Delivering Competitive Wells Katy Heidenreich, Operations Optimisation Manager, Oil & Gas UK Mariesha Jaffray, Continuous Improvement Manager, Oil & Gas UK The Mining Institute for Scotland, 14 Feb 2018
Agenda Business environment Oil & Gas UK Wells Forum & competitive well delivery Achieving Cultural Change in UKCS Efficiency Task Force a wells perspective Q&A 2
million boe/day The Vision: Halving the rate of decline in the UKCS, ensuring a sustainable future for the basin and sustainable energy supply for the UK Vision 2035 UK oil and gas industry 2.0 1.5 1.0 0.5 2X Production in 2035 0.0 2035 2034 2033 2032 2031 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Assumed "pre-wood" baseline projection (7.3 billion boe 2016 2035, total of 8.9 billion boe by 2050) Vision scenario (extra 3 billion boe above baseline projection by 2035, total of 14.9 billion boe by 2050) 3
Reserves/Resources (Billion boe) There is 26 Billion investment yet-to-be sanctioned and potentially much more that we cannot yet see 25 Yet-To-Find Resources 20 Potential Additional Resources Reserves 6 15 10 2 5 2 5 6 9 0 Low Outcome High Outcome Source: OGA, Oil & Gas UK 4
Development Wells Spudded Production (Billion boe) Fewer producing wells add to the threat of another production collapse towards the end of the decade 350 300 250 Contingent Development Wells Outlook Firm Development Wells Outlook Development Wells Production 1.8 1.6 1.4 1.2 200 150 100 50 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1 0.8 0.6 0.4 0.2 0 Source: BEIS, Oil & Gas UK 5
Number of Fields More smaller discoveries go on to be developed in the UK than elsewhere in the world Fields Discovered since 2007 that are now in production or under development 40 35 30 25 20 15 10 5 0 0-50 50-100 100-250 250+ Field Size (mboe) 2 4 7 1 Norway UK 6
The UKCS - the most attractive mature basin in the world are we making the most of it? Competitive fiscal terms Progressive regulator/licensing regime Improved access to data, technology Access to infrastructure/good commercial behaviours Collective ambition (collaboration)/mer Extensive supply chain 7
Oil & Gas UK s Wells Forum & Competitive Well Delivery 8
Maximizing Economic Recovery (MER) UK Forum Governance MER UK Forum Smaller, focused membership with industry chairs, ministers and officials, and OGUK & OGA leadership, with others invited according to the agenda MER UK Steering Group Focus of this group will be to steer the 6 Task Forces, discuss & review key strategic issues such as industrial strategy, collaboration & OGA/Industry interface. The MER UK Steering Group will meet at least twice per year (prior to the MER UK Forum) Exploration Asset Stewardship Efficiency Exploration Task Force Technology Technology Leadership Board Asset Stewardship Task Force Decommissioning Decommissioning Task Force Efficiency Task Force Supply Chain & Exports Supply Chain & Exports Task Force The Regional Development and Infrastructure Board will be disbanded. Work will continue in six core areas with appropriate leadership. It is suggested that nomenclature is changed from Boards to Task Forces except perhaps in areas with established brands (e.g. Technology Leadership Board) 9
Where does the Wells Forum fit? MER UK Steering Group Decomm Task Force Technology Leadership Board License to Operate Adding Barrels Oil & Gas UK Wells Forum Competitive Well Delivery Asset Stewardship Task Force Exploration OGTC Efficiency Task Force Inform Work with 10
Addressing the things we can influence Leaving rig cost and commodity price aside Significant cost reductions can be achieved through Working better together Sharing knowledge and experience Improved efficiency Use rigs less Broader technology uptake Reducing unplanned overspend Top 6 factors to Well Cost (average % contribution) Top 6 factors to Well Cost 7 wells, (average 4 operators % contribution) 2013 to 201 7 wells, 4 operators, 2013 to 2015 Top 6 factors to Well Cost (average % contribution) 7 wells, 4 operators 2013 to 2015 Logistics Overhead Rig costs Services Tangibles Log Ove Rig Serv Tan Bulk Bulks 11
Well scrutiny exercises are reducing costs NOW Networking is key to successful and sustained collaboration Teams are energized to revisit designs and explore new ideas Cross operator discussion improves confidence in design strategy and Referencing other operator experience adds weight to design, and budget, presented for approval Well cost reduction 10 days saved 12
The Competitive Well Delivery Staircase is a mechanism for operators to work together with supply chain to identify ways to enhance basin competitiveness Share with industry Agree priority focus areas Benchmark delivery performance Basin wide improvement strategy Identify opportunity areas 13
Representative snapshot of how well we are pulling competitive well delivery levers 5 key themes across full well lifecycle Captured good practices, savings impact and key challenges remaining Potential high value opportunities identified No silver bullet! Areas identified where we can collaborate to get better
Staircase Results Corporate Culture Alignment Procurement, Supply Chain & Logistics 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Simplify Design & Minimum Scope Technical Innovation & Step Change Lean Execution & Perfect Performance 15
% Saved Forecast % savings Staircase Results Cost Savings 70 2016-2017 70 2018-2019 60 60 50 50 40 40 30 30 20 20 10 10 0 0 16
A different mindset and approach is needed to unlock opportunities Cross industry and company led initiatives have realised significant cost savings - we must find ways maintain this We must shift the dynamic to address specific threats to supply chain We need to find ways to lower the credible economic threshold on opportunities Focus on where we can influence Create a basin wide strategy for improvement 17
A commitment to real cultural change will reduce costs and create opportunities throughout the value chain Cultural Change Champion will engage with industry to tackle adverse behaviours and embed a new collaborative mind-set Four themes: Leadership Collaborative behaviours Sharing & learning Outcome orientation 18
Operationalising Cultural Change on the UKCS Leadership Oil & Gas UK Board Members promote collaboration Create a unifying goal ; Vision 2035 Collaborative behaviours Self assess, assess each other and share the results Describe good practice for developing Area Plans Sharing & learning; Contemporary communications channels Outcome orientation supply chain involvement once Area Plans framed 19
Efficiency Task Force a wells perspective
Aim of the ETF.. To seek, evidence and promote access to efficient practice while maintaining safe operations. ETF methodology: Draws on fundamental principles of Lean to identify and remove waste and non-value adding activities; Adopt a structured approach to Project delivery, progress monitoring & benefits realisation; Relies on building relationships with key stakeholders across the Oil and Gas Supply Chain; Follows a cycle of ongoing continuous improvement. 21
2018 Objectives are To drive sustainable change, specifically to: Contribute towards optimised UOCs to increase global competitiveness Improve industry procurement and logistics practices Maximise the impact of existing good practice Promote a culture of collaboration and knowledge sharing ETF Roadshows, joint industry events, Efficiency Champions Network, O&G UK Council ETF Engagement Sessions Facilitate alignment of industry efficiency initiatives to maximise impact and avoid duplication Joint ETF roadshows & initiatives Industry initiative steering group representation 22
Key Focus Areas: 1. Business Process Improvement: Compression Systems, Maintenance, Procurement (Tendering Efficiency), Logistics Optimisation 2. Standardisation/Simplification: Subsea Design, Installation & Analysis Valves & Engineered Products 3. Cooperation, Culture & Collaboration: Industry Efficiency Champions Network Supply Chain Collaboration Benchmarking & Improvement Case study/knowledge-sharing Industry efficiency initiative alignment (Efficiency Hub) 23
Efficiency Hub 1. Read about industry efficiency initiatives; 2. Download good practice guidelines; Tendering Efficiency, Subsea Standardisation; Compression Systems; Maintenance 3. Search our library of efficiency case studies; 4. Share your efficiency case studies. oilandgasuk.co.uk/efficiency 24
Discussion - ETF ETF: How aware are you of the work the ETF does? How are the guidelines being used by your company? What are the challenges to progressing these ideas? Do we need to make the guidelines more wells-specific? How do we facilitate using ETF principles? 25
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