Perspective: Too many standards up project cost when oil prices are crashing

By Drew Robb, for Turbomachinery Intl.

Mar 24, 2016

The crash in oil prices has brought into sharp focus the underlying inefficiency of the oil & gas field. Until recently, oil prices hadn’t fallen below $40 a barrel since the summer of 2003. They even surged above $100 on several occasions. With plenty of money around, oil companies grew complacent.

Here is the conundrum facing the industry: Oil is trading around $30 per barrel and few outside of Saudi Arabia can sell it profitably at that rate. Accordingly, Shell has reorganized to change this trend by placing its projects and technology teams into the same division.

Harry Brekelmans, Project & Technology Director, Shell, looks after that group and says it is much more efficient as those designing projects are forced to talk to those piecing together the various technology elements to be used in the field.

“We have seen in increase in specs, contractor requirements, documentation and team size raise by anywhere from 139% to 275% from 2000 to 2012,” said Brekelmans.

He found fault with the sheer number of standards in the industry. There are currently hundreds of standards for valves alone. To his mind, the surfeit of standards actually defeats the entire purpose of standards. Shell, therefore, is giving greater scrutiny to project scope. In a recent offshore project in the Gulf of Mexico, for example, a well simplification brought about a 30% reduction in costs. He views tighter collaboration as a big part of the solution.

“Given the industry downturn, oil and gas companies should be collaborating with a united purpose to secure a sustainable, more efficient and competitive future for our industry,” said Brekelmans.

Read more from other industry leaders as well as Colorado Gov. John Hickenlooper.

 

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