The Government this week set up a top-level taskforce to counter the impact of continuing low oil prices on the UK’s offshore sector.
The 19-strong group, chaired by energy minister John Battle, includes chief executives from oil companies and contractors along with senior Government officials. It is due to come up with specific recommendations by summer 1999.
Battle said there was now ‘little or no margin’ between the cost of UK oil production and the market price. While the latter was beyond anyone’s control, he said the Government would work with industry to reduce the cost of the former.
Battle said the taskforce would focus on achieving the ‘cultural shift needed to capture the value of intelligent working and to create new technological approaches to reducing costs’.
He said he would first launch a series of initiatives to manage the supply chain better many big companies in the industry spend 60 90% of their turnover on outside purchasing.
The taskforce will strengthen cross-industry initiatives such as the Crine Network, which has set a target of viable production from the North Sea at an oil price of $8 a barrel.
But recently there have been signs of the industry-wide approach faltering the Offshore Contractors’ Association warned oil companies three weeks ago that there was no scope to squeeze contractors’ margins further.
The Government’s move should reinforce the pursuit of common goals in what trade and industry secretary Peter Mandelson described as ‘an extremely important industry for the UK’.
Mandelson said he did not believe ‘that such a powerful partnership has been formed before’ and that he expected it ‘to make a real difference to the future of everyone who works in and depends on this industry’.
The UK Offshore Operators’ Association welcomed the initiative. James May, the association’s director-general, said partnership across the industry with Government will be critical to efforts to reduce costs via greater efficiencies and new technologies.