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Onshore News: Operator Short-Termism Damaging North Sea

Posted on 07.09.2004 - 04:05 EDT in ONSHORE NEWS by ginamc

Sustained buoyant oil & gas prices are not delivering the benefits that North Sea contractors had hoped for, according to the current chair of UK supply-chain grouping Subsea UK. Tight time frames, coupled with a desire by operators to "achieve project goals at the cheapest price", is forcing the North Sea sector to make some difficult business decisions, and projects in the pipeline face possible delays, Ron Cookson warned an offshore-industry gathering in Aberdeen last week.

"From a contractor's perspective, a project in Norway or elsewhere that has a two-year lead time will be pursued aggressively ahead of a UK project that has the same anticipated offshore completion but is not going to be tendered until a year later ... meaning key assets will be drawn away from the UK sector," he said.

"The likely outcome is that operators may be faced with having to defer projects in 2005 due to the unavailability of (contractor) assets, while this year, assets have been under-utilised. This is an exasperating situation for the contractor and makes prospect targeting across regional boundaries particularly difficult. However, as mature assets or projects outside the North Sea grow, it is also a problem for our customers in the longer term."

Cookson acknowledged that the subsea contracting community could be criticised for its lack of investment in new technology initiatives in the past, but pointed out that the way in which the North Sea was being run by the oil companies, and the volatility this led to, was making investment decisions within the supply-chain community difficult.

He said: "Further to this, the lack of clarity of requirements regarding the direction of the North Sea market makes decision-making for the longer term an impossible task, especially in recent times when we have been feeling our way in the dark. In short, it is vital that UK plc is able to effectively forecast demand."

However, Cookson acknowledged that some oil-company clients were taking steps towards addressing the key problems, and this had to be applauded.

This included looking to the contracting market to source management expertise for their developments and operations, while others were asking contractors to demonstrate their market differentiation.

It was important to make the supply chain more effective, he said, but it was tough for contractors and SMEs to provide new options for clients and still achieve a best-value alternative when price seemed to be the driving factor behind awarding contracts. The road to solutions lay in effective communication.

"I believe the answer to this challenge is to work closer and to collaborate with our customers so that, together, we are better able to tailor more cost-effective solutions that specifically meet their needs."

Source: The Press & Journal
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