Oil and Gas Blog_Nov17_

By Graham Hollis, Senior Partner for Deloitte in Aberdeen

The oil price decline of 2014 forced the global oil and gas industry to take a large step back and look at many of the ways it operated – nowhere more so than in one of the world’s most mature basins: the UK Continental Shelf (UKCS).

Significant progress has been made in the interim, with unit operating costs dropping from $26.30 boe in 2013 to $15.30 boe in 2016. Combined with the recent rise in oil prices, temptation could be to let some of the old ways of doing business creep back in.

However, if the North Sea industry is to secure its long-term future, it needs to build on the achievements of the past few years, rather than consigning them to the history books.

One of those success stories has undoubtedly been collaboration – operators and suppliers working together effectively to the benefit of both. It’s the subject of Deloitte’s UKCS upstream supply chain collaboration survey, the third edition of which will be launched at a breakfast event held with Oil and Gas UK on December 5.

While it might seem a relatively obvious thing to do; in truth, for many years good examples were few and far between. Back in 2015, there was a real lack of clarity behind what exactly collaboration entailed and how the industry could get better at it.

Addressing this opacity was one of the main drivers behind the creation of the survey, in which we set out to establish what it means, why it’s important, and how organisations can better work together.

Another key plank of the survey is to demonstrate the benefits of working in partnership. Effective collaboration has, among other things, delivered significant cost savings over the lifetime of projects and improved investment returns for operators.

There are other less tangible incentives too, from stronger relationships with suppliers to more innovation. In fact, according to our analysis, operators considered leaders in supply chain collaboration also have some of the lowest operating unit costs on the UKCS.

Last year’s results, showed some positive steps have been taken in the right direction. More respondents said they were moving away from focussing on driving down unit costs through collaborative work; instead, increasing numbers are looking at working towards shared goals, the total end-to-end value, and the overall costs of the project.

This year, we hope to see further behavioural and attitudinal changes. This could take the form of more activism, more examples of projects where partners have teamed up earlier, and less adversarial behaviour, ultimately showing that the messages around collaboration are becoming embedded in company strategies.

The events of the past 12 months already suggest that’s being borne out in reality. We’ve seen more examples of operators and suppliers working together, demonstrated clearly by the burgeoning set of case studies on Oil and Gas UK’s Efficiency Hub.

Although times aren’t quite as tough as they were this time last year, the industry mustn’t become complacent. Huge progress has been made on the UKCS in driving efficiencies and making the industry more robust – we can’t undo that by reverting to old ways. Instead, we need to continue building on the legacy left by the oil price decline and take collaboration to the next level.

Want to find out more about collaboration? Sign up for our breakfast briefing with Oil and Gas UK in Aberdeen on December 5 or download the report.

Hollis, Graham (3)

Graham Hollis – Office Senior Partner, Aberdeen

Graham is an audit & advisory partner and became Aberdeen office senior partner earlier this year.  Graham also leads our upstream audit & advisory practice in Scotland, with over nineteen years’ experience in the provision of these services to a number of listed upstream oil and gas and oilfield service clients in the UK and internationally. He also has significant experience in capital markets transactions and the provision of complex accounting advice within the sector under IFRS, UK GAAP and US GAAP.

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