The need for much more standardisation in the oil industry has been a key concern for more than a decade, although to date headway has been slow
In recent years, individual operators have been reluctant to agree on common systems and methods, even if billions of dollars of savings were being passed up around the globe, as each operator believed its own approach was superior.
However, the recent drop in oil prices is putting significant pressure on firms to cut costs and find more efficient ways of working, which is in turn giving fresh impetus to standardisation initiatives. For many years, high oil prices papered over cracks in the offshore industry and masked inefficient production techniques. With the recent announcement that OPEC has agreed to continue its policy of unconstrained output for another six months, there is no sign of relief anytime soon. As such, it is important that operators find solutions and find them quickly.
Encouragingly, some producers are reporting progress. Bob Dudley, Chief Executive of BP, told a recent OPEC seminar that the company had previously been hamstrung by a habit of viewing every project as challenge that needed its own unique solution.
He added: “That has led to some great technology, but in fact there is often a real case for using more solutions off the shelf. We started down this road some time ago in BP and we have now dramatically reduced the number of versions of hardware that we use.”
Addressing this has been a priority for BP, and the company now has the same subsea control pods on the seabed in the Gulf of Mexico and Azerbaijan, and the same trees in the West Nile Delta and Trinidad. Additionally, there are a number of similar standardisation efforts currently being made by the company across the globe.
Most oil and gas companies come from a tradition of developing individual projects designed to specific geological conditions. To be successful in the current economic climate, they must overcome the natural reflex to think that their projects are unique and therefore resistant to common approaches. For example, frequently-made components for any other industry could have a price tag of a few thousand dollars, but its one-off equivalent for the subsea sector can end up costing hundreds of thousands of dollars. The lack of standardisation in the oil industry’s approach to documentation is also a headache, with suppliers swamped by paperwork for each bid and every project won.
Samir Brikho, Chief Executive of Amec Foster Wheeler, highlighted the scale of the problems facing the sector at last month’s OTC oil show in Houston. He pointed out that thousands of offshore platforms were virtually all different, despite essentially doing similar jobs. Stressing the need for standardisation, Mr Brikho emphasised that: “We don’t need to reinvent the wheel every time.”
What the oil industry really needs is for all the operators – from super majors down to small players – to work together as one group so uniform standards are brought in throughout the whole upstream sector as a matter of priority.
One way to achieve this may be through the creation of an industry standardisation summit to be attended by every producer. This would allow all producers to agree on the best systems and methods to take forward with their suppliers. If all operators signed-up to the same standards, there would be a real opportunity for them to save money and time, in addition to increasing quality and reliability plus cutting duplication of effort.
Ultimately, no significant value will be created unless all producers adopt the same systems and methods. This means that for such an agreement to be successful, all producers should be involved. Costs in other industries, such as car and aircraft manufacturing, have been driven down by mass-production methods. The oil business must now follow.
Tough times continue to lie ahead for offshore producers in the months ahead as they struggle to get their cost base down while also coping with the low oil price. They will have to make many changes to current working practices, and learn to collaborate more to survive and thrive in the new business environment.
Advancing standardization will help operators rein in project time and cost overruns. It’s an opportunity they must grasp and no doubt the downturn and recent technological innovations like 3D printing will make them less resistant to change. Overcoming these issues will be a significant challenge, but solutions do exist. Standardisation must be at the top of the agenda, but ultimately progress won’t be achieved without collaboration.