A boss at an international drilling contractor said yesterday that his company was committed to working in UK waters, but not at any cost.
Brian Taylor, chief operating officer of KCA DEUTAG, told an Oil and Gas UK breakfast briefing in Aberdeen that the firm could not continue subsidising some customers.
The Aberdeen-based drilling company has seen major expansion in the past 14 years, moving from eight rigs and 450 people to 106 rigs and 8,000 people.
At the same time, the percentage of its earnings from the UK has dropped from 85% to 8%.
Mr Taylor said market fundamentals were in KCA DEUTAG’s favour in the medium to long term.
The company was in the right shape – in terms of its structure, cost base and performance – and prepared for diverse geographical growth in locations such as Russia, Kazakhstan, Azerbaijan, Africa and Norway. It would also keep its spread of drilling assets: platform, land, jack-up and barge.
Mr Taylor said the company was committed to the UK, but not at any cost.
He added that the margins in the UK, particularly in production drilling, were very low and worse than other parts of the world, but said: “We can’t continue to subsidise some of our customers in the North Sea.”
Mr Taylor said it was very important to have a fiscal regime that encouraged activity on the UK continental shelf (UKCS) and encouraged full recovery of oil and gas resources.
“We would like the (UK) Government to have a plan for energy and the industry, and one that’s pretty visible,” said Mr Taylor.
Yesterday’s event at the Beach Ballroom looked at the challenges the UK supply chain has faced during the recession.
Another of the speakers was Alan Curran, chief executive of Wood Group Engineering (North Sea).
He said that, for Wood, future growth would come increasingly from overseas. However, the UK continental shelf (UKCS) would remain a pivotal foundation stone for the group; responsible for 20% of overall business.
Mr Curran said the persistent and high cost base on the UKCS must be addressed jointly by owners, suppliers, workforce and government, adding: “The fiscal treatment of mature fields needs attention, and urgently.”
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