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April 2016

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Editorial comment

I was in Oslo recently as part of a press tour for journalists covering the oil and gas industry and, in addition to the usual benefits (technical information, article leads, contacts, market forecasts, etc.), I happened upon an interesting piece of philosophy: ‘Don’t worry about what you can’t change, focus on what you can change.’ It’s a phrase that sounds like the vague, wishy-washy kind of comment that tends to go viral on Facebook or elsewhere (in fact, I’m fairly certain that it is one of these), but – strangely enough – it may well have some relevance for the upstream industry.

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Nobody knows for certain where the oil price is going to be in a year’s time. Eldar Sætre, CEO of Statoil, pithily summed this up during a presentation at Subsea Valley Conference 2016 when he said: “The oil price will go up and down, but not necessarily in that order.” No matter how good the data is, predictions on the oil price will always carry an element of uncertainty with them – especially so in the current climate. This is where the Facebook philosophy kicks in; you can’t control the oil price, so ‘don’t worry’ too much about it. Instead, focus on what can be done such as developing new technologies, streamlining and standardising processes, and establishing collaboration between companies.

Whilst the drive to develop new technologies is nothing new to the upstream industry, the increasing focus on collaboration and standardisation marks an important change in attitudes. In a recent survey conducted by DNV GL, respondents were asked what they felt were the key priorities for maintaining innovation in a cost-pressured environment; the largest single response (45%) was “Increase collaboration with other industry players.” The second highest response (30%) was “Greater involvement in Joint Industry Projects”. Forsys Subsea (FMC Technologies and Technip) and the Subsea Production Alliance (Aker Solutions and Baker Hughes) are just two examples where companies have decided to combine their technical expertise in order to reduce costs.

Also at the Subsea Valley Conference, Norway’s Minister of Petroleum and Energy, Tord Lien, jokingly pointed out that, for no discernible reason, there are 60 different shades of yellow paint currently in use on the NCS. Whilst the variation in paint isn’t too important in itself, it’s symptomatic of the broader lack of standardisation - Sætre reinforced this point when he commented on the thousands of X-mas tree designs and formats currently in use on the NCS, where 90% of wells could be operated with a far smaller number of standardised designs. Taking these lessons on board and making the required cultural changes will be key to bringing the industry through the downturn and putting it in the best possible position for recovery.

Exactly when that recovery will occur is another unknown, but growing global demand and a significant reduction in exploration activity have made a return to higher prices inevitable. It will be interesting to see which areas of the industry lead this recovery; one likely candidate is the subsea sector. A study conducted by the Norwegian Petroleum Directorate found that subsea development represented the most effective solution for bringing online the majority of new discoveries on the NCS.1 The subsea sector is often looked at as being high-cost, but improved standardisation and collaboration can go a long way to countering this issue.Speaking of subsea and offshore, the Oilfield Technology team will be exhibiting at OTC in Houston (2 - 5 May), so feel free to drop by our stand (3901) – we’d love to hear your thoughts on the technologies and innovations that look set to drive the industry through the downturn. See you then!

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