Offshore Energy 2013: Speakers Say Increasing Project Complexity Is the Real Industry Challenge

Changing industry fundamentals – from geology to geopolitics, increasing megaprojects complexity, fluctuations in regulatory regimes and local content demands, risk management, risk allocation and new business models, were the topics of this year’s Industry Panel held on the first day of the sixth time running, Offshore Energy 2013 Conference & Exhibition event at the Amsterdam RAI, The Netherlands.

Furthermore, trends were debated. Can we expect a new round of industry consolidation / integration? And at last, what is the global energy outlook in terms of oil and gas investment, price and supply predictions, climate, fracking, the role of shale gas, drivers for growth and impediments to industry growth.

High profile expert speakers participated in the session, – representing the entire upstream value chain, from CB&I (Mark Bloemsma, Business Development Director Oil & Gas), Siemens AG (Horst Fischer Vice, President Industrial Applications Oil & Gas, Chemicals), Deloitte (Vincent Oomes, Partner), SBM Offshore (Kees Willemse, Proposal & Technology Development Director), Shell (Chris Stouthamer, Engineering and Maintenance Manager), Rabobank International (Ton Wouterse, Senior Banker Wholesale Maritime Industries), Schlumberger (Alexander van Noort, Country Manager Denmark & The Netherlands). Representatives exchanged ideas with conference delegates during the second annual Offshore Energy Industry Panel „Future Structure and Strategy of the Offshore Industry – Making sense of complexity.“

The talk-show-style meeting was moderated by John Andrews, consultant editor for The Economist.

Vincent Oomes from Deloitte talked about the impact of shale gas and LNG exports from the U.S. and what will that mean for the offshore projects on the drawing board. Massive amounts of shale gas have become available for consumption and in the U.S. this is transforming energy demand. „There is so much shale gas available now, that the shale gas is about four times cheap as oil, and it is so cheap, that it is difficult to make money, that is why Shell is backing out of some shale gas developments in the U.S.“

„The problem is that gas is very difficult to export, because you have to ship it, and liquefy it, and then regasify it, which is expensive, and the second problem is that it is not sure that the U.S is going to permit gas exports to the rest of the world. If the exports do occur, they will require a global rebalancing of gas flows which will definitely hurt some offshore projects. The main victims of these US gas exports would be the LNG projects in Australia, Indonesia and Brunei which are already among the most expensive gas projects in the world.“

Vincent Oomes also touched upon the development issues of the Gorgon and Browse LNG projects in Australia, the Russian Shtokman LNG project and the future oil and gas prices. Oomes and other speakers expressed concern over developing similar future LNG projects, since the market is altering rapidly and the expenses for their development are growing exponentially and therefore the projects are being scrapped. Labor costs, technical and environmental questions are all aspects which need to be well-thought-out from the very first beginning as well.

Horst Fischer from Siemens AG said suppliers for these highly complex projects need early engagement, that means forming partnerships, which can be challenging. „How to partner up? So, for Gorgon, seventeen partners in seventeen countries work on the project. What it means to work in international teams? The challenge is forming partnerships and developing these projects very clever. The price now for the Gorgon is, I guess, USD 40 billion, from the first beginning with USD 20 billion. There are a lot of reasons for that, but nobody has that kind of experience right now to set up such a huge project.“

Fischer said offshore projects are getting bigger and gaining complexity. “Money is not really the problem in this industry, but the growing complexity of the projects and their execution – that is the real challenge.”

Increasing project complexity goes hand in hand with increasing risks and the need for new technologies. It is therefore to be expected that oil and gas majors and offshore contractors will cooperate more closely together to develop new technologies.

[mappress]

October 23, 2013