The oil industry must leverage the sector’s current down cycle if it wants to give itself a fighting chance for the future, industry leaders said at standout event at this year’s OTC.
Energy 2050: Securing our future sparked an industry-wide debate around the critical challenges created in the wake of the oil price slide.
Leaders from Aberdeen, Scotland and Houston, Texas gathered at an Energy Voice event to examine the long-term, global effects of the current climate.
Panelist Professor Paul de Leeuw said: “There’s not much I like about low oil price but there’s one think I do like and that’s that it creates a direct conversation around innovation.
“Because this is the time to start looking at things differently.”
The first place to start is with the UK’s currently low exploration levels, according to de Leeuw.
He said: “There’s been one very big mistake and that’s how we in the UK produce 10 times the amount of oil than we find. That’s not good.”
He said new annual exploration wells skimming the single digits would do little to bolster the industry’s future.
De Leeuw went on to say that the barrage of “thou shalt not” letters asking for cost reductions whipping around the industry needed to eventually give way to credible conversation.
“I think the next couple of years are going to be really, really messy,” he said.
“I don’t think anyone knows where the oil price is going to go.
“The flip side is that I’m actually quite optimistic about the next 10 years.”
The current turmoil will force the industry to smarten itself up, according to de Leeuw.
Fellow panelist Kevin Lacy, who previously led BP’s Gulf of Mexico operations added: “I really hope this is the rallying point for the industry because we are at the inflection point where it has to rise to the challenge, recover from it and find different ways to achieve.
“I think most businesses will have to find away to do business at $65 to $70 oil.”
Lacy said he was confident the sector could do it, but it would take time and money to adapt the technology needed.
The two men were joined by Burness Paull chairman Philip Rodney and British Consul General in Houston Andrew Millar at the event.
Rodney said the conversation about the industry on both a fiscal and leadership level needed to shift.
“I would like to see the narrative change,” he said.
“I would like to see success celebrated and the industry not just be seen as some sort of cash cow for tax.”
All of the panelists agreed the industry should ditch its “stop/start” approach to fostering the skills pipeline.
Referring to the UK, de Leeuw said: “My big concern is how there are going to be some really good people that we’re losing in the industry right now.”
Andrew Millar pointed to “right to work” policy in the the US, which has seen mass hiring and then firings.
“There a two groups of people with big smiles on their faces,” he said.
“And that’s mergers and acquisition lawyers and consultants.”
However, he cautioned the US was more nimble than the UK and had the ability to restructure and adapt at a far greater pace.
The panelists also discussed the research respondents’ take on oil price.
While the figure could recover to $100, Lacy cautioned it would take years to see the bounce.
“Be prepared to be able to do business at $65 oil,” he said.
“I think when it goes up to $85 there’s something artificial affecting it like political unrest.”
Moderator Loren Steffy praised Energy Voice for starting the industry discussion.
He said: “The findings are an important bellwether of industry attitudes – attitudes that will form the basis for the decisions that will guide the industry in the coming decades.
“Taken as a whole, the results reflect a sense of cautious optimism on the part of the oil and gas companies that although this downturn in prices may be one of the deepest and most prolonged in recent years, companies are better prepared to deal with it than they have been in the past”
Lacy added: “As humans normally do we tend to see things as we want them to be, not necessarily as they are in reality.
“I think there is a very high probability that oil may remain in the same $60 to $70 per barrel range, absent a major supply situation for a number of years.”
Attendees echoed the panel’s industry call to action.
Ian Williams, chairman of Campbell Dallas, said: “The event has been extremely useful. What I’d like to see is a discussion about how the industry needs to take ideas from other industries. There’s the nuclear industry which is completely driven by safety and the aeronautic industry.
“The US government was actually panned while the European and UK government for once got credit.
“We see this [oil price] as a huge opportunity for innovation. If the market says reinvent yourself, we will. I think that’s what Aberdeen needs.”
Andrew Bradshaw, head of energy insight at Fifth Ring, said: “It was an interesting discussion and the sort of thing I’d like to see more of in this industry.
“The challenge that the service sector faces were highlighted. I liked the thought about the bigger picture of the geopolitical situation, and it raised the point that the North Sea market should be more aware of what’s going on in the US shale market.
“I got a real buzz from it. It’s clear that people see that something needs to be done. And with the UK election happening, it would be great to see whatever new government we have taking the issues raised here and doing something about it.”
Colin Black, chief commercial officer at ACE Winches, SPE Director and member of the UKTI Oil & Gas Advisory Group commented on Energy Voice event.
He said: “Energy2050 presentations at OTC15 provided a great overview of the global market supply versus demand dynamics of the Oil & Gas industry.
“Presenters discussed the Wood Review and clearly established the need for safe, cost effective delivery of projects as well as the requirement for focus on standardisation, simplification and collaboration.
“As the SME community tries to come to terms with oil companies cutting costs, postponing or actually cancelling projects Energy Voice is discussing and debating industry drivers providing a very much needed ‘helicopter view’ of market dynamics.”
Read the research findings here.
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