“Costs have gone north, performance has gone south and, while that was happening with an increasing barrel … $150 … we got away with it,” TOTAL’s VP drilling and wells, John Bannerman, warned delegates at the IADC World Drilling 2009 Conference in Dublin on 17 June.
“I think we got complacent, and now the world is very different. We can no longer live with costs going north and performance going south.”
Mr Bannerman said the situation had changed with great speed and the industry, and its supply chain had better cut its cloth to survive.
“Let’s be clear, our CEO Christopher de la Margerie did not say cut activity to spend less. What he said to us was reduce costs and keep activity because we’re (TOTAL) in it for the medium- to long-term, and it’s activity we need.”
He warned that there were millions of barrels of daily production shut in worldwide and that this was a major challenge to companies with development portfolios, such as TOTAL, with some $10 billion worth of projects in its West Africa pipeline alone.
“If we can’t manage our costs, projects will be postponed, activity will go down, and if activity goes down, then somewhere along the line we’re preparing the next spike. And while some of us like to ride the roller coaster, the vast majority agree that it would be nice to smooth it out a little bit; something that this industry has a lot of difficulty doing.
“What’s important to us is to protect the medium- to long-term by not jeopardising the short-term. It’s a fact of life, if you don’t look after your company this year and next, you perhaps won’t have a company to look after.”
On contracts, Mr Bannerman said everything was up for review … it had to be.
“Nothing’s rock solid; we have and we will continue to discuss existing contracts and, for us, on occasions, early termination. And we have done it recently, and we may do it in the future, but we need to keep in mind, for us, early termination of a rig saves us peripheral costs, which are not negligible.
“On new contracts it’s quite simple … if we don’t get our target price, we don’t sanction. If we’re not comfortable with our costs, we can’t afford to go.”
On drilling efficiency measured in metres per day, Mr Bannerman said the numbers were not going in the right direction. At best, metres per day as a measure has stood still, even decreased.
Mr Bannerman hit out at the proposal by fellow panelist Judson Jacobs, a director at Cambridge Energy Research Associates (CERA), who proposed that key drilling personnel be located at remote operations centres onshore.
For his part, Mr Jacobs said he was not surprised that there has been a decline in drilling performance over the past several years, with up to a 50% drop in performance in some instances.
“Dig down into the data and you can see differential performance across companies, across rigs and even across crews, which indicates a lack of expertise and deficiencies in training.”
Mr Jacobs said harnessing the latest technologies was an answer, and this could be used to bring key drilling decision-makers on rigs back to command centres on the beach.
“What this does is broaden the expertise available to look at problems,” he said. “Some companies are moving quite quickly on this, others prefer to keep personnel offshore.”