Keeping a stiff upper lip

Meg Chesshyre

April 1, 2016

There’s a lot of doom and gloom in the North Sea as operators battle to make operating costs profitable. Yet, it’s not all bad on the UKCS. Meg Chesshyre reports.

The Culzean facilities. Image from KBR.

A measure of optimism about the future of the North Sea, despite the current low for longer oil price scenario, was expressed by speakers from both Maersk and Total at the IP Week in London this spring.

“We’re very optimistic about the North Sea and doing business there,” said Maersk Oil CFO Graham Talbot. “We believe we have a very good understanding of how to operate effectively in the North Sea and we are planning to continue to invest there.” He said that Maersk Oil “has an appetite for long-term resilient countercyclical investment in energy.” It is currently developing the high-pressure, high-temperature (HPHT) Culzean gas condensate field in the UK (OE: December 2015) and is a partner in the major Statoil-operated Johan Sverdrup project in the Norwegian sector.

“We’re building into the design of our Culzean project the means to control our operating costs by developing a truly 21st century smart platform,” he says. “The upfront investment in facilities, such as pre-wiring fiber optic cables linked to a robust and secure Wi-Fi network, allows us to track manpower, materials, equipment in almost real time and thereby optimize production efficiency, and run a safer, more reliable facility.

“Critical equipment on the Culzean platform will have ID tags attached. These tags will scan using handheld devices, such as tablets, and provide the operator with all the information associated with that bit of equipment in real-time. The information will include manufacturing data and certificates, drawings, video simulation and maintenance and operational activities, maintenance history and so on.”

He said that the full potential was still being mapped out, but simply making sure that the right equipment was available at the right time, and ensuring uptime of facilities had a material impact on the cash flow, was going to be absolutely critical in the North Sea going forward. Applying these enhancements to Culzean is currently forecast to result in savings in excess of US$10 million per annum. “The tablet is now joining the wrench and the screwdriver as a standard piece of equipment in North Sea developments of the future.”

Staying efficient

UK Continental Shelf unit operating costs, excluding southern North Sea and Irish Sea, presented by Total.  Source: Energy Institute IP Week presentation. 

Total E&P UK’s Managing Director Elisabeth Proust quoted UK Prime Minister David Cameron as saying, on a recent visit to Total in the UK, that “this industry is the jewel in the crown of the British economy, not was.” Proust continued, saying that Total remains very interested in being here. “We know that there are resources,” she said. “The prospectivity is still there.

“We know that there is need for change. We know that the change is going to be difficult, because we are reducing the number of actors, but it is necessary.” Proust said that there was “a strong need effectively to identify what are the fields, what are the problems of production, asset by asset, where we can be economic.” She pointed out that about 70% of UK Continental Shelf fields are above the $30/bbl barrier in operating costs (see graph). “This is why the landscape is going to be very different and very soon.”

The Total E&P Group launched a cost efficiency project in 2014, with Total E&P UK as the pilot, with a three-year implementation phase from 2015-2017. All aspects of company activity were included in the scope with full workforce engagement. This program delivered 20% savings in opex, capex and exploration costs in 2015, compared with a 2013 baseline, and is targeting a 30% reduction by year’s end. It aims to simplify the organization. The final objective is a cost culture fully embedded in the company and its shareholders.

Total is one of the top three operators in the UK in terms of production and reserves, and recently brought on stream the Laggan-Tormore gas and condensate fields. The Laggan-Tormore development consists of a 140km tie-back of four subsea wells to a new onshore gas plant on Shetland. The fields will produce 90,000 boe/d. The UK subsidiary contributed almost 10% of the Total’s daily production in 2015, and anticipates an expenditure of £6 billion ($8.6 billion) over the next five years.