Operators reducing IRM work, says analyst

A recent update by Douglas-Westwood finds that some upstream operators are curtailing inspection, repair, and maintenance requirements in the current sustained low oil price environment.

Oct 24th, 2016

Offshore staff

SINGAPORE– A recent update by Douglas-Westwood (DW) finds that some upstream operators are curtailing inspection, repair, and maintenance (IRM) requirements in the current sustained low oil price environment.

In the past two years, upstream E&P operators have scurried to re-evaluate their operational business as usual practices. As they aspire to come out of this downturn stronger, they have implemented immediate cost-cutting steps, such as the downsizing of the workforce and the elimination of redundancies, as well as longer-term savings measures, such as the rebalancing of portfolios.

While complying with legislative standards, DW points out an apparent trend that has surfaced is the postponement of non-critical work which otherwise would have been sanctioned in a $100/bbl oil period. For some upstream operators, associatedIRM requirements have retracted by some 20-30%, relative to pre-downturn levels.

While efforts to reduce bottom line figures have paid off and continue to be in play, the analyst says E&P operators must acknowledge the inevitable threshold levels ofmaintenance, modifications, and operations (MMO) and IRM spending that are required in the prevention of lost-time incidents.

According to author Michelle Gomez of DW Singapore, “It is inevitable that a current ‘fix on failure’ attitude is not sustainable and operators need to re-assess the long-term sustainability of their approach given ever growing cost accruals.

“As the recentWorld Offshore Maintenance, Modification & Operations Market Forecast 2017-2021 shows, perhaps the only positive spin on the current trough for the wider industry is a foreseeable wave of upstream MMO and IRM contracts that are due to be awarded in the coming years given existing backlogs that can no longer be postponed.”

10/24/2016

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