Is the Oil and Gas Garden rosy?
Is the Oil and Gas garden rosy?
There is a great film worth watching which is called ‘Being There’ starring Peter Sellers. It is all about his character as a gardener. He is humble, consistent and tends the garden and it is partly through the film that you realise everything is not as it seems. I have been thinking a little bit more about this more recently as my daughter is getting married in July. I have been spending much more time working on our garden to ensure it is in great shape for the wedding, pictures and family BBQ. It has given me time to reflect, enjoy the art of practice, improving the foundations and focusing on the things that are important.
Then today, a friend of mine sent me this quote which was a question posed to Buddha. The question was, “What is the difference between I like you and I love you?” This was beautifully answered as follows “When you like a flower, you just pluck it. But when you love a flower, you water it daily. One who understands this, understands life”
For a rosy garden, we need to create the right foundations, the right conditions and then water and nurture the garden whilst removing the weeds. What we should not do, is remove and throw away the flowers. Then we can have a beautiful and sustainable garden that we can enjoy for years to come.
Maybe what we should do is simply follow this advice. “At some point we just have to let go of what we thought should happen and live in what is happening”
So in the Oil and Gas garden what is happening today – Facts first?
Oil price today is to least 35% higher than it has been over the oil price history over the last 150 years and is around 25% than the average price of oil between 1985 and 2005.
Brent futures market in March this year was $48/bbl rising to $54/bbl by 2020, today that market has changed from $48/bbl rising to $62/bbl by 2023 bringing consistency and more confidence in the market
Current Brent price is competitive against other energy sources and hence in the right place moving forward.
Oil demand has continued to rise from 84mm bbls/day in July 2010 to around 94mm bbls/day in 2016. That is an increase in demand of 10mm bbls/day in the last 6 years. Interestingly, OPEC supply has only increased from 30mm bbls/day to 32mm/day but non OPEC members have increased production from 50 to 57mm/bbls/day. So demand and supply are closely matched
Gas spot market is starting to improve and is currently at 36p/therm
OECD countries have only reduce demand from 48mm bbls/day down to 46.5mm bbls/day but non OECD countries have increased their demand by nearly 10mm bbls/day
There are around 370,000 skilled and competent people working in the UK sector
There are around 20 billion barrels still to develop in the UKCS as well and producing the current 2P reserves
In 2015 the UK exported over $24 billion of equipment and ‘know-how’
The sales volumes for the UKCS between 2016 and 2050 could be somewhere between $1.5 Trillion and $2.6 trillion market.
If you looked at all of the above in isolation of the current woes in the UKCS sector, you would say that the industry is in good shape, we have the right level of supply and demand, a reasonable oil price to maintain competitiveness, plenty of reserves to develop, a highly skilled workforce and good potential in terms of future sales revenues if we capitalize on the opportunities.
So back to my opening remarks, the question is, “are we as an industry more biased to being a florist and just picking the flowers we like, or are we/do we need to move to being a gardening and tendering and watering the garden we love for longer term enjoyment / sustainability.?”
It is a lot easier being the florist but a lot more rewarding being the gardener. The gardener needs to be out in all weathers, use hard graft to dig the foundations/soil, needs to be fully aware of the seasons, the environment and most of all the threats from bacteria, weeds and wildlife. But when you sit back and see the results it is far more satisfying than just tying together a bouquet. As a basin we have become uncompetitive, maybe we have plucked to many flowers. Now we need cut down the weeds, dig over the soil, add the right fertilizer and then start to plant a new garden and grow our business. It is all about getting the foundations right and a real vision of what we want it to look like.
The starting point though is about focusing on getting the fundamental’s right, back to basics of how we should work as an industry. (Gardens only develop well if the soil and general conditions are right.) So how do we work together to maintain the basin's competitiveness? – ie know how to water and feed the garden correctly. We need to ask the right incisive questions and then find the right answers.
What is our unit costs and how to I help to improve this?
Why do we need this special specification for a piece of equipment?
Why do drawings now take 2 to 3 times longer to produce?
Why have our man-hours norms increase so much for the same task?
Why do we have some many revisions after approved documents and drawings?
Why do we tend to work more in silo’s and work less effectively across interfaces?
Why is there mis-alignment between the operators and supply chain companies?
Why are we failing to delivery predictability and bench-marked performance on our projects?
What is the vision and values for the UKCS Oil and Gas sector?
What are we here to really do? Be a gardener or a florist?
What skills are really important for the future?
What can we be really good at and what are we passionate about?
Just a few thoughts, let all become gardeners, put in the hard work, remain humble, have a vision of how it might look, manage the ups and downs of the seasons, weather the storms, remove the weeds and pests and re-plant where necessary. But most of all we need to feed and water everything around to keep it growing and keep it beautiful so we can enjoy every moment. We can then enjoy what is happening rather than what should be happening! Only then will we get real engagement.
Commit to being a gardener and develop companies that water and feed our industry
P3L Fusion
Bringing together People, Policy and Processes through effective leadership.
Planning and Project Controls, who says they don't matter
8 年Great article
Sr Planner / Scheduler
8 年Need look for and be willing to accept the root cause and act in order to be a successful Gardner.
Consulting reservoir engineer, responsible reservoir development, technical leadership, making a difference
8 年Chris, if I can continue your excellent gardening analogy, the experienced gardener understands the potential of the garden, what grows well and where and what nutrients are needed to enhance growth. The UKCS is not understood in this way, largely because the Resource base has never been regulated; operators and investors - the florists - have been allowed to pick the flowers without understanding the garden. The potential remains, but the investment opportunity lacks clarity, it is confused by what's been taken and then by unstable weather from elsewhere that damages the poorly maintained plants and bedding. It is time for a proper assessment, by experienced gardeners, to first understand the full Resource potential and then, rather than hacking away with the old garden tools in a bid to save costs, invest in some sharper new tools and some nutrients and then apply them with solid gardening experience to grow a new bloom, a different future. All gardens can look amazing with the right approach, the North Sea is no different.
Senior Project Manager - Available for long or short term assignments
8 年Chris, this is a very stimulating article and very much echoes the presentation you delivered at a recent meeting I attended. It was good to catch up. I would personally regard myself as a 'gardener' and with many years of working to deliver top drawer performance on projects around the globe, fully subscribe to the incisive and challenging points you have tabled. Chris and others reading this, many of these questions have answers and solutions within the gift of the committed 'gardeners' amongst us to deal with, but only if we can influence governmental bodies and others with influence, to take up the baton. Who are the 'others'? They certainly include the investors in our oil and gas industry. We need to do more to encourage their confidence. This has to focus on improved performance and cost effectiveness across the entire project life cycle. This last sentence being a Project in its own right which has been kicked up and down the road decades. Time has come to trap the ball and score the goal - sorry England national football team but maybe it figures, not so subtly, as a case study (I am a disgusted Englishman by the way). But seriously, I am not Percy Thrower (there's a tester for some of you), but I am willing to positively contribute to providing the solutions. Ulterior motive - I'm currently in between jobs and my dear lady wife is 'encouraging' me to channel my experience and motivation to something useful. I consider Chris's challenge particularly useful. Thanks Chris. You have stimulated the thoughts of many people. Like I say, I am more than happy to pitch in.
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8 年I like the Buddha quote. Given environmental impact of burning fossil fuels, is it not the case that the oil & gas industry likes Mother Nature, but does not love her?