Recent oil price volatility has triggered spending cuts across oil and gas companies, leading to job losses, project cancellations and the redrafting of service contracts. For the UK oil and gas industry, this latest industry downturn is also a timely reminder that the region is one of the least efficient in the world for oil and gas production. Industry estimates say that the UK North Sea needs production efficiency improvements of 30–40 percent by 2020 and more effective management to attract fresh investment, cut costs and achieve profitable growth.* How the mature environment of the UK North Sea might do this, however, is less clear.
The UK Continental Shelf is one of the highest cost production regions globally. Even before the oil price decline, costs had risen by 50 percent in the three years up to June 2014, according to the industry body Oil and Gas UK.* There is an urgent need to address process and operational inefficiencies in order to reduce costs.
The solution to achieving greater efficiency along with lower costs is to go digital. Accenture finds that by enabling disruption, innovation and automation, digital technologies can generate value even in the most inefficient of operations. Indeed, digital adds the most value not by simply reducing cost but by transforming the way assets are operated and the way people work and communicate. This is the key reason, according to a recent survey by Accenture and Microsoft, why oil and gas companies globally are increasing or maintaining their investment in digital technologies in the next few years.
Oil and gas operators in the North Sea should not miss the opportunity to capitalize on the value digital can bring. With the current lower oil price environment, it has a strong reason and a golden opportunity to embrace digital to recover competitiveness within the global industry. The need to take action is urgent, and industry and government have a joint interest in protecting production levels to:
Attract new investments to manage production security and help reduce energy imports.
Protect oil and gas contribution to the exchequer, both from production and workforce.
Develop digital oil and gas expertise, increase employment levels of a digitally skilled oil and gas workforce and produce exportable skills.
The UK oil and gas industry, in particular, cannot afford to miss this chance. Even small improvements in production efficiency can help yield significant revenue increases per annum. Watch this space to learn how these technologies could benefit North Sea operations in the UK.
*“North Sea oil needs to cut costs to survive oil price slump,” May 28, 2015, thejournal.co.uk, © Trinity Mirror Group PLC, via Factiva