The fall in crude-oil price has had quite an impact on the cash flow of not only the operators of oil and gas fields but also the companies that provide supplies and services to the operators. It also revealed some “dirty little secrets” of the industry: inefficiencies, overpricing and arbitrary risk allocation in the design, planning and construction of oil and gas projects. Now is the time to redress them, says Harry Brekelmans. Speaking at the Offshore Technology Conference, he points out how an operator can improve its capital efficiency in the scoping, execution and technology of projects. But for the industry to achieve a sustained across-the-board improvement in performance, a much deeper collaboration is required among all links of the supply chain.
Ladies and gentlemen: Good afternoon. I hope you’ve enjoyed your lunch.
You certainly will need plenty of nourishment, if you check out all the goods and services on offer here at the OTC. All the links of the offshore industry’s supply chains are represented in the exhibition arena: service companies, drilling contractors, engineering firms, materials vendors – not to mention the operators of oil and gas fields. I understand that there are more than 2,500 exhibitors this year!
That’s not as many as last year. But then, last year’s sold-out exhibition space was the largest ever at the OTC. Perhaps the industry was still in denial then. This year the consequences of a persistent low oil price cannot be ignored. Major projects have been delayed, and many layoffs have been announced.
But it is not the only tough year our industry has experienced. The oil-price crash of 1986 also led to investment drying up and employment shrinking. Yet oil and gas companies persevered. They adopted new technology. They went after different kinds of petroleum plays. In the end, the industry managed to lift productivity levels high enough for many of our companies to remain profitable throughout the 1990s. In short, we learned to succeed – no matter the market price – by dramatically improving our performance. That took courageous, committed and visionary leaders.
But that was 30 years ago. Most of those leaders have now retired. So now it’s our turn to take on the mantle of leadership – to rally the industry, to make bold decisions, to inspire radical change.
Today’s industry leaders have to re-forge the links of supply chains to hammer out inefficiency, overpricing and arbitrariness. These were picked up over the last decade, when the industry chased oil and gas production on the back of economic expansion. At that time, you may recall, we had our sights set on more barrels rather than higher returns. We were convinced that global demand growth would see us through.
But this has left us today with baggage that drags down our industry’s performance. Our industry must now jettison that baggage in order to survive today’s business environment and emerge reinvigorated from it. And this requires much deeper collaboration among industry players. We’ll have to fundamentally change the way we interact with one another.