CATEGORIZED | News

Schlumberger regional president: Downturn forcing industry to 'cut out the fat'

Posted on 19 June 2009

 A few weeks ago, it was as if the oil & gas industry was staring into a “dimensionless black hole,” but now it is traveling through a long, dark tunnel with a “small light” at the end, according to Mark Corrigan, Schlumberger’s president for oilfield services covering Europe, Africa and the Caspian.

Delivering the second-day keynote at the IADC World Drilling 2009 Conference in Dublin on 18 June, he said that it was right for companies to batten down the hatches in order to ride out the current economic storm. However, it was essential to plan for better times ahead, perhaps around 2011 when supply and demand for petroleum appears likely to come back into reasonable balance.

 Mr Corrigan said that, while some in the industry appear to regard the current upstream downturn as relatively moderate … witness the way in which the deepwater/ultra-deepwater sector remains relatively unscathed … he said this was most certainly not the case for independents and especially in North America, where the land rig count has lately more than halved.

“The work (on US land) is so service-intensive that this has serious global consequences for land drillers and service companies. Internally (at Schlumberger), we have a saying that whenever North America sneezes, the rest of the world catches a cold,” he said.

“This slowdown in North America generates huge excess capacity and has the knock-on effect of making everyone associated with it extremely hungry.

“I can assure you that for anybody associated with North America, be it a land drilling company or a service company, this is not a slight downturn; this is a major crisis.

“In this scenario, the industry, led by the operators, must certainly roll back inflation … as much inflation as possible, and an element of that is certainly very healthy.

“It forces us all to cut out the fat that typically accumulates after extended periods of growth and refocus on efficiency and quality that, quite honestly, took a back stage when demand so far outstretched supply.”

Mr Corrigan said it was “interesting” to observe how the different customers have been handling the current situation. Some have been doing it with a clear eye on the future, applying strong but “appropriate” pressure in order to get costs down, and do it cooperatively.

He attacked those with a short-term view and who were using “quite provocative” procurement practises to squeeze the maximum out of the service sector and to exploit the hunger now being felt.

“Market forces will of course rule, and we (Schlumberger) will do the necessary to sustain our market leadership position.

“However, which of these approaches applies will inevitably have consequences on the relationship and our ability to best meet our customers’ requirements when it does turn around.”

Mr Corrigan spoke of a real dilemma for the service sector and that it wanted, indeed needed, to hold onto its competencies.

“This is not self-serving; the operators will need a robust service sector when they go back to growth. The problem is that with such a significant drop in activity, we have absolutely zero choice but to dramatically cut costs.”

Leave a Reply

*

FEATURED MICROSITES


Recent Drilling News

  • 24 April 2014

    Baker Hughes and Aker Solutions form subsea production alliance

    Baker Hughes and Aker Solutions have formed an alliance to develop technology for production solutions that will boost output, increase recovery rates and reduce costs for...

  • 22 April 2014

    Noble names Steven Manz as Senior VP And CFO of Paragon Offshore

    Steven A. Manz will serve as Senior VP and CFO of Noble Corp’s spinoff company Paragon Offshore, a standard specification offshore drilling company, Noble announced today...

  • 17 April 2014

    Shell makes deepwater gas discovery offshore Malaysia

    Shell has made an exploration discovery offshore Malaysia in the Rosmari-1 well located 135 km offshore Malaysia in Block SK318. The well was drilled to a total depth of 2,123...

  • 16 April 2014

    Maersk Drilling takes delivery of ultra-deepwater drillship

    Maersk Drilling has taken the delivery of its second drillship, Maersk Valiant from the Samsung Heavy Industries (SHI) shipyard in Geoje-Si, South-Korea. Maersk Valiant has begun its voyage toward the...

  • 16 April 2014

    Ensco orders new jackups from Lamprell

    Ensco has ordered two high-specification jackups, ENSCO 140 and ENSCO 141, for delivery in mid-2016 from Lamprell’s shipyard in the United Arab Emirates. The rigs will also...

  • Read more news