Subsea 7 Chief Executive Officer, Mel Fitzgerald, today called for closer collaboration between operators, and contractors to help take unnecessary costs out of the system as the key to ensuring long term sustainability for the oil and gas industry, in particular in the North Sea.
Speaking at today's Subsea 09 Conference in Aberdeen, Mr Fitzgerald said that, "while recognising the impact of the global financial crisis has had on the ability for companies to access working capital, Subsea 7 has developed and embraced an operating model that has a 'focus on efficiencies' at the centre of building a sustainable and profitable business."
He called for operators not to focus solely on margin reduction but on removing non-value cost, defending the supply chains' need to retain a realistic margin, in order to maintain the necessary investments in assets, equipment and people.
Speaking at the conference Mr Fitzgerald said: "Contractors need realistic margins so that they can continue to invest in the assets and equipment the industry needs to exploit the potential that exists in the North Sea. This is not about high prices being charged by contractors. There has been cost inflation in recent years and unnecessary fat has built-up in the system that we have to collectively get rid off. Now is an opportune time to do it. In recent years Subsea 7 has been able to build a reputation for providing a reliable service, where operators in most cases see their projects coming in on time and on budget. This has been made possible by us stepping up and investing in the new assets, equipment and building-up the skills required to design, engineer and manage what are technically challenging projects and quite often fast-tracked."
Mr Fitzgerald called for operators to allow contractors into the development process much earlier, enabling an integrated planning approach to identify and implement costs savings, through among other things taking out unnecessary costs.
"In the North Sea Subsea 7 has been working with clients such as Venture Production to engage in the planning and design process much earlier than would normally happen with contractors. As a direct result of this Venture has seen savings in excess of $300m by being able to be more flexible around schedules, engineer projects differently and having access to vessels when they need. In most cases this allowed them to bring on production much quicker."
Mr Fitzgerald also commented on the need for the contracting community to work closely with its own supply chain to take on the Subsea 7 'focus on efficiencies' model.
"Subsea 7 has been focussing on its own critical supply network as a key part of improving our efficiencies and securing reliable on-time delivery of key components and equipment, such as vessels and pipelay equipment. Through improving relationships with our key suppliers, including having sponsorship at senior management level, we have been able to provide a more reliable service for our clients. By trusting each other, we do not need a man-marking approach to projects, and in the process we have reduced our costs, as well as provide ongoing work for our suppliers."
"The UK oil & gas supply chain is an exporter of expertise globally. If it can not survive in the UK it will be forced, through necessity, to look for other more profitable basins globally in which to do business."
Welcoming the message being delivered by fellow speakers such as Petro-Canada, who also called for a greater 'rapport' between operators and the contracting community, in closing Mr Fitzgerald made a call for operators not to go back to the 'old ways' when the mentality was much more about 'them and us'.
"The last thing we need is a return to the old adversarial relations between contractors and operators. Initiatives such as PILOT and UK Oil & Gas were set up to stop such a mentality coming back into the industry. In recent years times have changed for the better thankfully. We must maintain the momentum and objectives that we all agreed and signed up to. It's all about creating shared value, through a focus on efficiencies."