiencing the impact of another technology disrupter – successful fracking of US shales has within a five-year period unleashed 4.4 MMbo/d onto the world market, leading to a collapse in oil prices. Of course it’s not just about technology but involves another key element – people prepared to think differently and take the associated financial risk.
But to be successful, detailed knowledge of the market for the technology and the client needs is also essential. This was also the case when we started the world’s first commercially successful ROV operator in 1979 and eventually achieved a 16 times gain in cost-effectiveness, and in doing so wiped out the manned submersible business.
Fast forward to the years 2000 to 2013 when oil and gas expenditure grew by 237%, but oil and gas production by only 24%. To compete with the Middle East producers demands we slash costs and one opportunity lies in ‘industrialization’ – giving developers the ability to select from a range of mass produced standard modules to suit their offshore field characteristics.
So what can we say about the future? Oil and gas is today a 155 MMboe/d industry with major long-term prospects – the world needs increasing supplies of oil and gas. Douglas-Westwood estimate that on-and-offshore, some 448,000 new development wells will be needed from 2015-21. Huge opportunities exist for both game-changing innovation and also more corporate consolidation – the supply chain is still far too fragmented to operate at maximum efficiency and ride the industry cycles.
And what of oil prices? The underlying pressures are upwards and furthermore the geopolitical wild cards are always in play – one significant incident in Saudi and US$100 oil will seem cheap!
Offshore Engineer’s 40 years
By Edward Heerema, President, Allseas
During 40 years of Offshore Engineer magazine, since its launch in 1975, we have seen the vast development of the offshore industry with the emergence of huge oil and gas drilling and production platforms and pipelines, and the equipment to make this possible. The pace at which technical developments followed each other has been striking; it would have seemed that such a pace could not be maintained, but it was. In that sense our industry maintained its momentum.
But the industry did change in many ways. The industry has become more formal; responsibilities of individuals have reduced in favor of senior management decision making and presumed financial prudence. Legalistic contract management has made project execution processes more difficult and slower. But in an industry that has outgrown its pioneering stages, this is quite understandable. Also the increased complexity of techniques and projects has made the processes slower and more difficult.
The competitive game, more so than 40 years ago, drives all participants to greater ingenuity in order to increase efficiency.
In many ways, private companies have led the way in development of new technology; this has always been the case, but in the past 40 years has gained wider respect. The typically long-term view of the family business has stimulated ingenuity and dedication.
Safety has become a key driver in operations, so that – despite a few major mishaps – our industry is very safe. Particularly for the man on the job, safety precautions have significantly increased.
Over the last 40 years, Offshore Engineer has always highlighted technical developments in our industry, and this makes every issue worthwhile reading.