If there was one sector considered unlikely to be mounting a recruitment drive at the moment, it would be the oil & gas industry.
The North Sea has the highest oil production costs in the world, and with Brent crude prices hovering at just above $50 per barrel in August – well under half the $115 per barrel in June 2014 – it is unsurprising that many proposed developments have been shelved, workers have been made redundant and pay levels have been cut.
The oil and gas sector is often perceived as a ‘sunset industry’ and combined with the current downturn, this may negatively influence young people in considering a future career
Alistair Geddes, Expro executive vice president
“The dramatic fall in the oil price had an immediate impact on the industry,” says International Association of Oil & Gas Producers (IOGP) executive director Michael Engell-Jensen, chairman of the keynote programme at this year’s conference.
“It means companies – our members – are cash-flow constrained and thus revisit their priorities and revise the phasing of projects. For the most part, the projects are still the right ones, so they may get deferred for a few years rather than cancelled completely.”
Despite this gloomy backdrop, organisers of the bi-annual gathering of the oil & gas industry in Aberdeen this month – the SPE Offshore Europe 2015 conference – have chosen to focus on the future.
Specifically, the conference is focusing on the personnel and technological challenges that the oil & gas industry is likely to face in the future.
“The short-term impact of the recent downturn on our industry has undoubtedly cast a shadow over the sector and its attractiveness to new and emerging talent,” says Expro chief executive Charles Woodburn, who is chairman of the technical programme at the conference.
“But, as the past has taught us, we cannot afford to lose our next generation as they play a vital part in advancing safety, innovation and the technology our industry demands.”
Indeed, Woodburn’s colleague Alistair Geddes, executive vice president for Product Lines, Technology and Business Development at Expro Group, points out that a report by Ernst & Young (now known as EY) late last year claims that while total employment in UK upstream oil & gas is likely to fall over the next five years, there will still be a need for 12,000 new entrants over the same period.
Largely driven by an expected 38,000 retirees in the sector, the need for 12,000 new entrants means that this year’s conference has an over-arching theme of “how to inspire the next generation”.
Neglecting to encourage talent into the industry at this time would be damaging, says Geddes, who is co-chairing the Developing Talent committee.
“The oil and gas sector is often perceived as a ‘sunset industry’ and combined with the current downturn, this may negatively influence young people in considering a future career,” Geddes says.
“We don’t want to repeat mistakes of the past, so it’s important we take a balanced and long-term approach to talent management.Continuing to develop the talent we already have is also imperative, despite constrained budgets.”
Alongside the ongoing need to attract and develop talent, there is also recognition that in an environment of depressed oil prices and – particularly in the case of the North Sea – dwindling reserves, the industry must work together to embrace technological innovation that can help improve its efficiency.
“The industry is looking at extracting more difficult reserves due to ageing fields or deeper waters,” says Engell-Jensen.
“Technology is the only way forward. It is absolutely clear that a large part of the resources open to the industry are viable only via the application of innovation and technology – even if the pace of their application is slightly delayed due to current budget constraints.”
Indeed, the budget constraints inflicted by low oil prices should in fact act as a driver for technological innovation, adds Woodburn.
“Costs need to be controlled through standardisation, the appropriate use of technology and fit-for-purpose engineering solutions. Increased collaboration between operators and service companies will not only facilitate appropriate field development plans, but also drive better project execution,” Woodburn says.
Geddes agrees that it is important, particularly in challenging times, to continue to deliver pioneering technology, but also says collaboration is key.
“As operators defer costly exploration and appraisal projects, they look for innovative, cost-effective solutions both to develop known reserves and to maximise production from existing fields,” he says.
“Technology is at the heart of this solution. However, this also requires stronger collaboration between operators and service companies, bringing together their collective wealth of knowledge to solve these challenges,” Geddes says.
Collaboration in the short-term means industry reviewing its practices to ensure they are efficient, fit for purpose and not over-engineered, says Geddes, while in the long term it involves planning towards the future challenges, such as how to exploit deeper waters, higher pressure, higher temperature reservoirs.
There are some areas where collaboration is already thriving in the oil & gas sector, most notably in the area of health and safety in the wake of the BP Deepwater Horizon explosion on the Macondo prospect in the Gulf of Mexico.
“Collaboration and standardisation are two key areas where we can work together so that everyone gains,” says Engell-Jensen.
“A good example is the Global Industry Response Group (GIRG) set up by IOGP in the wake of the Macondo incident to identify, learn from and apply the lessons of Macondo and similar well incidents. Following publication of the GIRG recommendations, IOGP created three entities, comprising international operator experts, to manage and implement them: Wells Expert Committee, Subsea Well Response Project, and Oil Spill Response Joint Industry Project.”
However, while rivals may work together in bodies such as those listed above to develop safety solutions and standards, it can be much more difficult to persuade companies to work together on technology with a commercial application, says Oil & Gas Innovation Centre (OGIC) chief executive Ian Phillips.
“A lot of the development [of technology] is nearer to market where there is competitive space between companies and quite reasonably they don’t collaborate,” he says.
Where Phillips says he does feel there is potential for greater collaboration and efficiency is in the area of standardisation of components among the major oil companies.
“One of the weakest areas is the tendency for each company to have its own different standards for equipment,” says Phillips.
“That sort of collaboration is weak and there is scope for improvement. While there is some degree of standardisation – for example the de facto connector on the top of the well is a H4 connector. Beyond that there is a ridiculous number of different standards for things.”
The OGIC was founded by the Scottish government last year to bridge a gap in the level of support for technological research and development (R&D) in the North Sea.
While major oil companies have access to the Industry Technology Facilitator (ITF), it was felt that there was little in the way of support for the supply chain to bring about innovative solutions, says Phillips.
The OGIC helps to finance R&D joint ventures between oil & gas supply chain companies and local universities. Its first project to be completed saw fluid transfer specialist Hydrasun working with the University of Strathclyde on the testing of a flexible well intervention hose that is lighter and less expensive than current solutions available of the market.
The ultimate driver behind the Hydrasun project has been to reduce costs, and Phillips says it is the common factor among many of those approaching OGIC for funding.
Likewise, while some projects may be cancelled, Phillips says the does not mean there is no activity in the North Sea.
“For the last 40 years the UK oil & gas industry has been the North Sea and it has created a vibrant supply chain,” says Phillips.
“Even before the collapse in price the North Sea was declining and as a result, 50% of the UK supply chain’s work is now international. At OGIC we are tapping demand that is there. Although some projects cancelled because of downturn, people are hearing about us and knocking on our door.”
Notwithstanding international demand and a potential slowdown of new North Sea fields, Phillips says that the nature of the UK Continental Shelf’s ageing infrastructure means that there is still a huge need for technological innovation locally.
“The old cliché is true – necessity is the mother of invention,” he says. “Smaller newer operators are running those older platforms and are willing to take risks that perhaps the fields’ previous owners were not.”