Current pressures on oil majors due to low oil prices and a heated market should not be allowed to turn into another crisis, a top ExxonMobil executive told SPE Annual Technology Conference in Amsterdam today (27 October).
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Image of Neil Duffin, President, ExxonMobil Development Company. |
The event's opening session had a strong focus on cost-cutting, against the backdrop of weakening oil prices and high capital costs the industry has been agonizing over during the past year.
While the industry undoubtedly needed to focus on costs, and new technologies, to become more efficient, it should be careful to ensure that it still has the resources available when the market strengthens again, executives warned.
Neil Duffin, President, ExxonMobil Development Company, said: "The important thing is we don't turn this in to a crisis. It is important we continue to recruit so we don't create the trough in the system like we felt from the 1980s that has lived with us forever. This is an opportunity to redefine ourselves."
Phillipe Barril, President and Chief Operating Officer, Technip, made a similar comment. He said: "The issue is that in the short term we seem to be having difficulties around CAPEX discipline and finding the right opportunities. Some clients are under stress, either from geopolitical issues or financing. For contractors, what is going to happen in the next few years or so? We need to have a workforce to respond at the right time [when the market picks up again]."
Duffin also said that the industry had become overheated - the current pressures were not just about the oil price.
"The industry, if you look back, has been overheated and there is real opportunity to get back to a focus on quality rather than quantity," he said. "We need to refresh ourselves somewhat and deliver on these large scale projects on the terms we agreed at the beginning."
Chris Besson, Senior Energy Analyst, International Energy Agency (IEA) warned that it was "absolutely critical" that the industry continued to invest.
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SPE ATCE panel. |
"Demand is still expected to grow next year and in following years," he said. "At the same time supply is increasing by about the same amount. IEA's market report last month reduced anticipated demand. We are not suggesting a large drop. Longer-term oil demand is going to continue to grow, not as fast as in the past, but it is going to grow. On the supply side, regions that have increased or thought to be increasing production will come to a saturation point in next 10 years or so. So sooner or later markets will become tight again.
"During this period of lower prices, investment should continue. This is absolutely critical. By the time projects begin to deliver, the market will be tight again."
Areas where the industry could save money are production operations and drilling. Gustavo Hernandez, Director General, PEMEX Exploration & Production said: "Any savings we can make in drilling area, in the different phases off drilling, will help us - drilling in a sequenced way, optimizing cost, saving on the day rate."
Barrill said a great way to reduce costs would be to not over engineer projects and even repeat projects. Duffin said: "We call it design one build multiple." But he also said the way the industry works with the IOC/NOC contracting work to a contractor, which has it's own contractors and so on, creating duplication, was "antiquated." Integrating teams instead would create a more efficient model.
New technology will also help, said Duffin, citing a 13,000m-long well at Sakhalin, which meant a platform could be cut out. "The innovation to reach these distances, which was a pipe dream when I started in the industry, has jaded major savings, he said. "Looking ahead today, I'm convinced we we will see the innovation needed to make strides today, as we have in the past."
SPE ATCE continues tomorrow and Wednesday.
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