As I look back some ten years ago at the petroleum industry in general, and the service and supply industry specifically, I am amazed at the progress our industry has made during this period and the changes we have undergone. Ten years ago, with the price of oil falling precipitously, we all faced some very difficult decisions on structuring, staffing, and operating our companies in such an economic environment.
Very few people and very few companies in the industry were spared the pain. Looking back, who would have thought that in the past several years we would be breaking records in deepwater completions in that same $15-18/bbl environment? Who would have thought that today's service and supply companies would have the global reach to provide equipment in Russia or service a well in the South China Sea? Who would have thought that today's technology would allow operators to bring production on-line quicker than ever and at lower costs?
To be sure, we have lost a lot of talented and valuable people in the petroleum industry. In the US, very few industries have withstood the economic pain that we have and survived. We adapted quickly and successfully. Indeed, in their quest to renew their industries and prosper in the 1990s, many other industries have copied the steps we took 10 years ago. How did we do it? Is it complicated or simple? Let's take a look.
First. we globalized. The service and supply industry was one of the first truly global industries. We are now able to provide parts and services on virtually any hydrocarbon producing continent in the world. In the 1980s, major operators turned away from the US to access reserves which were more economical to produce in a low-price environment. The service and supply industry followed.
We built plants and developed expanded service capabilities throughout the world. That trend has continued into the 1990s as we seek to penetrate markets in Russia and China. Our corporate structures have also crept across borders. My company, FMC, owns the Norwegian subsea supplier Kongsberg Offshore. The large European engineering firm Kvaerner owns US- and European-based service companies. And the list goes on.
Second. we invested in new technologies to meet our customers' needs. Subsea technology to produce hydrocarbons on the ocean floor reduces the need for expensive producing platforms. Floating production, storage, and offloading vessels (FPS0s) obviate the need for pipeline systems, especially in remote areas of the world. Applications for other technologies such as coiled tubing drilling and slimhole wells are growing. Such new technologies are allowing us to drill and economically produce at greater depths than ever before in areas such as offshore Brazil and the US Gulf of Mexico. Technology has been tapped to bring developments on-line quickly and at lower costs.
Third, we changed the way we worked. In the past, many of us had traditionally followed the old adage "Do what we do best, let the others do the rest". Yet, our customers began to ask more of us in many areas. Chief among them were some of the engineering and project management activities that they customarily performed in-house. It became clear that the old ways of doing business would not work in the new oilfield.
Alliances between suppliers to provide total capabilities to our customers are one of the many ways we changed to provide greater value. At the same time, many suppliers have entered into direct alliances with customers, eliminating the need for a host of duplicate activities and overhead costs. Today, there is a greater interdependence than ever before in our industry - between suppliers and between customer and supplier.
Somewhat paradoxically, while US companies have traditionally been viewed as leaders in oilfield technology, the US petroleum and the service and supply industry received very little it any support from the US government, even in the darkest days. The US agriculture industry has received and continues to receive substantial government subsidies. When automotive imports threatened the US auto industry in the 1980s, the US government stepped in and negotiated voluntary restraint agreements to curb imports. The energy industry was left to fend for itself. Even access to promising domestic reserves in the Outer Continental Shelf and Alaska has been cut off. Alternatively, European and Asian governments have welcomed our technology and capital. We have survived and adapted despite the US government's actions, or lack thereof.
Many other industries, both US and other, are following our lead to prosper in the 1990s - expanding overseas, developing new products, and fundamentally changing the way they operate. Is it that simple for every company or industry? Probably not. But all of these steps have one basic tenet in common - meeting a customer's needs. Many industries have declined because they failed to focus on a successful business' primary mission - providing customers the products and services they need. The service and supply industry has never lost touch with its customers. That has kept us going where other industries would have failed.
Our industry still faces many challenges during the remainder of this decade and as we enter the next century. However, the key to continued success is the same - focus on the customer first, the rest will follow.
J. H. Netherland
Vice President, Group Manager
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