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Capacity remains an issue despite UKCS downturn

Capacity remains an issue despite UKCS downturn
IAN Burdis agrees that the North Sea still presents exciting opportunities for development, with encouraging discoveries and clear development candidates such as Breagh, Rinnes, Huntingdon and perhaps Cladham; also Laggan/Tormore, Rosebank/Lochnagar, Fyne & Dandy, Causeway and Columbus helping to buoy the UK industry.

IAN Burdis agrees that the North Sea still presents exciting opportunities for development, with encouraging discoveries and clear development candidates such as Breagh, Rinnes, Huntingdon and perhaps Cladham; also Laggan/Tormore, Rosebank/Lochnagar, Fyne & Dandy, Causeway and Columbus helping to buoy the UK industry.

“Some may be marginal depending on oil price,” says Burdis.

“But if the cost base comes down significantly, that will help, and that will be good for us.

“We have a full range of services that can now be offered right through reservoir management, integrated projects here and the overseas, where we’re providing the full scope of services.”

One of the current worries of Burdis and others in the well construction management segment is what happens when oil prices recover to more economically attractive levels. Is there a danger of shortages again?

The answer is yes.

“This is a fluid market, things are generally down, there are limited opportunities and a limited number of rigs in the North Sea. If everyone decides three months from now on the back of rising oil prices that they want to go out and do all the business they’ve been planning, there still won’t be enough rig capacity to do it.

“If you get it wrong, the chances are that you’re not going to get a rig.”

So, despite the downturn, rig capacity remains an issue in the North Sea. This, in turn, presumably makes it pretty hard for the majors to drive a rock-bottom rates policy with rig owners, does it not? Burdis thinks so.

“We’re seeing a bit of a hard line from the drilling contractors now to the extent that rigs will be stacked rather than go out at offers below $300,000 per day.

“The Arctic II is now cold-stacked, and that will not come out of Invergordon for less than a 12-month contract, so that’s off the market … one semi down already.

“There are two other semis there from the Oilexco contract.

“There are a couple falling off contract … Byford Dolphin and Borgsten Dolphin. However, Dolphin Drilling’s already offering the Borgsten in India, which would further reduce capacity here if it’s taken up. Dolphin already has a presence in India and knows what it’s talking about regarding big opportunities there.”

So have operators learned anything from the late-1990s price crunch, an episode that left scars to this day in the North Sea. The Burdis response is intriguing.

“Our reservoir team has carried out a significant amount of training and personnel development for the majors. They were told back in January that, despite the downturn, ‘We, the operators, have learned our lessons and we’re going to continue with the training and development of staff, so don’t worry about that’.

“That gave us heart. But here we are in February getting called in by the majors, this time weeping into their handkerchiefs, saying ‘Oh dear, oil is only $40 a barrel, woe are we. Reduce your prices’. I don’t think that’s necessarily wrong, but it does stick in the throat.

“What they’re not saying (yet) is, we’re not doing it. They’re saying that, if we can get the cost base day down, commensurate with a $40 price rather than $120 or more, then we’ll continue with the training.

“That’s encouraging as it means that if you’re still training people, you’re not laying them off.”

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