Two years into the downturn and still counting – but also still drilling and producing oil and gas. Since 2015 amazing strides have been made in efficiencies and technological advances, meaning that breakeven prices have dropped dramatically. It is reported that even traditionally high cost areas like deepwater sub-salt can now be made economic at an oil price of less than US $45 per barrel.
At the forefront of this productivity boom, of course, are the US tight oil plays, where increased and more efficient production has been spurred on by innovations in drilling, hydraulic fracturing and geosteering. As a result, production from the Permian Basin alone is up nearly 50% over the last three years.
This is an example of the very different industry which seems to be emerging from the price abyss; one that needs to be agile and dynamic to optimise its assets. The word that seems to epitomise this new thinking is ‘collaboration’. Adversarial attitudes should be a thing of the past, it is suggested, particularly in mature provinces like the North Sea, where partnerships between the growing number of smaller companies in that arena will be key to extracting resources in the most efficient manner. More collaboration between companies also means looking at issues differently and moving out of the corporate mind set. It should result in different and innovative ways of doing business.
Building long-term relationships with, rather than squeezing, the supply chain is key. Everyone has a part to play in the future of this business. E&P companies will need to develop new work practices with the service industry, sharing data and information and creating partnerships for technological advancement and greater efficiencies. Ultimately, collaboration between operators and suppliers should not just result in efficiency improvements, but in reduced costs.
Most importantly, collaboration must become part of everyday practice, not just theory, with a substantial shift in thinking, particularly with regard to the supplier-operator relationship. This needs to be done to ensure that when the price environment starts to improve we are ready for it with a new, revitalised and streamlined industry. Otherwise we will just slip back into the old cycle of boom and bust.