The paradox

Bente-Nyland
06.01.2014

"A pertinent question is whether the high level of oil prices meant it was aceptable to neglect costs or efficiency improvements"

More wells are very necessary on the NCS for realising substantial assets, particularly in mature fields. At the same time, we see with concern that operators are not delivering the number of planned production wells.

Given that oil prices are also declining, the picture has become even more serious for petroleum production from the NCS. A pertinent question is whether the high level of oil prices meant it was acceptable to neglect costs or efficiency improvements.

While expenses have risen, the industry has not become better at working more effectively, adopting new tools, or devoting enough attention to what could be done better. It has not managed to take the next step.

Far fewer production wells are now being drilled from fixed installations than 10 years ago, and at many times the cost per well. That naturally makes it harder to reach the target of improving recovery factors on mature fields.

Drilling and wells account for 30-50 per cent of costs over a field’s producing life. Spending here has shown a particularly sharp rise in recent years. So it is important that the industry manages to emerge strengthened from a period which threatens reduced activity and a flatteningout of investment.

Working with wells presents a complex picture involving rigs, drilling, completions, contractors, technology development and so forth. The sector’s inability to deliver in a way we all want to see, despite much talk of standardisation, integrated operation and technological progress, is thought-provoking.

It may be the case that the industry has been a little “sated” for a time. The challenge has been lack of capacity, but that is now changing.

At the same time, avoiding an overly negative view of developments is important. The goal must be to emerge strengthened from this downturn.

Everyone talks about costs, but changing ingrained practices is not easy. Attention must perhaps be concentrated to a greater extent on how to do more for the same budget.

In my view, the industry faces a Catch 22, with increased costs, the need to drill more wells, more old wells needing more workovers, permanent plugging of wells, upgrading of rigs and so forth. The list could be extended.

Nor do I think the industry should look back too much. Focusing on the future is preferable. The NCS has always been far ahead on technology development, but the industry seems unable in the present conditions to realise the potential of these advances.

Something must be done about that.

Bente Nyland
director general