By Alex Endress, Editorial Coordinator
As the E&P industry navigates through the challenges of prolonged low oil prices, Statoil Mexico General Director Helge Hove Haldorsen is urging companies to look for efficiency gains through innovation rather than mere cost reductions. “We cannot cost-cut our way to greatness,” he said at the 2016 SPE/ICoTA Coiled Tubing & Well Intervention Conference in Houston on 22 March. “We have to change the business, or we’re not going to be viable.” In fact, he believes companies must achieve efficiency gains that allow for sustainable operations at $40-$50 oil prices, Dr Haldorsen said.
Even when oil prices were above $100/bbl, he pointed out, most operators were making only 11-13% return on capital employed. “That’s a pretty bad return on investment for the (E&P) segment of the industry,” he said, noting that previous returns had reached as high as 25%. In the current economic climate, however, companies are being forced to optimize performance and reduce waste as a matter of survival. “Everyone seems to agree that we’re going to be here lower for longer,” he said.
To achieve the necessary efficiency gains, Dr Haldorsen urged the industry to look to automation technologies. In particular, he noted the potential for efficiency gains from closed-loop automated drilling technology that can function autonomously without the need for human intervention. “I think we will drill better with these computers going forward.” He also advised companies to standardize, simplify and industrialize, using concepts such as factory drilling. Further, he suggested the industry should consider service contracts that spread incentive across the supply chain. For example, he said, perhaps the operator could pay a lower dayrate for the rig but the drilling contractor would receive a share of the profit from the resources recovered as an incentive for better performance.
Despite glum outlooks for the price of oil, he emphasized that oil and gas remain essential components of the global energy supply for the foreseeable future. At the current rate of demand growth and production decline, he said, the industry will have the production gap of “two Saudi Arabias” to fill by 2020. Further, renewables remain too costly for large-scale consumption. “I am a very big proponent for renewables, but today, only 1.4% of the global energy use come from solar, wind and biofuel… It could take 30, 40 or even 50 years before these are ready.”
In the meantime, the oil and gas industry must continue to explore for and produce additional hydrocarbons around the globe in order to meet growing energy needs, Dr Haldorsen said. Moreover, businesses should be proud of the work they’ve accomplished to fuel human progress. “We lift people out of poverty by raising their living standards. Those of you who produce energy, you are changing the world for the better.”