A balancing act

Balancing digitalization, decommissioning, and a need to remain relevant and the lower “for the foreseeable future” scenario made for a complex range of topics at SPE Offshore Europe 2017.

Bob Dudley. Photo from SPE Offshore Europe.

The industry has worked hard to improve efficiencies and cut costs but, more needs to be done to ensure long-term health, remain relevant and attract future generations of technology savvy individuals to the industry, the opening plenary session at SPE Offshore Europe 2017 heard.

The concerns were raised by plenary speakers, comprising BP CEO Bob Dudley, Shell CEO Ben van Beurden, Wood Group CEO Robin Watson, Petrobras chief exploration and production officer Solange Guedes, Exchequer Secretary to the Treasury Andrew Jones MP, and SPE President Janeen Judah, alongside conference chairman Catherine MacGregor, who is also Schlumberger’s Drilling Group President.

This year, 35,000 people attended SPE Offshore Europe at the Aberdeen Exhibition and Conference Centre, in early September, according to co-organizers Reed and SPE, down from >50,000 in 2015, and >63,000 in 2013 (a record). Look to the pre-boom figures, however, and it’s less of a drop, the show attracted 48,000 in 2011. Among the exhibitors, 44 countries were represented, with delegates from 100 countries.

Robin Watson. Photo from SPE Offshore Europe.

With a lack of major news announcements, the event was reflective but forward looking. A key to industry reinvention will be new technologies, but the industry will also need the people to use them, Watson told the plenary session. He said that some 350,000 industry jobs had been lost globally since the downturn started three years ago. “Some of these jobs will never return. This is a generational shift,” he said.

The shift the industry is experiencing was highlighted by industry body Oil & Gas UK during the event. Its Economic Report 2017 was launched at a business breakfast and showed that UK oil and gas industry job losses had slowed to 13,000 in 2017, compared to 60,000 in 2016.

The report also said an estimated US$6 billion worth of mergers and acquisitions were made in the UK oil and gas sector in 1H 2016, pointing to a turn in fortunes for the basin. Much of the activity has been driven by private equity backed firms, whose approach to doing business in the basin is enabling new business models, particularly around closer working relationships with contractors, including where the latter works in return for future payments or production.

The $6 billion figure didn’t include Total’s acquisition of Maersk Oil, however, a move that could signal further job losses due to the $400 million annual synergies Total said could be made by joining the two firms. Uncertainty over Brexit adds further to the murky path ahead for the North Sea industry.

Significant focus at this year’s event was on digitalization and decommissioning. MacGregor told the event: “Whatever you think about high power computing, or the advent of digital construction, or fully utilizing production data to make systems run better… The impact is enormous. And it will make the industry more attractive.”

Robin Wye, BP Group Technology research commercialization manager, told the event that digital is going to change how the industry does business. “We have subsurface engineers and scientists looking at cutting their workflows by a factor of 10 or 100, as well as getting a better result,” he says. “But it may take a decade before we’re seeing a major impact of that transformation, but every bit of our business is being impacted by how we use digital technology.”

BP sees this area as worth investing in. BP Ventures, for example, has invested in Beyond Limits, an artificial general intelligence software company, which has artificial intelligence (AI) technology on board a Mars rover, he said.

Ragnhild Ulvik, vice president, Innovation GSB Corporate Strategy and Innovation, Statoil, said the firm expects to invest NOK1-2 billion (£100-200 million) from now until 2020, in addition to current IT investment the company is making.

“We have a vast amount of data and we only use a small fraction of it. The amount of data increases 25% each year. We have so much data that we don’t even know what we know,” Ulvik said.

However, a joint study by software company AVEVA and Westwood Global Energy Group, released during SPE Offshore Europe, found that while the benefits of digitalization, using tools such as intelligent data management and laser scanning to create a Digital Twin, are generally recognized, the industry’s risk averse culture coupled with reduced budgets and common misconceptions has been preventing its full potential from being realized.

Recognizing the rapidly expanding decommissioning sector, SPE Offshore Europe devoted one of its six halls to the discipline this year, including a themed exhibition and dedicated conference space.

“Are we thinking big enough, or is the challenge smaller than we think,” was the key questions asked at the decommissioning keynote, led by North Sea industry leaders, including session moderator Steve Phimister, who is upstream director UK & Ireland for Shell.

One of the challenges is reducing the £60 billion bill to remove the UK North Sea’s oil and gas infrastructure by at least 35% – a target set by the UK’s Oil and Gas Authority and described as ambitious by Phimister, but thought achievable.

Phimister told SPE Offshore Europe: “We really do have to think quite deeply and differently about it [decommissioning], and draw on all the expertise in the industry, take on the issues… find the solutions and smart ways of working together whether in execution strategies or contracting strategies.”

CNR International’s decommissioning project manager, Roy Aspden, said an important question is how the industry was developing the capability to respond to the sheer size of the decommissioning challenge: around 470 installations will need to be decommissioned over the coming decades in the UK North Sea alone.

He said: “Six years ago, we had zero [decommissioning] capability in the company, and faced decommissioning the tallest, deepest, most northerly [installation] in Murchison. So, we needed to build capability pretty quickly.”

Forging ahead

Hermod – in 1979 on its first job, the Piper A platform. Image from Heerema Marine Contractors.

While field development announcements were thin on the ground during SPE Offshore Europe, there some positive stories for the industry to digest.

Aker Solutions announced it had secured a front-end engineering and design contract from Nexen Petroleum UK for a second phase development of the Buzzard field. The project could see up to 12 subsea trees added to the field. FEED is due to complete by the end of the year.

Buzzard, which has a four-platform complex in place, is 100km north-east of Aberdeen and has an estimated 1.5 billion bbl in place.

Subsea 7 signed a letter of intent with Royal IHC in the Netherlands for the construction of a new, <US$300 million reel-lay vessel and associated pipe lay equipment for delivery in early 2020. A firm contract is expected to be awarded before the end of 2017.

The vessel will be targeted towards longer tie-back developments and will replace the Seven Navica, which is expected to be retired from reel-lay operations in due course.

Boskalis won contracts, including transporting the West White Rose platform topsides in North America, transport of offshore wind jackets in Europe, and taking Heerema Marine Contractor’s Hermod semisubmersible crane vessel to China to be scrapped. The vessel set sail late September from Rotterdam for Zhoushan, China, where Hermod will be delivered to be dismantled and recycled at the Zhoushan Changhong International Ship Recycling yard. HMC’s new semisubmersible crane vessel, Sleipnir, which will be equipped with two 10,000-tonne cranes, is due in service in 2019, with contracts for Noble Energy on the Leviathan development and Maersk Oil on the Tyra Future project already booked.

Read more from Offshore Europe 2017 here.