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Working co-operatively and learning from others is key to improving UK oil and gas industry efficiency

19 May 2015

Ardent co-operation across the UK oil and gas industry which draws on the experience of others is important in helping to contain inflationary pressures and achieve a sustainable future for the UK Continental Shelf (UKCS), a London audience heard on May 19 at an Oil & Gas UK briefing, sponsored by Costain Upstream Ltd and Herbert Smith Freehills.

Stephen Marcos Jones, Oil & Gas UK’s business development director and chair of the event, explained the serious challenge the industry is facing: “While the tax reforms announced in the Government's 2015 Budget and the establishment of the new regulator, the Oil and Gas Authority, will take effect over time, Oil & Gas UK estimates that efficiency improvements of 30 to 40 per cent need to be made by 2020 to put the basin back on a healthy footing.

“Companies are having to make tough decisions on their capacity during the downturn and are individually taking measures to improve efficiency. However, co-operative working across the industry and drawing on the measures that have yielded success in other sectors and countries can also help deliver the cost and efficiency improvements required to secure a long-term future for the UKCS.”

In addition to the range of pan-industry projects revealed earlier this month, the Oil and Gas Industry Council has commissioned PwC to study the measures taken by other industries to improve efficiency. Through interviews and research, the ‘Cross-Sector Efficiency Study’ aims to identify characteristics that drive efficiency in high performing sectors, namely aerospace, automotive, chemicals and rail, and propose tangible practices that can be transferred to oil and gas industry operations. The results will be presented in June at Oil & Gas UK’s annual conference.

Alastair Geddes, oil and gas consulting specialist, PwC said: “In last year’s Northern Lights report we noted that the oil and gas industry lagged behind leading supply chain management practices in other relevant sectors, such as process, extractive and engineering industries, by around ten years, and concluded that with more effective management, costs could be reduced by 10 per cent and profitability boosted by as much as £3 billion.  But in terms of cross-industry best practice, this just scratched the surface.

“We’ve a long history of working closely with heavy-industry companies across a range of industries, helping them to respond to severe cost and service pressures by undertaking fundamental change.  While there are many unique factors about the UK oil and gas industry, we believe this study will enable us to draw wider parallels and identify a number of practical lessons. For those leaders who are open to change, incorporating proven, best practice approaches could net significant long term business benefits.”

Speaking at the briefing was Statoil Production (U.K.)’s logistics manager, Line Kaldestad, who outlined the efficiencies achieved through shared logistics in Norway and John Catlow, cost efficiency project manager at TOTAL E&P UK Limited, who described how operators are collaborating in search of innovative ways to share and allocate resources on a basin-wide scale.

Mr Marcos Jones concluded: “There are considerable efficiency gains to be made by approaching the business in a different way and where better to look for ideas than at industries and companies which have already re-structured their operations and re-gained competitiveness as a result. The UK oil and gas industry has a firm grip on the challenge of improving efficiency and is acting to restore competitiveness so that the UK can continue to benefit from the energy security, employment and technology it supports.“

Further information on the cost efficiency initiative is available here.

Videos of the speakers’ presentations will be available here



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