Mr Big or Mr Small? Of apple trees, the North Sea and decomploration.

Harvest time

Every year in late summer the kids and I go through the exercise of frisking the apple tree for use in apple sauce and apple pie and whatever other things apple our imagination supplies. The rock-pooling nets are pulled out with the step ladder, and combined with a good bit of shaking, we get what we can.

Inevitably, the biggest and best, that haven’t already been found by the parakeets or the plethora of insect larvae, are plucked early on. However, there almost always seems to be a few big pristine ones left at the top that no amount of shaking and prodding can dislodge. It might be more possible if we invested the money in a bigger ladder, but it’s that bit riskier, and nobody wants to break their neck (or their wallet) for an apple pie.

Also left are a swathe of smaller apples throughout the tree, some perhaps with the odd blemish here and there.  No doubt with a bit of TLC and attention to detail, the blemish could be cut out, and their contribution would be just as sweet – but normally we just can’t be bothered - and the appearance of things at first glance is enough to put us off. We only have a few mouths to feed, and 17 tubs of apple sauce in the freezer tends to be enough.

The geological apple tree

In the North Sea there seems to be a general consensus, little disputed, that the big and moderate sized fields, that are easily within reach, have gone – nobody is going to spend much time arguing about that. However, there are two schools of thought about what’s left – some getting out the tallest ladder they can find and chasing those big but high risk things either hidden or inaccessible at the top of the tree, and others huddling round the trunk and shaking, chasing the smaller and/or blemished little ones. Who’s right?

Previously, my initial leanings were with the big higher-risk things. It seems to be what generates the most interest from investors – after all - the time and effort required for technical and commercial evaluation of big things is often not very different to that required for the small things – the success case commissions are bigger all round for everyone – and reserve replacement ratios have a better chance of being impacted.  People might argue it's far better to attack ten high risk things on the assumption that one will eventually pay off, rather than waste time with tiddlers.

More recently though, I’ve been challenged in that view, and I’m coming-round to the idea that both may be viable. The fact is that while small accumulations often take quite a lot of attention, there is a lot of commonality between them too – particularly in the production phase – and what works for one often works for a significant proportion of others. When we line up with our apples in the kitchen and get the production line of de-blemishing, peeling, and slicing, we can process a whole lot of little apples quite quickly – and they taste just as good. 

Legoland Aberdeen - building bricks for production

The improvement in technology on all fronts is consistently and significantly cutting both finding and production costs. While the international space station might not be the best analogue on the cost front, the problem solving that occurred to get a whole lot of disparate countries working together to build a station for many diverse operations – is a good case study. Whatever you think of its merits, technologically it’s right at the forefront of human achievement. Modularity was at the heart of its design. Recognising that every bit of the station was different, but recognising enough about what was similar to design modules that could be linked together, pushed the boundaries of what could be achieved.  

A lot of smart people have been working for many years to do the same thing with offshore subsea production – there are a host of innovating companies in the countries surrounding the North Sea applying innovations to small field production and decommissioning – and these two things are not as different as we first might think. Get clever, get streamlined, at doing either, and the pay-offs will help you do both. We perhaps need to stop thinking of decommissioning as a separate euthanasia industry for oil and gas fields, and start thinking of it as a necessary pruning part of the cycle that also rejuvenates areas. Just maybe, the technology we use to dismantle things subsea efficiently – with a bit of imagination can help build things subsea as well. The North Sea - and Aberdeen in particular bless its cotton socks - has the engineering nouse to really take this to a new level globally. If you'll forgive the shameless corniness - it could be a phase of “decomploration” – exploration empowered by efficient decommissioning. Decommisioning is less about taking our North Sea pet to the vet to be put down and more about a bit of surgery to help the wee beastie get the most out of its late life. 

ISO containers revolutionised shipping in their beautiful simplicity. Tetrapak did a similarly elegant thing in making one size fit many. Sometimes lots of little problems can come together to make one big opportunity, if their commonality can be recognised and taken advantage of.

Confidence - shaken but stirring

Cost-cutting without compromising safety is the challenging name of the game, and done well helps provide robust economics even for the North Sea, at bounds significantly lower than the current price. That is the reality today. The technology is new, and the confidence of investors over past years is shaken, so it will take time, anybody’s guess how much time to recover – but I know I have been guilty of underestimating the power of human ingenuity and innovation to take things forward. I’m gradually concluding that as far as the North Sea is concerned, the pace of technological and cost efficiency advance is more than enough to keep up with fluctuations in commodity prices. The waves of new approaches coming out of the past few years, borne of necessity – have been a privilege to watch.

The high risk high reward stuff still has attraction and at a personal consultancy level I’m still working that up happily – but the small stuff is alive and kicking and I’m getting more involved. It is the new subsea production technologies – standardised modular “lego” subsea facilities that can be mass produced in small field exploitation production lines – that really offers a new pulse to the heart of the North Sea. The issues surrounding hydrocarbon exploitation and climate change won’t go away, but let’s remind ourselves that the issue is not the burning of hydrocarbons – it is the release of CO2 into the atmosphere. They need not be the same thing – and the same innovation being applied to subsea production is being applied to carbon capture. The signs are there for me that humanity can crack that nut too. 

I’ve written previously that a lot of brilliant geoscientists have gone before us, trying to make a lot of smaller things work and couldn’t, and that it is only the introduction of new paradigms that can bring these into play. That still holds – but where I have been wrong – is simply and vastly underestimating the number of technology driven new paradigms that are consistently coming to the market, and which significantly change the economics of smaller things. Like the small apples, there needs to be a steady production-line-train of them for it to make economic sense, but hey - they are there. Not every one will be for the cooking pot, but there are still some for plucking not chucking.

In the past year I’ve been able to work as a consultant with several very different companies who are tackling both Mr Big, Mr Small, and seizing the best new technology can offer. Just how soon it will take for confidence to return to the North Sea isn’t easy to predict, driven by very fickle human factors as it is, but be it short, medium, or long term, I feel the future for these companies, and others like them, is good.  The 30th Rd results will be fascinating in coming months, and what happens after it, even more so.

I don't in my naievety want to trivialise the scale of the challenges and difficulties which accompany such matters - this stuff is not easy - but I'm definitely going to be a whole lot more careful before I conclude things can't be done.

Oh, and pass the cream please.