North Sea oil firms 'missing out on $1.1bn savings'

14 December 2018

North Sea oil companies are not “walking the talk” when it comes to supply chain collaboration and integrated services, losing out on hundreds of millions in savings they could have made, according to research by Maersk Drilling.

The company’s analysis of the 101 drilling contracts signed in the North Sea during 2018 reveals that $1.1bn in potential savings has been missed.

The analysis assumed that integrated services contracts can save up to 15% of drilling and logistics-related costs.

But only a minority of operators are using such contracts, with around 20% of drilling contracts signed in the North Sea in 2018 including integrated services.

The results were presented by Morten Kelstrup, chief commercial and innovation officer, Maersk Drilling, to delegates at the Oil & Gas Council World Energy Capital Assembly in London.

He said: “The results speak for themselves. As an industry, we are not walking the talk on supply chain collaboration and have left over $1.1bn [£868m] on the table in potential savings so far in 2018.”

Kelstrup added: “Looking out to 2019–21, we estimate there’s another $3.3bn in potential savings at stake in the North Sea. This assumes that the uptake of integrated services contracts will increase by 25% in each of those years through to 2021.”

He argued that the offshore oil and gas industry needs “broad-based structural change across the value chain”.

This means that drillers and service companies need to “transform their value propositions” and oil rig operators will need to “reward quality and the end result, not time spent on the well”.

The call for action comes just months after new rules were introduced by the Oil and Gas Authority, requiring oil and gas companies to develop supply chain action plans in a bid to help firms reduce cost increases and delays in the supply chain.

The plans need to reflect a comprehensive contracting strategy, addressing areas such as supplier engagement, innovation and quality throughout the life of a project.

 

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