Despite initial hopes of a V-shaped recovery, the UK Continental Shelf is set to see a more gradual recover over time, which will prove to be not only a stress test, but a test of resilience, according to a senior Lloyds Register director.
“I have never seen a down cycle like this before and there are a number of factors that made this drop different from earlier ones,” said Duco de Haan, Commercial Development Director of LR Energy.
De Haan said there was already an oversupply of drilling rigs when the price of oil dropped. Most people anticipated a “V-shaped" recovery, but he says it will be a more gradually rise over time that will not reach the past highs of more than £80 a barrel.
“With a more gradual recovery, it will not only be a stress test, but a test of resilience,” said de Haan. The oil and gas industry has been in a reactive mode that has resulted in sharp cost reductions through layoffs and delays or cancellation of major projects.
“Not only must companies adapt to these market changes with an absolute grip on their costs, but they must enhance the integrity of their assets, organization and systems to survive. It is only when you can influence your capital and operational expenses through the implementation of smarter technology and new innovations that you can have quantum leaps and paradigm shifts in your cost base,” said de Haan.
A company can reduce costs by people and operational setup, but eventually it comes to a point where a company can no longer cut those areas without impacting the “muscle” of their business.
Lloyd’s Register Energy says while reducing costs through staffing reductions and operational set up changes, technology innovation can play an important role in today's environment.
“It will not be one single breakthrough, but a spectrum of technology breakthroughs that will bring us to the next level of efficiency and effectiveness. This market situation is fueling a new era of technology innovation,” said de Haan. He said it was exciting to walk through the corridors of Offshore Europe to see the latest thinking and applications of technology, and companies will become more receptive to new technology because of the market conditions today.
“Production from the North Sea has always been a challenge and, as we increasingly face global competition, standing still is simply not an option," he says. "The responsibility for ensuring the future of the industry lies with us now. If we don’t work more collaboratively, more intelligently with a greater vision and reduce our cost base, then we will effectively advance its demise.”
Find out more information at Lloyd’s Register Energy booth #2C100.
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