Returning to any annual event the following year can be enlightening. I don’t know about you, but opening sessions tend to stick in my memory, and the often bold soundbite statements made by various VIPs as they set the tone for the rest of an event can often sound more than hollow a year on.

At the 2015 edition of the Subsea Expo event in Aberdeen, Scotland, I recall one oil company keynote speaker commenting, “We should not waste a good crisis. It’s time to show that we are making progress. It’s time to get back to basics and do the basics well.”

To be honest, we’ve probably all heard similar statements made at various events around the world over the past year. There’s nothing like quoting a good quote to get quoted, my PR friends tell me.

But it is clear that the industry is not wasting this crisis—it has no choice if it wants to survive and eventually thrive once again.

At this year’s Subsea Expo one plenary session speaker pointed out that for the U.K. North Sea, cutting development costs by 50% would unlock at least 150 small fields and kick-start an estimated $20 billion of project investment. Matt Nicol, director of production and nonoperated assets at U.K. operator Centrica, added that a 50% cost reduction would drop the average economic minimum for these small pools to 6 MMboe and eventually achieve production of about 1 Bboe of extra reserves in total.

Centrica’s own internal cost-reduction program, which Nicol said was dubbed the “Hackathon,” saw its close work with suppliers on potential new solutions succeed in cutting the costs on some projects by up to 52%.

Similar evidence has seen Statoil confirm it has reduced the forecast capex for its presanction Johan Castberg project offshore Norway by about half, from an eye-watering $11 billion to between $5 billion and $6 billion.

Chris Bird, managing director of MOL Energy UK, added that with the industry having let its offshore costs soar “by between 200% and 300% over the last five years,” such measures are a must—but still not enough. The U.K. North Sea is “not an investable basin at present, and it cannot just rely on the oil price to come back up,” he said.

So Centrica’s work, and that of all operators both onshore and offshore, is far from done—but crucially, it is being done.

Last year it all sounded like the same old lip service being paid to what needed doing. This year the upstream sector is clearly turning those words into quantifiable action, although it’s by necessity rather than choice. In a year’s time we will know whether the industry has walked far enough.

Comments