Low production efficiency in the UK North Sea has amounted to some 900 MMboe of lost production, a senior oil executive told a business breakfast in Aberdeen this morning.
Ray Riddoch, Nexen Petroleum’s UK managing director, said in 2014, the number amounted to 120 MMboe losses. But, the good news is that the picture appears to be improving, with the figure set to increase to 70% this year, according to the UK’s Oil and Gas Authority. The industry also has a goal to get back to 80% by the end of 2016, the Oil & Gas UK Aberdeen business breakfast heard.
Riddoch said the low production efficiency numbers were “bad business. Those are barrels worth chasing for the industry as a whole and individual operators and it has a huge impact on net operating costs.” He admitted that Nexen* had been among the worst performers in the North Sea, with 50% production efficiency in 2011, but that it had since improved and was now standing at 90-91%, thanks to “a relentless pursuit for good performance.”
The firm has taken up the cycling team Sky’s marginal gains ethos, looking to drive gains out of every possible part of the business, with the workforce engaged in the process. Nexen has also increased so-called wrench time from 4.5 to 8.5 hours per 10-hour shift. Listening to the supply chain and having an open mind to different commercial models, was also important, as well as learning from other industries, Riddoch said. At the firm’s latest development, Golden Eagle, the figure is 96%, he said.
But, Riddoch said, until you admit you are not very good, you cannot improve. “As an industry we had to admit we weren’t very good,” he told the Oil & Gas UK Aberdeen breakfast briefing this morning. “As operators we are rather insular when we look at statistics and kid ourselves we are quite good because we don’t have a comparator.”
It was only when industry body Pilot looked at production efficiency rates across operators and saw that it had dropped, on average, from 80% to 60% in 2004 to 2012, that the industry saw it had a problem, he said. A production efficiency task force was set up with a goal to reach 80% by the end of 2016. Current areas being looked at include planned maintenance and shut downs, unplanned production losses (compression systems), and data insights.
Within the area of compression systems, which accounted for 20% of unplanned losses, it is just 5-6 operators that have the main problems, he said. Gains could be made by making better use of data, he said. “As an industry we generate a huge amount of data but we don’t know what to do with it,” he said.
The event also heard from Gunther Newcombe, exploration and production director at the newly formed regulator, the Oil and Gas Authority. He agreed that better management of data about the industry, for the industry, would help, specifically around exploration.
“The reality is we have to drill a lot more,” he said. The OGA is looking at the licensing strategy for the UKCS and seeing what “the best terms and conditions” could be to encourage interest in exploration for next year’s 29th licensing round, which will include frontier acreage, and rounds beyond that. A new frame work is due to be set out by the end of Q1 next year.
Results from a £20 million government-funded seismic acquisition campaign, including legacy data, is also due to be available early next year.
Phil Kirk, chief executive of independent explorer Chrysoar, was also speaking at the event. He said government-funded seismic was something he never thought would happen. The processed data will include legacy data and 80 well ties and will be made available to the industry. There will be opportunities in this data, he says and suggested perhaps UK industry could work together to fund other new regional seismic. “There are frontier areas we have not looked at in detail, the Mid North Sea High, the Western Approaches, the Orcadian,” he says. Other technologies such as ocean bottom seismic could be looked at.
Kirk says the Oil and Gas Authority enabling better access to data will help firms find the “yet to find” resources on the UK Continental Shelf. But, he said a bigger lever towards spending on exploration would be a change in fiscal policy in the basin.
Kirk says: “People would love to invest in the UK North Sea we just need to change the perception of the industry, that it’s not over regulated. The investment arena at the moment is tough. Exploration spending is the most discretionary spend and we are competing against global opportunities.”
*Nexen Petroleum, which was bought by China’s CNOOC in 2013, has been the largest producer in terms of volume on the UK Continental Shelf for two years running and looks set to make it a third year in a row in 2015, said Riddoch. As well as Golden Eagle, the firm operates the Buzzard field, one of the largest producing oil fields in the North Sea.
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Operators outline cost cutting
Image: The Ensco 120 jackup at the Golden Eagle field. Image from Nexen.
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