Deal­ing with ‘new norm’ is way for­ward

North Sea: Time to adapt to oil price

The Press and Journal (North-East) - - Business - BY NEIL GOR­DON OF SUB­SEA UK G

When look­ing at oil price trends over the years since the 1920s, it be­comes ap­par­ent that apart from the cycli­cal spikes ev­ery few years, $100 plus was never go­ing to be the norm.

How­ever, we be­came com­pla­cent in that un­prece­dented pe­riod of sus­tained, high oil price and the thought of liv­ing in $50-$55 oil seemed un­think­able in 2014.

Well, two years on and we’ve got to get used to it. This is the new norm and the re­cov­ery is much more about how we deal with the cur­rent price, rather than wait­ing for oil prices to “re­cover”.

While I am in no doubt there will be tough times ahead in the short term, I do be­lieve the sub­sea in­dus­try in this coun­try is in a strong po­si­tion to em­brace the new norm and, in­deed, can cap­i­talise upon it.

So what does this new norm look like? Fewer big, deep­wa­ter projects will be sanc­tioned and the trend will move to­wards more cost-ef­fec­tive sub­sea tiebacks in the short-term.

“Longer-term prize lies in in­ter­na­tional wa­ters”

At the same time, it’s all about get­ting more for less. Squeez­ing more out of our ma­ture as­sets and mak­ing much bet­ter de­ci­sions about projects will be key. And guess what the UK sub­sea in­dus­try does best? Yes, sub­sea tie-backs, late life ex­ten­sion and pro­duc­tion op­ti­mi­sa­tion. This is what will lead the North Sea out of the dol­drums and also what we’ll be ex­port­ing more of to an in­creas­ing num­ber of over­seas mar­kets.

The cur­rent fo­cus on de­vel­op­ing new ways of work­ing and new tech­nol­ogy to re­cover re­serves in so­called small pools in the North Sea has a much greater prize than max­imis­ing eco­nomic re­cov­ery for the UKCS.

The tech­nolo­gies, method­olo­gies and ex­pe­ri­ence gained in un­lock­ing these hy­dro­car­bons will be highly ex­portable.

In 2014, ex­ports ac­counted for al­most 50% of the UK’s £9bil­lion sub­sea rev­enues. This ex­port suc­cess story stemmed from the ground-break­ing en­gi­neer­ing so­lu­tions we honed in the North Sea in the 80s and then fos­tered through the 90s. That same year, those rev­enues rep­re­sented a third of the global mar­ket share based on capex and opex fig­ures, mak­ing us a world-leader.

In the in­ter­ven­ing pe­riod, many coun­tries in­vested in tech­nol­ogy to match or sur­pass our cov­eted world-lead­ing po­si­tion. It’s true that a lack of in­vest­ment by both in­dus­try and gov­ern­ment in this coun­try threat­ened our mar­ket-leader sta­tus. But to­day, with a much greater in­dus­try fo­cus on tech­nol­ogy, in­vest­ment in or­gan­i­sa­tions like NSRI, OGIC and OGTC and a com­mit­ment on small pools led by the OGA, we have a fight­ing chance to re-es­tab­lish our­selves firmly as lead­ers in in­no­va­tion and tech­nol­ogy and pi­o­neers in ma­ture prov­inces.

Dur­ing the North Sea sub­sea boom, it was easy to get lured away from in­ter­na­tion­al­i­sa­tion strate­gies and fo­cus on the stuff on our doorstep. The po­ten­tial of the North Sea still rep­re­sents a ma­jor prize which the sub­sea in­dus­try must get af­ter, but the greater, longer-term prize lies in in­ter­na­tional wa­ters.

If the UK sub­sea in­dus­try can rise to chal­lenge of solv­ing the North Sea’s prob­lems, while po­si­tion­ing it­self in key over­seas mar­kets as proven prob­lem solvers, we’ll have it fixed!

Neil Gor­don is chief ex­ec­u­tive of Sub­sea UK. Its 12th an­nual con­fer­ence and ex­hi­bi­tion, Sub­sea Expo, takes place on Fe­bru­ary 1 to 3 at the AECC.

FACE IT: Neil Gor­don says the sub­sea in­dus­try must ‘get used to’ the oil price

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