Industry expert Peter Gaffney warned the oil and gas industry not to begin decommissioning in the North Sea too early as oil prices decline.
The co-founder of Gaffeny Cline & Associates was in Aberdeen to speak at an event which sees more than 200 delegates from across the world come together.
He sat down with Energy Voice during the Aberdeen – Houston Gateway to discuss where he sees the industry heading as it rebounds from declining prices and higher production costs.
Mr Gaffney said: “I think to believe in a price decline that will you tend to think well, maybe I’m going to have to decommission some of these fields much earlier. I belong to a school of thought which is ‘please, please don’t think about too early decommissioning’ because we always find another way to get an additional barrel out with some new technology or some different approaches to cost.
“Therefore if you’ve left the facilities there as long as possible we can go back and get some more oil out of those same reservoirs.
“I hope that, again, this time the industry won’t feel they have to decommission everything very quickly.
“Sometimes we tend to decommission a little too early.
“I think it’s tough, always on a downturn, it’s very difficult. The inclination is always is to reduce personnel and I think a lot of us who have been in the industry a long while often think we reduce the personnel too quickly sometimes and we frequently let the wrong people go by accident and we wish we had them when the market turns back up.
“Its tricky and they have to try and keep a business going which will come back in the future and that takes a fair amount of management skills- which projects do we slow down, which projects do we shut down temporarily? Which projects do we continue to encourage?”
But he said the most recent challenges the industry faces are no different than previous cycles of oil price decline.
He said: “I think they’re much the same, if I look back on my life I’ve been involved in about nine. They all have much the same approach, some come back very quickly. The 1980s one was very slow to come back. We went from about $38 down to $8 in the 80s and it really took us till well into the 90s to come back.
“We’re in a cycle at the moment but we went from $140 to $40 in 2008. It came back relatively quickly to $100. One hopes that will happen this time too that we’ll get back up the curve. But it depends a lot on what is happening in the world. On the demand scenario and new production – whether it’s frack production, non-OPEC production around the world where we are continuing to find quite a lot.
“I think it’s very difficult to tell, in the last few days we’ve had a drop and WTI has dropped. The futures market which drives a lot of this is very shaky and concerned about new production coming on at the moment. There’s the possibility that some new arrangement with Iran might work, may lead to the possibility in the next 6-8 months of more Iranian production . That kind of thing may never happen – but it influences the market.
“One can say it might go down a bit further but one hopes we’re into the spring of the oil price and it’s on its way up.”
Watch the full interview with Peter below.
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