OPINION
How can the UK oil and gas sector
Mike Houghton calls on the industry to view the turbulent oil price and related cost pressures as a time of opportunity
Mike Houghton insta a la industria a ver la turbulencia del precio del petróleo y las presiones de los costes relacionados como un momento de oportunidades
Mike Houghton ruft die Branche dazu auf, die turbulente Ölpreisentwicklung und den daraus resultierenden Kostendruck als Chance zu sehen
SECURE ITS FUTURE? D
espite the recent small recovery in the global oil price, it is clear that continued concerns about over supply, and suggestions that the UK sector is seeking 20%
cost cuts from its supply chain to protect profits, are creating a challenging short and medium-term outlook for the nation’s oil and gas industry. Te sector’s stuttering performance is also having a considerable effect upon the rest of the economy. Ian McCafferty from the Bank of England recently commented that 22% of the productivity shortfall in the UK can be attributed solely to the oil and gas sector. Seeking to extract such high levels of cost savings from the supply chain is both ambitious and, ultimately, non-sustainable, as it is the beginning of a cost-cutting journey that will very quickly come to an end as suppliers are simply unable to deliver the savings being sought over the long-term and still remain in business. Te situation offers an opportunity for
an important industrial sector that has been blessed with continued high oil prices over the long-term, producing a reluctance to embrace innovation-driven change. It could reap major benefits by
Mike Houghton is MD, Process Industries & Drives, Siemens UK & Ireland.
www.siemens.co.uk
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www.engineerlive.com
following other sectors such as automotive in adopting a culture of continuous improvement that over time can help secure a prosperous and sustainable future. It is widely acknowledged that the UK automotive sector is achieving between 4 and 8% improvements per year on the back of a continuous improvement strategy.
As many companies in a variety of sectors have already done, the oil and gas market needs to partner with technology suppliers to begin the improvement process. With the operating costs of barrel extraction in the UK just under US$40 a barrel, compared to US$20 in the USA and US$5 in Kuwait, it is evident that it’s not a case of just thinking about future competitiveness, it is, indeed, imperative. Te industry would be well placed for
future success by shaking off historical reluctance to embrace innovation and by examining how other industrial communities are gaining benefit from technological and production improvements. Optimised production, safer operating environments and a reduction in costs are just some of the tangible advantages that a culture of continuous improvement can deliver over the medium-term – benefits that sectors such as automotive are already seeing. Improvements on the scale seen in the motor industry are feasible for the oil and gas market. It requires leadership from the top of companies to state that incremental continuous improvement is the strategic way forward to safeguard the sector and its supply chain. A combination of careful planning, partnerships across the supply chain, the acceptance of technology innovation and an open mind that seeks to overcome historic barriers can underpin the oil and gas sector as it surmises the next 20 years and a time when global competition can only intensify. It is a new world for the UK oil and gas sector; but one of real opportunity. l
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