As the Offshore Technology Conference OTC kicks off in Houston, Texas today companies in the UK oil and gas industry are turning to new technology as a way to breath fresh life into the sector during challenging conditions.
The 2015 OTC arrives as the global oil and gas industry contends with the effects of falling commodity prices while some areas, in particular the North Sea, also faces the challenge of significantly reducing production costs.
These conditions were reflected in the recent Bank of Scotland Oil and Gas report 2015, which highlighted a slowing in the previously rapid pace of overall investment and job creation across the UK oil and gas industry.
However the report also found that the sector is continuing to drive fresh innovation through technology as a long term solution to these challenges, with over a third of UK oil and gas companies surveyed from across the industry stating that the adoption of new technology could stimulate activity in new growth if the oil price stays low.
Investing in new technology, although often involving a high up-front expense, can actually prove a more effective way for oil and gas companies to reduce costs and raise productivity than through job cuts.
Digital oilfield technology has become something of a buzzword in the UK oil and gas industry in recent times thanks to its ability to cut costs and boost production. A recent McKinsey report highlighted that the technology had allowed one major oil company to cut its operating and staffing costs by 10 to 25 per cent while at the same time increasing production by 5 per cent.
The focus on new technology has the potential to generate a welcome boost for the UK’s many innovative oil and gas technology companies too, particularly in Aberdeen, which is home to a number of subsea technology firms. The potential benefits around cost and productivity could encourage significant investment in this type of technology by large production companies with billions in capital embedded offshore.
Not just an answer to short-term issues in the oil and gas sector, technology was highlighted as an important longer-term focus for the industry in the eminent Wood Review before the current oil price fall. A ‘core’ recommendation of the review included a call for the new Oil and Gas Authority to work closely with the sector to focus on better deployment of current technology, as well as the development of new technologies.
With incentives also recommended by Sir Ian Wood as a way of encouraging firms to trial and deploy new technology along with demonstrations from UK oil and gas companies of how they are actively deploying the latest technology as part of their annual stewardship review, technology looks set to become a key driver of the industry.
This year’s OTC conference is arguably about much more than just technology. The 90,000 attendees from more than 120 countries across the world represent one of the most resilient industries that is constantly innovating for the future. As the industry prepares to gather in Houston, the importance of technology in overcoming the global challenges currently faced by the oil and gas sector is clear.
Stuart White is Bank of Scotland area director for Aberdeen and the North of Scotland.