Watching the World
R&D fear in cost-cutting era
The alliance consists of operator BP; well contractor Baker Hughes Inteq, Aberdeen; mobile drilling rig contractor Transocean Inc., Houston; platform drilling rig contractor Santa Fe Drilling Co. (North Sea) Ltd., Aberdeen; and well management and data acquisition contractor Schlumberger IPM, Aberdeen.
BP attributed the bonus to above-target well productivity and completion of wells 4 weeks ahead of schedule and 10% under budget. The alliance saved BP and partners £3.1 million ($4.96 million) on expected well costs.
Development of Andrew, with contractors sharing project risks and rewards, set the pace for U.K. operators' Cost Reduction Initiative for the New Era (Crine).
The aim of Crine is ultimately to reduce field development costs by 30%. Andrew was developed for £290 million ($435 million), compared with an expected cost of £373 million ($560 million) (OGJ, July 8, 1996, p. 22).
R&D fear
While Andrew and subsequent North Sea developments have screwed down costs under U.K.'s Crine and the similar Norsok program in Norway, there are growing fears that cost-cutting is stifling technological progress.
Andrew used established North Sea development technology, such as a steel platform and horizontal well sections. The major innovation was in the contracts.
Norman Smith, director of Smith Rea Energy Associates Ltd., Canterbury, U.K., said lots of people are grumbling that Crine and Norsok have squeezed research and development out of budgets.
"The operators have been removing themselves from R&D," said Smith, "and expecting new technology to be developed by suppliers. But Crine and Norsok have put pressure on the margins of suppliers."
Smith Rea is leading a study, funded by European Commission's (EC) Thermie research program, to answer the question: Can upstream technological progress be maintained in the cost reduction era?
Study aims
The study will first try to find out how much new technology has contributed to creating hydrocarbon reserves, reducing development costs, and improving environmental protection in the 1990s.
Then the plan is to estimate how much identified but as yet unexploited technologies could continue these improvements to 2010. The study is to be completed by yearend.
Smith said the effect of industry cost reduction initiatives on the funding of technological development-and the extent to which this may constrain progress-provides the background to the study.
Smith expects the study will show that deepwater development technology, improved reservoir management, multilateral drilling, and advances in geoscience could bring further major reserves extensions, if allowed.
"When we approached Brussels for funding," said Smith, "EC agreed that a critical question is whether industry is really aware to what extent current benign oil and gas prices depend on R&D."