'Grim Determination' Takes Hold at Offshore Conference; Signs That the Oil Price Is on Its Way Back Helped Lighten the Mood at the NOF Energy Conference at the Sage Gateshead - but Only Just. PETER McCUSKER Reports

The Journal (Newcastle, England), March 17, 2016 | Go to article overview

'Grim Determination' Takes Hold at Offshore Conference; Signs That the Oil Price Is on Its Way Back Helped Lighten the Mood at the NOF Energy Conference at the Sage Gateshead - but Only Just. PETER McCUSKER Reports


Byline: PETER McCUSKER

NOF Energy's chairman Paul Charlton kicked off its sixth annual conference by stressing the need for transformational change in the offshore oil and gas industry.

Speaking in the main hall at the Sage Gateshead, Mr Charlton said many in the industry believed this particular downturn is unlike any they had previously witnessed.

"$30-$40 oil is the new norm and by all accounts, it's going to stay at this level for the foreseeable future.

"I still hear some people say that 'it's simply a cyclical business and the upturn will come; it always has and it always will'.

"Well, that may be the case, but some of us in the room are of an age where we've seen a number of these downturns before and to many of us, this one looks different and it certainly feels different too. Operators are cutting almost all of their discretionary spend to survive in this $30 world."

This theme was taken up by John Westwood, of international energy consultants Douglas-Westwood, who asked rhetorically how, 'How did we get into his mess?' He believes there is little chance of oil returning to pre-June 2014 levels of over $100 a barrel for some time to come, unless there is a major escalation in one of the world's conflict zones such as Saudi Arabia's involvement in the Yemen civil war. "If that situation deteriorates and Saudi Arabia crossed the border then $100 would be cheap," he said.

He noted the impact of the oil price fall on subsea projects with deepwater Capex falling by half, and he highlighted the surge in US production - up by 75% since 2008. "Conventional oil production has peaked," he said.

He went on to say the global off-shore services market peaked in 2014 and we are now in a new world of massive oversupply in offshore drilling rigs.

He continued: "The North Sea is fighting for survival and is in need of fiscal reform. We are seeing a return to reality and there has been progress in securing cost improvements of 20% to 40%."

A succession of speakers all gave their own perspective on what needs to change to meet the challenges facing the UK offshore industry. Richard Stark, duty project manager at Apache Corporation, said it focuses on detailed planning for 80% of a project and then it manages the rest as it goes along.

He said that "too much focus on the remaining 20% can sometimes take up to 80% of time and resources".

He said the company is one that prefers "leadership to management" and strives for an open relationship with the supply chain by flattening hierarchies. The topside for its recent Forties Alpha satellite platform was built on Tyneside, and 75% of the total project sourced from the UK.

Mr Stark said: "It's a shame the Hadrian Yard (the Wallsend home of OGN which built the topside) is lying empty. It should have a healthy, and full, order book."

In September last year the industry representative body established the Oil & Gas UK Efficiency Task Force, and John Pearson, group president Northern Europe at Amec Foster Wheeler, reported on its progress to date. …

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'Grim Determination' Takes Hold at Offshore Conference; Signs That the Oil Price Is on Its Way Back Helped Lighten the Mood at the NOF Energy Conference at the Sage Gateshead - but Only Just. PETER McCUSKER Reports
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