After four years, the oil and gas industry is now in a position to take a step back and start to assess the long-term impact of the most recent, prolonged downturn in the oil price.
The initial response to the situation by operators in 2015 was familiar to industry watchers and veterans alike: an immediate scaling back of projects being planned and undertaken in order to cut costs in their own businesses. Of course, this was followed by a chain reaction through the vertical supply chain.
Initially, companies across the board saw a significant reduction in the number of final investment decisions (FIDs), as demand for equipment and technology rapidly decelerated. It was generally expected that, once the price of crude returned to more ‘normal’ levels, the temporary suspensions would be reversed, and the industry would continue much as before.
The expected trajectory failed to materialise for a number of reasons; but one of the most notable and impactful, was the decision by tier-one suppliers and others to look for and embrace new and innovative ways of working – and then encourage operators to embrace the results of these re-imagined methodologies. The end goal was to drive greater levels of standardisation throughout the industry, and in doing so reduce immediate project costs while embedding operational efficiencies in the supply chain that would remain long after any future price recovery.
From trust to TOTEX
This has been a pivotal change for the industry as a whole. The key to this changing dynamic was to build new kinds of relationships between operators and suppliers, relationships that break down historical barriers that have, at times, inhibited contributions to project efficiency and technical development. Trust-based collaboration, vendor-led solutions and partnerships fostered by shared commitments to common goals would be essential. Without them, new methods of driving down costs were unlikely to be successful.
For suppliers like Baker Hughes, a GE company (BHGE), entrenching trust in the supply chain is about demonstrating that, as a supplier, with decades of knowledge and experience, it is as invested in the success of any given project as that project’s owner and operator. Doing so ultimately ensures that the cost efficiencies and lessons learned during the downturn are sustained over the long-term.
This new supply-chain relationship is not about simply selling more equipment on one side and squeezing suppliers on the other. Transactional interactions that, before the downturn, had focused on what technology was to be supplied in a tick-box tender have now become broader conversations about the complete life of a project and sustainable project development. Even existing technologies have been subject to interrogation and review, enabling them to be deployed faster, more efficiently, and with less waste, all of which reduces carbon emissions across the industry.
The difference manifests itself in various ways but one of the simplest is the development of subsea trees. Almost every operator has its own specification, but the expertise often lies with the manufacturers and suppliers. In a collaborative relationship, responsibility for specifying the tree can safely transfer from operator to supplier, leading to an optimised product and no loss of differentiation.
New collaborative models adapted across the sector have already started to help extend the life of basins around the world. These new relationships focus far more on how to deliver a sustainable outcome. That means taking a step back from viewing projects through the lens of constrained CAPEX budgets and instead talking about total expenditure – or TOTEX – that can be sustained through the life of a field.
Author: Graham Gillies, Baker Hughes
This is part one of a two-part article. Part two is available to read here.
Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/11112019/innovation-and-totex-optimising-the-subsea-supply-chain-in-an-uncertain-world--part-one/
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