UK Takes Bold Step Forward to Improve Efficiency in its Oil and Gas Industry

Oil & Gas UK – Progress is being achieved through co-ordinated initiatives to improve cost efficiency and regenerate the UK Continental Shelf (UKCS), the 450 strong audience at Oil & Gas UK’s breakfast briefing heard this morning. Attendees at the event, sponsored by Petrotechnics, learnt why change is so urgently needed and gained insight into the steps that have already been taken on the themes of people, efficiency improvement, logistics collaboration, simplification and standardisation and late life asset management.

While the industry is tackling challenges on a number of fronts including rising costs, low oil prices and a plateau in production, there is little doubt that significant reserves of up to 23 billion barrels of oil and gas equivalent remain to be extracted from the UKCS.

Oonagh Werngren, Oil & Gas UK’s operations director, who chaired the briefing, said: “Tax reforms announced in the Government’s 2015 Budget and the establishment of the new regulator, the Oil and Gas Authority, have laid the foundations for the regeneration of the North Sea and the industry is now building on this by delivering the cost and efficiency improvements required to secure its long term future.

“Although tough decisions on resources and projects are having to be taken by individual companies, there is also now a concerted effort to work together to tackle the fundamental behaviours that have driven cost escalation on the UKCS. The goal is to achieve a more internationally competitive oil and gas province and attract the fresh investment needed to unlock the North Sea’s remaining potential. Achieving this will require a 40 per cent reduction in the industry’s cost base.”

Progress has been achieved in the following areas:

  • The consultancy, Mercer, has been commissioned to carry out a survey of daily rates paid to independent contractors, enabling companies to benchmark their rates against the market using up to date information. First results will be available to participants in July.
  • While production efficiency has increased by 5 per cent since 2013, further gains can be made by sharing examples of good practice. In this vein, best practice in delivering planned shutdowns is being collated by an Oil & Gas UK workgroup for publication this Summer.
  • Oil & Gas UK has established a database of spare parts held in inventories across the sector which will allow replacement equipment to be sourced quickly and efficiently with the aim of reducing production downtime. Nine oil and gas operators have already logged their inventories of spare parts and examples of success are emerging – a pump exchange between two operators enabled the continuation of well production for 18 weeks allowing the operator to avoid a 13-week lead time for delivery of the replacement pump.
  • Step Change in Safety is carrying out a mapping exercise of control of work and training processes to identify priority areas where standardisation will achieve improvements in efficiency. The findings will also guide Step Change in Safety in addressing duplication of standards relating to safety critical roles and tasks in its four traditional work streams (Helicopter Safety Steering Group, Human Factors & Competence, Asset Integrity and Workforce Engagement).
  • Arup has been appointed by Oil & Gas UK and Decom North Sea to identify the barriers that currently prevent the industry from implementing new technology in managing late life assets through consultation with operator and supply chain communities. Guidance on the best available practices for identifying, qualifying and adopting new technologies will be published in early Autumn.

Ms Werngren concluded: “Our vision for 2020 is an industry actively exploring and maximising recovery of the UK’s oil and gas, a supply chain providing a strong engine for growth with lifting costs less than $20 per barrel. The sector now has to deliver the bold action and behavioural change needed to make the vision a reality. Everyone has a part to play.”

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