The chief executive of the Oil and Gas Authority (OGA) has called on the sector to invest in the next generation of talent or risk perpetuating a crippling skills gap.
In the OGA’s official call to action, the industry leader said despite actions already taken in the wake of a dramatic oil price decline more “significant change” was needed.
However, he added the sector’s “expertise, imagination and tenacity” would see it weather the storm.
“Irrespective of the oil price, the UK offshore oil and gas industry needs to change,” he said.“While the headwinds are strong, the expertise, imagination and tenacity of our industry and the people it employs are more than capable of rising to this challenge. The OGA is urgently working with industry and government as a catalyst for this change and now is the time for everyone to demonstrate leadership.”
The industry’s most immediate needs are costs and talent, according to Samuel. Since the oil price halved, the industry has seen more than 5,500 jobs cut.
“It’s vital that companies respond to the current difficult operating conditions in a thoughtful and sustainable way that enables them to manage their business today without undermining their ability to be successful tomorrow,” he said.
“The OGA is working with groups such as the Scottish Energy Jobs Taskforce to encourage companies to consider all possible alternatives to redundancy and retain capability in the UK.
“We’re encouraging companies to continue to invest in training and developing people, securing the skills and expertise the industry needs for the future. It is important the apprenticeship, trainee and graduate schemes are retained. Failure to do so will create a significant skills gap in years to come.
“It is equally important for leaders at all levels to demonstrate and ‘role model’ behaviours that will help attract the next generation of oil and gas professionals.”
The OGA report also referenced the “overzealous legal and commercial behaviour” first highlighted in the Wood Review before saying significant gains were still needed to combat an inflated cost base.
The OGA’s ‘Call to Action, Six Months On’ report, said: “The significant fall in production efficiency and sharply rising costs have left the UK oil and gas sector particular exposed to the drop in oil price.”
Samuel added: “We have seen some excellent examples of highly constructive commercial behaviours however this is not across the board and a significant shift is still required as we look for new, more efficient ways of working in the maturing UKCS.
“Given the low oil price environment and related low – and in some cases negative – profitability, operators and service companies clearly recognise the urgent need to work together to reduce costs and improve efficiency.
“There are some great examples of progress, such as Nexen’s 30% improvement in productivity – or ‘wrench time’ – in just six months. This was made possible through excellent engagement and solutions from the offshore workforce who have numerous good ideas. We would like to see all companies fully involving their frontline staff as sustained efficiency improvements won’t be achieved just through the boardroom.”
The OGA leader pointed to Nexen’s adaptation of the Marginal Gains Theory – a system created by the British Olympic cycling team – as an example of tangible change.
The firm encouraged staff to breakdown routine work activities in a bid to identify small gains. The move resulted in a 30% increase in offshore productivity and an additional 140 million barrels of oil equivalent (MBOE) for the firm.
The report also highlighted BP’s move to halve its storage locations and inventory items, generating $32million for the oil major.
In the report, OGA also welcomed the formation of the new Efficiency Task Force, which is aimed at delivering the behavioural change the sector “needs to compete in a lower oil price world”.
However, it stressed: “Operators and service companies recognise the urgent need to create a competitive cost base and improve efficiency. It is now essential that these good intentions quickly translate into tangible results and the OGA will monitor progress every two months.”
The OGA will also continue to lead the production efficiency agenda, according to the report.
This includes the development of an EOR strategy focused on polymer and low-sal water technology, which has the potential to deliver an additional 250 million boe over the next decade.
It will keep tabs of “company scorecards” which will tally leading and lagging performance indicators, including production, investment, well-work, production efficiency and capital project delivery. The sector scorecards are expected to be introduced next year.
They will be coupled with the OGA’s efforts to increase exploration.
In the first half of this year, seven exploration wells and nine appraisal wells were drilled – a significant drop on the first six months of 2010 where 16 exploration wells and 15 appraisal wells were drilled.
The OGA also revealed plans for the next two licensing rounds to target frontier and mature basins.
Samuel said: “Revitalising exploration activity is a priority and, with three vessels currently acquiring data from the Rockall Trough and Mid-North Sea High, we have made swift progress with the Government-funded seismic programme which will enable us to make 40,000km of high-quality 2D broadband data freely available to industry in early 2016.
“To help companies plan future exploration programmes we also want provide an early view of future licensing rounds. In 2016, the 29th Offshore Licensing Round will primarily target under-explored frontier blocks, reducing the impact on operators’ near-term capex and leveraging the data from the ongoing seismic campaign.
“In 2017, the 30th Offshore Licensing Round will focus on mature parts of the basin, supporting our strategy to extend asset life and maximise economic recovery. It will enable open acreage, fallow licenses, ‘discovered undeveloped pools’, and other 2016 relinquishments to be evaluated and consolidated into hub opportunities.”
“Our plans are not yet fixed and are subject to approval and completion of strategic environmental assessment process. We look forward to getting feedback from the industry at Offshore Europe.”
Despite the detailed report outlining how the OGA would leverage all it could from the North Sea, Samuel stressed the solution didn’t rest with the OGA alone.
He said: “Our Call to Action report in February 2015 identified clear actions for the OGA and for industry and has helped to focus these collective efforts on the most urgent priorities.
“The OGA is serving as a catalyst for change but we don’t have all the answers. I always say that we ALL need to lead the change and inspire a new generation of oil and gas professionals with the vision and expertise to create a positive, long-term future.”
“Six months on, our latest report describes what we’ve done to establish the OGA as an independent regulator, the new regulatory powers included in the Energy Bill and how the MER UK Strategy will shape the future operating environment on the UKCS. It provides an update on the actions identified in our original report, highlights some of the positive work that has since been done and underlines our expectations of industry. Continued cooperation and collaboration from industry, government and the OGA is vital.”
As the international prepares to descend on the Granite City for the bi-annual Offshore Europe, the chief executive said one thing was resoundingly clear.
“The UKCS is open for business and we want to secure new investment,” he said.
“It is a world-class hydrocarbon province where significant oil and gas resources and economic value remain to be delivered.
“The £1.3billion of measures announced by HM Treasury in March demonstrate the UK Government’s commitment to create a stable fiscal regime.
“UKCS operations are served by a world-class UK supply chain and annual turnover of around £35 billion making a significant contribution to the UK’s balance of trade through exports and supporting around 375,000 high-skilled jobs. The diversity of our workforce is matched by the diversity of companies which brings innovation to the next phase of the North Sea’s development.
“I recognise the challenges ahead but the investment opportunity remains strong and I am confident that the UK Continental Shelf will be a great place to do business for decades to come.”