It’s 12 months since the price of oil plunged from the high platform of $115 per barrel into a pool of uncertainty and confusion, and the ripple effect from that dive into the unknown has touched most of us in one way or another.
It’s appropriate that the results of the second Energy Voice survey are launched on the first anniversary of that descent. I say ‘first’ because nobody knows how long the current situation will last. However, we’ve all come to appreciate that the hope some of us had last summer of a rapid upswing in price to match the decline is not going to happen.
The Energy Voice surveys are extremely useful, because of their frequency and poignancy of questions asked of respondents. They are providing the industry with a snapshot of the state of play as it is right now, adding further fuel to the debates occurring in boardrooms all over the world.
Last week, while presenting the BP Statistical Review of World Energy, group chief executive Bob Dudley made clear that the days of $100 barrel oil were over in the short term at least, stating that the pre 2014 period of ‘eerie calm’ in oil prices was at an end and we had returned to the ‘normal conditions’ of volatility and uncertainty.
It’s clear from the Energy Voice survey results that while optimism still abounds in terms of overcoming our long-term challenges, a greater sense of realism is creeping in. The first survey launched in May revealed that 44% of respondents were supportive of an oil price in excess of $100 by 2020. This time the figure has fallen to 38%.
Realism is also apparent in the responses to questions on research and development (R&D). A cause for frustration is that the findings show a clear recognition of the problems the industry faces, and the impact of what will happen if we let R&D and new technology adoption slide. However, there is also an acceptance that not enough is being done to avoid what has the potential to be a lifeline for our future.
It’s saddening but not surprising to see that more than 30% saw a reduction in technological investment, with 58% of exploration and production (E&P) companies among those. Nor was it surprising to see the large majority agree that the impact of a decrease in R&D on the offshore industry over the coming five years would be significantly detrimental, leading to reduced exploration and missed opportunities.
However, a worrying aspect from the findings is that while overall most people stated a willingness to apply new technologies had not changed, 50% of E&P respondents said it had reduced. And, within the next five years a reduced appetite for R&D investment is expected to overtake hesitance to be the first adopter as the primary factor limiting new technology uptake.
Similarly a large majority of respondents across the board recognised that better economics was the main benefit of increased standardisation for new capital equipment, but a majority also posted that they had seen little standardisation occurring.
So it seems that we know what the problems are, we know what the end results could be but we are not doing enough to avert them – and sadly for the North Sea there is nothing new in that situation.
Technological innovation will help us unlock the approximately 20 billion barrels of oil we have in the North Sea. It’s therefore critical to the lifeblood of the industry that research and development into new technologies for enhancing exploration and production is maintained. The Energy Voice survey results indicate that in a period of volatility and uncertainty for the global industry, we still need to look beyond our noses.
Andrew Bradshaw is the head of energy insights at Fifth Ring.