The oil industry cannot allow itself to fall back into old habits and allow costs to rise alongside a rebound in crude prices, especially as the business faces more competition from cleaner energy sources, a BP executive says this morning at the Offshore Technology Conference in Houston, FuelFix.com reports.
Drilling costs have come down sharply amid the deepest oil rout in decades, but analysts are skeptical that the industry will be able to keep costs down once the oil market recovers. High cost inflation has dogged oil companies for years, making it harder for them to greenlight complex deepwater installations.
“We have to change the mindset and not accept a cost structure that trends up with the oil price,” BP Upstream Chief Executive Bernard Looney says in a keynote speech for energy professionals. “We need to get a little better in everything we do every day. And we have to hold onto this even when the oil price recovers. That’s when the true test will come.”
Reining in costs will take deeper collaboration between oil producers and their equipment suppliers, Looney says. BP and its suppliers were able to bring costs down for one major project in the Gulf of Mexico from $20 billion to $10 billion—and those improvements largely came from its suppliers, not its own engineers.
Oil-production improvements have also boosted output for BP’s wells in the San Juan Basin by 60% in recent years. Across the industry, oil companies have doubled the amount of oil and gas they can recover from shale plays in recent years as drillers work closely with suppliers to whittle down costs and make drilling simpler and more efficient.
“Getting (suppliers) in early is the way,” he says. “We have to get more competitive as an industry. People have said the oil price could sort things out, and I think that would be a mistake.”
OTC is a massive oil-and-gas expo littered with flashy model rigs, car-sized robots and an array of tools from the industry’s deep-sea drilling fleet. The oil and gas industry’s largest annual conference is being held in Houston’s NRG Center.
