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2017 UK o&g investment ‘lucky to get £2bn’

Thursday, June 12, 2014

The project director of Total's Laggan-Tormore project said he thinks that the UK oil and gas industry could be 'lucky to get £2bn' investment in 2017-2018, compared to £14bn in 2013, speaking at a recent Oil and Gas UK breakfast





London Breakfast Briefing, 21 May 2014 Speaker Presentations from Oil & Gas UK on Vimeo.



'I read a recent note which said that in 2013 the UK's investment peak was something like £14bn, they reckon by 2017 - 2018 it would get to £7bn,' said Robert Faulds, project director of Total UK's Laggan Tormore project, speaking at a Oil and Gas UK breakfast on May 21, 2014, "Managing Complex Projects.

'Personally I think you're going to be lucky to get 2 [billion pounds], especially if the costs don't correct.'

'My personal view is we've experienced a boom and the bust is going to come.'

'I personally think we're heading towards another fall in the oil and gas UK, I think the oil industry in the UK is about to go through an extremely lean time. I think that a lot of yards will close, a lot of people will move overseas.'

'Why? [accordingt to] Wood Mckenzie figures from 2 weeks ago, 74 per cent of projects in the UK and Norway are over budget. Average overspend is 18 percent.'

'Why? Prices are going up all the time.'

'We recently finished a tender for a project called Edradour, going for its final investment decisions. It cost nearly three times what it would have cost in 2010.'

'Industry capacity to deliver these projects is not keeping pace, and that's leading to overspend and delay.

'For me the question is, we've had the boom in the UK, when the bust will arrive. Not if it will arrive, it's when will it arrive. Is it 6 months, 12 months, is it 18 months. It ain't 2 years.'

'In 6 days time, I am going to be bidding to try to make sure I secure part of my company's investment budget for this year to do a project.

'It is a competition, that's what people don't get.'

'Everybody says, 'It's oil and gas'. [but] if you've got £10bn to invest 2015 or 2014, the company is going to put that money where it gets the best return on its investment.'

'I think that the IOCs with this [UK] trend [of] increased cost, smaller field size, are going to invest their money elsewhere.'

'The market doesn't show any sense of slowing down internationally, that means the money we have as IOCs are more likely to be going overseas with higher returns.'

'Future major projects in the UK are being revisited today. It is already here, it is starting to happen now.'


Super contractors

'The international oil companies have created their own nightmare. We've allowed and encouraged the creation of giant super contractors,' he said.

'I think now the tail has been wagging the cost and schedule dog. They don't even talk to me as if I'm the client any more, apart from when I refuse to sign their invoice.'

'This is not new. I looked at papers from 1990 [about] the CRINE initiative, basically they could have been written yesterday. It hasn't changed. We need to find a way to work with our contractors.'

'Any every contractor is different. Every contractor has got its own risk profile and values its risk independently.'

'Whatever we do, I don't actually believe in industry initiatives. I've seen too many of them. CRINE, we've had other ones.'

'Frankly they've never worked. The only thing they've done is make consultants richer.'

'I know people who've retired on CRINE. We didn't make any money out of that.'

People

'Managers say, there's no I in team, and all the rest of that rubbish,' he said. 'But you can't do anything without people, you can't do everything yourself.'

'Just to give you an idea of Laggan Tormore, at our peak we had 20,000 people working on the project worldwide. I had something like 7 offices with my name on the door. I have more air miles than Richard Branson.'

'In year 1 we had 22 per cent [staff] turnover. Why? Because lots and lots of people have got used to working in this country 9 to 4 - having 1 hour lunch break working at a nice pace.'

'Projects don't do that. We work until the job is done. If that means we're working until 9 10 o'clock at night, weekends, public holidays, that's what we do. If people don't like it, don't join a project.'

'Year 2 this [staff turnover] dropped to 10 per cent. We weeded out the weaker members of our team. At the end of the day the strong will survive.'

'Keeping people is not easy. Why is it not easy? 80 per cent of project team in general is on a short term contract.'

'Why? because we never know when the next project is coming. Industry changes, investment profiles change, attitudes change.'

'Job opportunities at the moment are seemingly limitless, and day rates every day seem to go up.'

Mr Faulds quoted figures from a supplier saying that around 2 months ago (April 2014) the cost of an engineer per day in Norway was £1400, compared to £1000 18 months ago. 'And they might not even be any good,' he said.

'High turnover rate of the wrong people kills your project quicker than anything else,' he said.

'Finding people in the UK who are driven to deliver projects, is harder and harder. There are less young people motivated to work the extra hours.'

'I hear a lot about work life balance, I think we have become too rich, it has gone too far. I've heard about 9 day fortnight, 9 to 4 working 1 hour for lunch. Crèche facilities - seriously - you bring a kid to the office?'


Finding better people

'[the key to] getting better people is not education,' he said. 'We need to find a way to make people more driven, and look at different sources for people,' he said.

'In some of the countries I've worked in I've actually seen some brilliant people,' he said. 'I've met some brilliant people in Indonesia, I've met some brilliant people Africa, Nigeria, Angola. My project team is basically a multinations task force.'

Mr Faulds said he is particularly keen on recruiting from the military.

'I've been trying to teach engineers how to become leaders for years and largely failed, with some successes,' he said. 'I'm wondering if I can teaching leaders to become engineers.'

The British military in general is laying off large numbers of non-commissioned officers (NCOs) and young officers.

'So we're looking at a training program which I am sponsoring to try to get the people into our industry. They seem to be brilliant project execution people.'

'They've all got the same haircut, that's a good start. They are used to being shot at, which is brilliant as far as I'm concerned, and they like living in shi**y places, and so do I,' he joked.

'So I think that's a real source for future talent.'

'I've been invited to [a] regimental dinner - so I'm thoroughly looking forward to it,' he said. 'It is really a talent spotting exercise. I might find some future oil and gas engineers in that bunch of people who tend to be multilingual, not risk averse, driven.

'All I need to do is teach them how to engineer, and it is not that difficult, we are not building spaceships.'

Contractor rates

There have recently been announcements in Aberdeen that contractor day rates will reduce, he said.

'It may be the way to go, I just don't think it is the way to go.'

'If you cut the day rates like that without any real thought about what you're doing, you simply drag the best people overseas and we end up with the people who really good in the first place.'

'Exactly what we don't want, we just become less efficient.'

'I don't think the key in terms of cost is necessarily driving down the cost, it is getting better people. That might not be money.'

Laggan-Tormore

Total's Laggan-Tormore project is 123km North West of the Shetland Islands (off the coast of Scotland, UK), with subsea wells in water depth over 600m.

A gas processing plant is being built in Sullom Voe, on the Shetland Islands, including a plant to make Monoethylene glycol (MEG), a type of antifreeze, which is constantly injected into the two 18 inch gas lines.

From the Shetland Islands, the gas is piped 230km South to the decommissioned MCP01 platform, and from there commingled into the FUKA pipeline with a connection to St Fergus in Aberdeenshire.

'The MEG plant is really the key to the whole process,' he said. 'Without MEG basically the whole thing dries into a big solid lump.'

Complex projects

'Firstly there isn't anything called a complex project - they just don't exist,' he said. 'They are just bigger, and some things are a bit more difficult for the brain to get around.'

'The basics haven't really changed since 1990s - the tools have got a lot better. But the basics - formularised processes, checkpoints, accountabilities, checks and balances and continuous review, they just haven't changed.'

'People talk about new technology and ever bigger projects. Ever bigger projects bring one complexity, more people. And without people there is no such thing as a difficult project.'

Safety

'Everybody talks about safety,' he said. 'I guess it is one of the most important things in our industry. It used to be a rule, it used to be a priority. Nowadays it's not. It needs to be a value.'

'Everything we do, we need to think about safety first. I get very upset when I hear people say 'these HSE people' or 'safety is getting in our way.' Rubbish. Safety is simply an enabler.'

'If we can't do business without killing people or hurting them we just shouldn't be in business.'

'Since 2001, around 450 UK service men and women have sadly lost their life in Afghanistan,' he said.

'Since 2001m, in all construction sites in UK, not just oil and gas, 760 people have lost their lives.'

'So there's maybe a lot more soldiers in Afghanistan than in UK construction sites, or maybe it's vice versa I don't know the numbers. But what it basically tells me, it is safer going to a country where people are going to try to kill you, than it is to go to a construction site.'

'That I actually feel when I go in some yards and some construction sites apart from my own - and even my own sometimes.'

'Recently I shut down a site for 3 days just because I had a bad feeling in my water. The managing director wasn't very happy.'

'We need to work more in our safety culture - we need to make it a value.'

'We need to get away from this myopic belief in paperwork. Paper doesn't keep safe, people keep safe.'

'People are beginning to believe in this country, in Europe in general, if you've got a work permit, if you have risk analysis, all the boxes have been ticked, you can go out in the field and feel safe. It's not true.'

'I actually feel safer in when I go to construction sites in Nigeria than some of the ones in the UK. The reason I feel that way is because most people feel unsafe in Nigeria and everybody is watching what they are doing.'

Accountability

'Accountability is the biggest challenge of every project manager,' he said.

'A project manager or director arrives in a country for 3-4 years, we're never around for very long. The biggest problem we've got is to make the organisation understand that we're accountable, they're not.'

'It's incredibly difficult to get balance of power right to actually be able to make decisions to do your job.'

'Functional managers keep on wanting to make decisions, they've been used to taking decisions for the business in the past.'

'A major project is not part of the business, it has its own project identity and it must have its own project identity to instil pride and commitment in the people who work for it.'

'So the project [leader] needs to be accountable and most importantly the organisation needs to accept that they are accountable.

Technology and standardisation

'Lots of people talk about standardisation,' he said. 'I think it's great, it does drive down cost, cut and paste and all the rest of it, fantastic.'

'You need to find a way to get your technical [experts] in the company to agree to that, not very easy.'

'New technology yes, is valuable, but not every 5 minutes.'

'Engineers are bred and designed to come up with new ideas. Even today,
I've got a stream of engineers come to my office with new ideas. They tend to not be very pleased when I tell them come back in 3 years and I'll think about it.'

'Sometimes new technology is unavoidable. Maybe the only way to render your project economic. But it does bring additional risk.'

'In my view, standardise, do what you know you do well. Do not use new technology unless you've got absolutely no choice, and if you do use new technology, make sure you fully understand it, you understand all the risk you're taking. And make sure it adds value. '

'If you're buying new technology for the sake of new technology, [well] we're not in the research business we're in the project business.'










Associated Companies
» Total

External Links
» Watch the talk on video

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