With deepwater break-even prices slashed by 50% or more, expect oil company focus to remain fixed on cost efficiencies, says John Snyder.
The gains international oil companies have realised by investing in new technologies have been nothing short of astounding, particularly given they have come, in part, during an oil price crash. Through efficiency gains, Equinor, Shell and others say they now have a break-even price of US$30 per barrel of oil produced in deepwater offshore projects – less than half of what it was just a few years ago.
With this success, oil companies will continue to drive digitalisation and automation in the oil and gas industry as a means of improving efficiency, productivity and safety – and the bottom line. There will not be any backsliding to the ‘good old days’ of unchecked spending.
Speaking at the CeraWeek Conference on 6 March in Houston, Saudi Aramco president and chief executive Amin H Nasser called on the energy industry to take action in four key areas to ensure global oil and gas demand was met in the years ahead. Among "expanding exploration, offsetting declines in legacy fields, new and continued investment, and enhancing and creating new game-changing technologies," the final point stands out.
As charterers push these game-changing technologies in the energy business, they will look to OSV owners as partners in the digitalisation transformation. This will mean continued investment in fuel consumption monitoring, vessel tracking and other digital tools that will help improve logistics, fuel efficiency, increasing productivity and sustainability. For charterers, it will provide the verifiable hard data they need to improve decision-making.
Sustainability also figures into the equation. Charterers will look at reducing CO2 emissions from their supply chain as the world moves towards a low carbon future. In this climate, hybrid-electric, all-electric and LNG-fuelled vessels will continue to gain favour.
Equinor, for instance, offers preference to hybrid battery-powered vessels in 'green clauses' in its contracts to help it meet its CO2 reductions goals. Equinor sees battery hybrid power as a means to lower fuel consumption, reduce emissions and enhance performance because of the quicker application of propulsive power. OSV owners that invest in such technologies will create a value proposition that will make them more attractive to charterers, differentiating themselves from those who don't.
Topaz Energy and Marine has begun to transform its business, moving away from its traditional role as an OSV provider to an integrated OSV and solutions provider. Through digitalisation, Topaz can provide better, more reliable data on cargo delivery and take more responsibility in its customers’ supply chains. “By integrating data into their systems, we learned more about our customers which allowed us to enhance our services to cater to more aspects of their businesses,” Topaz chief executive René Kofod-Olsen told delegates at the Annual Offshore Support Journal Conference.
As in the case of Topaz, this digital transformation will lead to more transparency between charterers and OSV owners, which could provide a better understanding of each other's business models, pain points and, ultimately, form a healthier relationship.