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Jeremy Cresswell: Getting it right with North Sea projects is tough call

North Sea leaks
An unmanned gas platform in the southern North Sea

Aross literally decades we at the P&J have time and again revisited the relationships between operators, main contractors and the rest of the supply chain.

Why? Because those relationships have all too often been fraught.

We have reported throughout the CRINE (Cost Reduction for the New Era), CRINE Network, post CRINE/Oil & Gas Industry Taskforce era, the build to $100-plus oil and the bust that was triggered in 2015 by Opec’s decision to defend market share.

It’s been tough on the UKCS since late 2015 and the industry is by no means out of the woods yet; witness the state of offshore drilling with little sign of a let-up until 2018.

Crises always lead to self-examination and pledges to avoid repeating past mistakes. Stripped back to the ultra-simplistic, it’s a bit like an individual saying he or she will stop being aggressive towards others and resolve to be a decent human being. Or whatever.

The only way we now have of remembering World War I is through the medium of history; but many of you are familiar with the fact that, after it was over, WWI was dubbed the “the war to end all wars” because it was so destructive that the nations of the world wanted to prevent such slaughter.

And so we had World War II, the Cold War, the Korean and Vietnam Wars, the War in Afghanistan, the War in Iraq started by the Americans and British and so on. Every one of these conflicts has led to recrimination and resolutions to find ways to avoid future conflicts but the lessons learned were quickly forgotten or are in train.

And so it is with the North Sea. Each time there has been a major crisis … that broadly means three … the UK offshore industry’s leadership has resolved to do better and implemented various initiatives in the hope that people will listen and act accordingly.

Problem is that memories are short; so too is the tenure of most senior bosses – operators and tier one contractors especially. Changes of ownership are an important factor to consider too because most changes result in folk moving on.

So, even though a huge effort might be made at the time to debate and seek to resolve issues by setting initiatives in place and getting at least some of it down on record, the world moves on and it mostly becomes a memory.

For an industry that has gone through major crises … and upstream oil & gas is an extreme examples … I believe this to be a dangerous state of affairs. It is why the cycle of screw-ups comes around and around and around again.

Notwithstanding such issues, all being well, the North Sea is gradually clawing its way back to reasonable health, helped by initiative presumed to be well known to our readers.

Moreover, there is even potentially game changing exploration under way, both West of Shetland (basement oil) and in the Southern North Sea (deep gas).

One of the key-most organisations in the recovery is the UK’s Oil & Gas Authority which has just published an assessment of recent UKCS projects.

I’ve been picking through an early copy and the old chestnuts encountered … of which there are many … are a perfect illustration of how just how fragile past resolutions can be.

The following extract speaks volumes: “Since 2011 fewer than 25% of oil and gas projects have been delivered on time; with projects averaging 10 months’ delay and coming in around 35% over budget (relative to estimates made in FDPs (field development plans) consented by DECC (now Department for Business, Energy and Industrial Strategy)/the OGA)).”

In essence, the OGA is referring to the Indian summer of projects that isn’t over yet, given that large developments like Clair Ridge and Mariner are still in-train. One might think that such projects have 40-50 years of legacy learning behind them. Evidently not. Witness this statement: “There is generally a lack of recognition of project management skills in the oil & gas industry.”

A simple solution is offered: “Realistic, as opposed to aspirational, schedule setting and clients endorsing the value of project management qualifications, experience and competence will help to improve the predictability of project outcomes. This will also have the knock-on benefit of increasing investor confidence.”

For more than 25 years I’ve witnessed this industry banging on about why adversarial, prescriptive relationships don’t work. Guess what, the OGA is doing it too because this cultural problem has still not been eliminated.

The OGA says: “The UK oil and gas sector has evolved with a high degree of prescriptive control in the way projects are delivered. Contracting terms and behaviours have been largely construed as adversarial, on the large, rather than collaborative.

“Many behaviours continue to contribute to poorer project delivery, inflated budgets and schedule, or projects not even getting sanctioned.”

Little wonder with contractors grumbling that: “Time and time again we are faced with clients driving unrealistic deterministic schedules. It has not been unusual for our customers to dismiss probabilistic schedule analysis and one instance of it being referred to as ‘mumbo jumbo’.”

Again, the OGA proffers a solution: “Roll out industry lessons learned regularly and meet with operators before sanction to make sure they have thought about all the main lessons learned. Potentially develop a check-list for major projects as an aide memoire. Make the OGA more visible at the start of a project.”

Another laudable if blindingly obvious takeaway from this latest OGA report is the following: “There is significant benefit to be had from making use of what you already have, i.e. looking harder at existing facilities, destructing redundant equipment to make space for new (rather than creating space through expansion, cantilevers etc.), using infrastructure already there but previously used for something else (such as old production risers now used as conduits).”

And so-on and so forth.

OGA’s report is built around common sense and it’s commendably short. Perhaps it should be retitled ‘The “Ladybird Book” on how to manage projects.

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