“There’s a silver lining in everyone having a shared foe,” he said.
BP’s former regional president Trevor Garlick isn’t talking about a reluctant OPEC or the US shale revolution or even a politician.
No, to him the industry’s common enemy is a depressed oil price.
It is a force that has swept the industry into a storm of slashed budgets, job losses and project delays.
In his first and only interview since retiring, Garlick said the oil price is “lower than anyone thought it was ever going to be and looking like it’s going to stay lower for longer than anyone thought it would”.
Brent has dropped 76% since the start of its decline.
“And as tough as that is the industry has reacted,” he said.
“Some would say slowly. But it has reacted and now it’s reacting quite significantly on its cost and efficiency.
“Also, bizarrely, production is going up and that’s not just because there are new fields coming on.
“People have been really working on the efficiency and cost levers.
“Of course there are job causalities in that, and a significant number of those. That’s no comfort to the people who are made redundant, but in terms of the industry surviving it has to transform quite radically.
“I think we are seeing that.”
Both Westminster and Holyrood have offered up taskforces and workgroups in a bid to steady the sector.
Garlick serves as the “shared principles and values champion” on the Scottish Government’s Energy Jobs Taskforce.
“The taskforce has a Herculean task,” he said.
“With the number of jobs that have been lost, obviously a lot of them from my previous company, it’s a tough ask for a task group – even one that I think is quite well constituted and brings in people from the unions, the civic sector, academia, Scottish government and different levels of the supply chain.
“It’s quite unlike any of the other groups we would normally deploy on this. But it’s a hell of a task to say, ‘Well how can you combat the 8,000-plus jobs that are going because of this downturn?’
“And you really can’t. But what you can do is try and help and retain the skills, retain the training, help relocate people who aren’t made redundant. Then you can look at things that are stopping us from developing more fields more efficiently.
“That will help ultimately with jobs and job security.”
Garlick has been a driving force behind the Behavioural Charter being developed in the wake of Brent’s decline.
He said: “You can read the behavioural charter and think it’s motherhood and apple pie, so what? But actually when you get a group of managing directors saying ‘I’m going to sign up to this’. And, what’s more important, is ‘I’m going to make sure my employees are going to live to this’. That’s significant.
“One guy said to me oil companies want me to give them the same chemical at a lower and lower cost every year. He said they never really ask me to develop a better chemical or offer them a different chemical.”
It’s that sort of mindset that industry needs to eradicate, says Garlick – an attitude that is widely described as “permafrost”.
“There’s a view that you can get management in this industry all violently agreeing that access, technology, innovation and best behaviours are important, but you find that doesn’t get played out lower in your organisation,” he said.
“The permafrost guys would say the problem is with the people in the permafrost. I would say the problem is the leadership.”
The taskforce is helping to thaw historical bad habits, according to Garlick.
“Actually it doesn’t require any real technology or real money to fix. It just requires a change of attitude,” he said.
“Things like, ‘I’m going to be more responsive, I’m going to communicate more. I’m going to allow people in and connect better’.
“Even if someone has a proposition that you don’t want to take further, it’s more efficient to hear them out and say ‘no’ than have them try and get hold of your five times. I think the crisis has actually brought the different sub-sectors of the industries together.”
But the North Sea veteran worries the industry will end up with an empty seat at the collaboration table when it up-cycles.
“What I am quite passionate about is that through this downturn we don’t stop recruitment for graduates or apprentices,” he said.
“I’m disappointed the sponsorship take up of the OPITO apprentice scheme is down this year. We need to make sure it doesn’t go down any more. Otherwise in four years’ time we won’t have any trained apprentices. These guys are good for the North Sea. They’re good exports for the North Sea as well, because many of these people will get their start here and then go abroad and become good ambassadors for North Sea skills.
“This does feel like the toughest of the downturns, but we should learn from the previous downturn where we did slow down our recruitment and training. That was bad thing and it was the wrong thing to do. We should strive not to do that again. Even if that means, oddly, recruiting at the young end even as we are making people redundant at the other end.”
BP took 20 of the 110 OPITO posts this year. It also slashed 20% of its workforce.
Garlick said a critical part of recovery is targeting operating costs below $15 a barrel.
“A year ago the average cost in the North Sea was $29 a barrel and now the price is around $29 a barrel,” he said.
“We have moved the average cost down to $22 a barrel, so there’s $7 headroom on an average field.
“If you look at the figures, that still that leaves you with 40% of the fields in the North Sea that will not make any money at $29.
“Now that’s won’t make money on a day-to-day running cost, so all of that money for 40% of them is spent on running the field. That means there’s no money left to invest.
“We’ve managed to get it to $22 which is good but we’re going to have to manage to get it a lot lower than that.
“There’s a combination of bringing production up and lowering costs to be able to do that.”
Trade body Oil and Gas UK is currently working with the industry to reduce the cost of drilling a well by 50%. It’s about ditching buzz words like “bespoke” and adopting a culture of simplicity, according to Garlick.
“The well count is coming down,” he said.
“You merely have to look at rigs stacked in the Cromarty Firth. You can see that not only do we have a crisis this year, because of revenue versus cost, but we’re building up a crisis down the line because of lack of investment.
“That’s where I think there’s a danger of getting into too gloomy of a discussion, because actually we have caliber and competence in this city. We have the supply chain and infrastructure offshore. We should be able to find a way through, but it’s going to be difficult.
“I think we’re going to end up with a smaller but probably stronger industry at the end of it.
“That’s sad for those who go. But it could be argued that it’s better that the 80% remains healthy or even gains health at the expense of the 20%.”
Earlier this year, Garlick hung-up his leadership hat after 34 years in the industry – 30 of those with BP.
The geologist originally set out to be a miner.
“I thought I would go to the Zambian copper mine. That seemed to be all the rage in the late ‘70s,” he said.
“Then in my last year in my undergraduate degree we did a module on oil reservoirs. I thought it was quite interesting.”
It later lead to him managing North Sea projects including Brae Alpha, Claire Ridge and Andrew.
“It’s been great but also incredibly stressful and hard work. I also think there comes a time where somebody else should take it over,” he said.
“Given that we’re going through so much change, it’s good to have new leader in there.”
The dad-of-two is currently fielding offers.
While he remained coy about his next move personally, he was confident in the industry’s ability to fight the foe of low oil prices.
“My optimism, which is stronger than my fear, is that people get it.
“The OGA and both governments get it.
“The leadership here in both the supply chain and operating community understands that there is more that it can do together as well as whatever they’re doing in their individual companies.
“There’s a greater urgency to do it. $30 oil has just made people think we have so got to do something and help ourselves.
“It’s about making a margin in the North Sea, and it’s about retaining North Sea as a competitive market globally.
“If we can come through that then we’ve got a late life future.
“There will most likely still be 20 years-plus in the North Sea. We also have the growing export business and developing decommissioning business. So you’ve got three big industries that can still stay rooted here. You can almost argue that there’s a whole other knowledge and innovation industry that can be here too.
“There’s a silver lining in everyone having a shared foe.”
Energy Voice sits down with Energy Job Taskforce champions to get to the heart of the issue. Read the previous story in the series with Aker’s Matt Corbin here.
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