Cost reductions critical to future of UKCS

Large oil companies still have a major role to play in sustaining the future of the UK North Sea, said Total CEO/Chairman Christophe de Margerie at Offshore Europe.

Offshore staff

ABERDEEN, UK -- Large oil companies still have a major role to play in sustaining the future of the UK North Sea, said Total CEO/Chairman Christophe de Margerie at Offshore Europe.

The North Sea as a whole remains the fourth largest producer of oil and gas in the world, he pointed out, behind Russia, the US, and Saudi Arabia. In Total's case, he added, the region accounts for 35% of the group's global production. "While the decline in the North Sea output has been important, it's not as great as we thought it might have been."

Of more concern, he felt, was the recent fall-off in exploration activity on the UK shelf. The limited number of wells that are going ahead are mostly being drilled by the majors, he claimed. Economic constraints are hampering the independents in particular, but even large oil companies, he said, would benefit from a reduction in rates and service costs.

Widespread drilling on the UKCS benefited companies of all sizes, he maintained. "Discoveries lead to the creation of hubs and the potential for satellites. So when I see a number of rigs available for exploration, that's dreadful. It's a risk, and we have to be careful."

It was also important, he said, for large companies to retain their responsibilities for ageing fields. "For a long time these have been considered as not strategic, even boring - and that's part of the problem we have had recruiting young engineers to this industry. We could not make the decommissioning issue appealing to them, now we know it's not even true."

"Instead we need to train people to promote this [mature field management] as the real job of the majors." This role should not be left to newcomers to the sector supposedly "able to do it a cheaper price - I totally disagree with this." Total, he added, "will not sell our assets, which are our duty. In any case, we can still get a lot of benefit from them."

Majors can nourish the UK sector in other, more positive ways, he claimed. Total is playing its part, he said, through the application of new technologies to develop HP/HT fields, and via the establishment of a new gas pipeline west of Shetland.

De Margerie warned, however, that successive tax rises on the UK industry since 2000, combined with depressed gas prices, could frustrate future plans. "Most of our new North Sea developments are gas not oil, and we cannot expect a recovery in gas prices for many years.

"That is the debate we want to raise with the administration here in the UK - we cannot continue like this. The requirements on oil companies in terms of safety, the environment, global warming, it all triggers additional costs, which we have to accept." If governments pile on further C02 taxes, he added, "there comes a time when we have to consider if it's do-able,"

De Margerie also had a message for contractors: "Thinking that we will go back to the prices of 2004-06 is stupid." Given the circumstances, he suggested, the sector had to reduce its costs. "It is not a war, there is no fight, just a concern - can we share this problem or not?" 

09/10/2009

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