Getting to work: two Aker Solutions employees
'Slow revival for services market'
An Aker Solutions executive said there is less competition in the oil services industry at present as producers cut costs, adding the market has been slow to revive after the credit crisis.
Lars Solberg, who heads teh Norwegian company's energy development and services unit for Russia and teh Caspian, told Bloomberg in an interview: “You see a cost cutting drive - all over the world you see the same drive."
He added: “A number of players are no longer there, particularly in the contracting industry.”
Major players including StatoilHydro and Total have called on suppliers to trim their prices as a surge in costs and weaker crude threaten investments. Oil is down roughly 50% from last year's record of $147 a barrel as the global recession cuts demand.
In May this year, Aker Solutions won work worth $1.6 billion from Eni at the Kashagan field off Kazakhstan.
The field's developers plan to cut the project’s costs by $1 billion, Kazakh Energy Minister Sauat Mynbayev said last month.
“There’s no renegotiation of the contracts for phase one, but for phase two there’s an initiative on how to find more cost- effective concepts,” Solberg told the news agency.
“What has gone down is the price for raw materials, but our basic costs are man hours and you can’t cut those by 30% to 40%."
Solberg said the recent rally in oil prices had not translated into a significant pick-up in demand from oil companies yet.
He added: “We see a slow upturn after a slow downturn - I’m not sure the crisis is over.”
Solberg also told Bloomberg that Aker Solutions will seek to land more work in Kazakhstan and Russia. He added that Aker Solutions believes the on- and offshore market in the Caspian and north-west Russia will increase to almost Nkr80 billion ($13 billion) by 2013 from less than Nkr20 billion next year.
Aker Solutions is targeting contracts for phase 2 of Kashagan in 2011 to 2012, the Pearls and Nursultan offshore fields and the Karachaganak and Tenguiz onshore developments.
“These are very big jobs both in physical volume and monetary value,” Solberg said.
Kashagan is scheduled to start production at the end of 2012 when Eni relinquishes its role as sole operator. The field expected to produce about 300,000 barrels per day at first and peak at 1.5 million bpd by 2024. Development at Nursultan and Pearls will pick up as of 2014, Solberg said.