Industry 'should look to skies' for ideas

Plane to see: Svein Harald Oygard says oil players need to spread their wings when it comes to standardisation

The oil industry is far behind other industries when it comes to standardisation practices, but it can learn from the aircraft sector in an effort to chop costs.

Technology has played and will continue to play a central role in driving down unit costs of projects, but oil companies need to innovate much further than at present to replicate the standardisation successes seen in other industries.

Norwegian economist Svein Harald Oygard, who is a director at advisory firm McKinsey & Co in Rio de Janeiro, told an audience at the ONS conference on Wednesday that the oil industry will likely be the last large industry to embrace standardisation.

Taking the example of the aircraft industry, Oygard said every new generation of aircraft - Boeing’s 737 or Dreamliner, for example – has entered the market at the high cost level.

“Basically, every generation of technology, or fire safety standard, brings you to a higher level. But then something happens: you replicate, you standardise, you industrialise, you innovate,” he said.

“What does this say for oil and gas? Well basically it says that we might be up for quite an industry revolution.

“We all fly Boeing 737s between Oslo and Stavanger these days. Yes, you could have had a bigger plane in the morning and a smaller plane at lunch time, but then of course the unit cost would go through the sky, the whole supply chain efficiency would go out, maintenance systems would break down.

“So, basically it is better to have a 737 that flies back and forth all day, which is of course exactly what the oil & gas industry is not doing.”

A particular area of wastage in the oil industry is the subsea installation sector, Oygard said, adding: “You go out today and look at a new subsea installation project and there could be 10 vessels operating at the same time, covering different tasks.”

Other industries such as the power and steel manufacturing spheres have already benefitted from standardisation. “You need to develop and have a view on when you innovate and when not to innovate. So basically, you don’t send a team to Houston on a best practice visit every time you build a new subsea installation - you do it every third year when you are working to develop the next generation of subsea installation, or you have a specific feature that you want to address,” Oygard insisted.

There are signs this is happening in the oil industry, however. “In the onshore US unconventional gas sector, this is now starting to evolve, with a standard drilling pad,” Oygard said

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