By Frank Simpson
The UK North Sea (UKNS) is experiencing an unprecedented drop in activity due to the oil price collapse last year. An estimated 120,000 jobs have been lost with many more under threat. We’ve yet to see the worst and if costs cannot be brought down to allow activity to recover, elderly infrastructure will be abandoned and our oil industry will prematurely join the fate of ship building and coal mining industries.
A bright spot is expert drilling engineering consultancy, Merlin ERD Limited. Acknowledged leaders in Horizontal and Extended Reach well construction, this Scottish business has established a reputation for reducing costs and eradicating problems when drilling challenging oil and gas wells. As the remaining pools become ever smaller and harder to access, so this technology becomes ever more vital to ensure that no oil is left behind.
Built on a can-do Scottish attitude and a belief that the greater the challenge the more satisfaction there is in developing a solution, they really are the epitome of Yes we can. “More Dan the Driller, than Bob the Builder” notes Managing Director Iain Hutchison. Merlin like to be judged on results, “anyone can talk a good story, it’s the results that count,” continues Hutchison, who is disappointed with current industry leadership. “We can drill further than we think, faster than we think and at less risk and cost than we think” adds Hutchison, who bases his comments on international experience built up over 25 years. The company has gathered a string of accolades including its second Queen’s Award for Enterprise.
Hutchison believes that there’s too much talk, with too little action. For him it’s simple, not easy. The Wood Report estimated that there are a further 12- 24 billion barrels left in the North Sea. Successful exploitation depends upon drilling low cost, dependable wells to bring these reserves to surface. Drilling times in the UKNS have doubled in the last 10 years (OGA). A significant portion of well costs are time dependent (daily rig costs vary between £200,000 and £600,000), it’s no surprise that coupled with increased prices during boom times, these costs have surged, making small pools uneconomic.
Getting the oil to the surface is the priority upon which all other efficiencies are based. No oil, no opportunity to run platforms efficiently, maintain equipment or to become ever more cost efficient by sharing assets from helicopters to supply vessels or pipelines.
A report to the Scottish Government in September 2014 on Advanced Drilling Technologies (ADT), highlighted that proven technologies exist, which could make an additional 10 billion barrels economic. Findings were not actioned. A passionate Scotsman, proud to be a part of our British engineering heritage, Hutchison is amazed that the government and oil industry regulator have not capitalised upon the repeated expert advice on this. BP reversed a drilling performance decline in Azerbaijan through applying these techniques, eradicated problems and added an estimated $1bn of value in one year alone. That secures a lot of jobs.
It was hoped that after the distractions of an independence referendum, as well as local and national elections, our leaders would have time to act on the valid expert advice. The further distraction of the Brexit vote makes this harder and threatens further jobs. Without a step change in drilling performance, production from mature assets will dwindle and the spectre of decommissioning will cast an ever bigger shadow over our exception al offshore industry.
While some view decommissioning as a job saviour, the insightful understand that it only happens once. When it’s over, it’s over and the risk of Aberdeen becoming a ghost town is one step closer. The UKNS infrastructure is elderly, but world class. When it goes so too does the opportunity to produce much of the remaining reserves.
The time for action is now. The time to listen to the experts is now. The time to look overseas and learn from them is now. Apache Energy has demonstrated that mature North Sea platforms have so much more to offer than decommissioning jobs. It’s time apply this with a sense of urgency across the UK North Sea.