Learning from other Geographies North Sea

Transcription

1 AOG Conference Learning from other Geographies North Sea Adam Davey & Stephen Marcos Jones 24 th February 2017

2 Who are Oil & Gas UK? Raise profile Deliver industry initiatives Promote dialogue Engage with governments and other stakeholders Oil & Gas UK s vision is To ensure that the UKCS becomes the most attractive mature oil and gas province with which to do business

3 Agenda 1 Where were we in 2014? The case for change 2 Industry Intervention The ETF 3 Where are we now in 2017? Impact of ETF 4 Q&A

4 Where were we in 2014? The case for change

5 Total Expenditure ( Billion Money) Industry expenditure was at an all time high Decommissioning Costs Exploration and Appraisal Costs Development Costs Operating Costs Source: Oil & Gas UK, OGA 5

6 Cash-Flow ( Billion Money) In 2014 the UK Upstream ran a free cash-flow deficit of almost 5 bn Gross Revenue Post-Tax Expenditure Post-Tax Cash-Flow Source: OGA, Oil & Gas UK 6

7 Turnover ( billion Money) Oilfield service companies were growing but could see the future was not bright 45 Facilities Marine and Subsea Wells Sevices Support & Services Reservoirs Source: EY 7

8 Industry s Intervention: The Efficiency Task Force

9 The Efficiency Task Force Oil & Gas UK Board ETF Steering Group Business Processes Inventory Management Compression Systems Procurement Logistics Standardisation Subsea Standardisation Valves Cooperation, Culture & Behaviours Industry Behaviours Charter REE CIN Maintenance

10 Business Process

11 Efficiency in Inventory Management Apache North Sea, Centrica, EnQuest, Shell Upstream International and Talisman Sinopec Energy UK Limited 200,000 items of varying value on the trading platform

12 Efficiency in Procurement

13 Efficiency in Logistics

14 Standardisation & Simplification

15 Subsea Standardisation and Simplification Real Life Case Study -Prospect Review Centrica West Pegasus Applying the Theory Research Findings Potential efficiencies that could be applied to subsea developments by adopting a fit for purpose and a more simplified approach to projects. The objective of undertaking this prospect review was to establish what cost savings could be realised when applying the findings identified to date to an existing prospect considered economically challenging.

16 Subsea Efficiency Cost Savings Range* Project Management and Engineering 20.4% 24.7% Procurement, Manufacture and Fabrication 14.8% 28.3% Transportation and Installation 16.3% 33.6% The above % indicates the savings achieved within these groupings. Overall Percentage Savings 20.4% 24.7% * Dependant on Field Option Approach is not just limited to subsea application Further cost savings are possible through application to other areas

17 Culture & Behaviours

18 Industry behaviours and level of collaboration is improving

19 Rapid Efficiency Exchange Portal to facilitate cross industry learning and sharing of case studies 50 industry efficiency improvement case studies Highlight challenges being faced to encourage potential solutions REE v2 being developed Inclusion of workforce engagement element Ideas submission portal Activity tracking/follow-up assessment Discussion forum

20 Focus for 2017

21 ETF Deliverable Prioritisation High Promote 1 Focussed Priority 2 1 Culture & behaviours 2 Communications 3 Logistics Impact Commodities (valves test case) 5 Procurement & Tendering 6 Subsea 7 Compression 8 Inventory Low Low Low Priority Focus Early Impact/Quick Win High Training and competency to be scoped 21

22 Where are we now?

23 Total Expenditure ( Billion Money) Expenditure is heading back toward 2010 levels Decommissioning Costs Exploration and Appraisal Costs Development Costs Operating Costs Source: Oil & Gas UK, OGA 23

24 Capital Expenditure ( Billion Money) Attracting new investment into the basin is one of the biggest challenges currently facing the UK 16 Committed Investment Potential Upside from Projects yet to be Sanctioned Source: Oil & Gas UK 24

25 Operating Costs ( Billion Money) Operating costs have come right back down to levels last seen in Operating Cost Operating Cost Forecast Upper Range Source: Oil & Gas UK 25

26 Is the cost reduction market driven or sustainable over the long term? Price Reduction 15-20% 20-25% Operational Change 10-15% Deferred Demand 40-50% Eliminated Demand 26

27 Production (Million boe/day) Production back above 1.7mn boe/d, driven by efficient operations and new capacity Source: Source: Oil & Oil Gas & UK Gas UK 27

28 Unit Operating Cost s ($/boe Money) Unit operating costs back to a sustainable level... Future production holds the key to this picture Source: Oil & Gas UK 28

29 Cash-Flow ( Billion Money) Summary: Last year was the first year of cash-flow surplus since Problem solved? Not quite Gross Revenue Post-Tax Expenditure Post-Tax Cash-Flow Source: OGA, Oil & Gas UK 29

30 Any Questions? #oilandgasuk 2016 The UK Oil and Gas Industry Association Limited, trading as Oil & Gas UK