Oil and gas contractors will be happy to note that oil producers operating in the North Sea have reached an agreement to collaborate with one another to reduce operational costs.
Premier Oil, one of the largest oil producers with interests in the North Sea, has taken the initiative to join forces with other oil-producing companies. This agreement will see the companies merging a large part of their operations, including logistics, finance and procurement. This collaboration is unprecedented, one that has not been witnessed in the highly competitive oil and gas industry where companies are always looking to gain an edge over their competitors.
“We are talking about shared rigs, shared logistics, shared back offices. We are at an early stage, the talks are quite complicated and there are lots of parts involved, but this could be quite radical for our industry,” explained Premier Oil Chief Executive Tony Durrant.
The companies involved in these agreement talks are planning to establish a centralised procurement department that would be responsible for purchasing spare parts, such as piping and valves. The individual company would then have the option to purchase or lease the part it requires.
Regulators have been trying to get oil producers to team up with each other with the aim of extending oil production in the UK North Sea. The industry body, Oil & Gas UK, had blown the warning whistle in February 2016, when it announced that a majority of oil fields in the North Sea would be loss-making fields if the oil price stayed at $30 per barrel throughout 2016.
In 2015, the UK Government set up the Oil and Gas Authority, a new regulatory body, to encourage oil producers to collaborate to reduce their operating costs. This move has yielded results, with Premier Oil being a good example.