We have all become accustomed to the chants of the industry about how more has to be done to ensure sustainable economics and thus the longevity of the basin. To date much of the call has been on the government or related bodies to reduce taxation and provide support for the sector in this low commodity price and high cost era.
A small group of E&P operators led by Tony Durrant of Premier Oil are taking matters into their own hands however, looking to establish a new shared service organisation to drive efficiency and improve economics.
Acknowledgement of the need to standardise on product specification in addition to identifying the efficiencies of shared services is positive. What is more encouraging is the momentum to create a vehicle to actually make this happen. As we look to a troubled 2016 with little catalysts for meaningful commodity price improvements stakeholders in the industry need to take matters into their own hands.
When we examine the supply chain of oilfield services firms there are a number of support providers who already manage and consolidate product and service supply to drive efficiency across a number of E&P firms in the North Sea. These include logistics, marine inspection, production tubing, valve supply, drilling rigs, accounting, HR…the list goes on.
It makes sense to focus on working with the incumbent providers who are already invested with specialist facilities, processes, supply relationships and management. The bundling of demand requirements for a group of E&P companies with a common specification into a larger, single, term based contract would allow for greater efficiency as providers can simplify their operations and invest in further improvements.
My personal experiences having worked with these oilfield service firms is that they really strive to increase efficiency, reinvest whenever possible and pass on savings to their clients given scale and visibility of activity levels.
The creation of a E&P collective that can effectively standardise and work with invested oilfield service partners has the real potential to drive economic advantage, in addition to stimulating and sustaining a specialist supply chain.
Andrew Reid is the managing director for Douglas-Westwood.
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