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Analysis

Resetting the industry

Exploration and production executives are facing a bleak year with tough budgets – but the mood wasn’t all doom and gloom at IP Week. Solutions are being suggested – as

Meg Chesshyre reports.

scalating cost facing the global upstream sector was a recurring theme in presen-

E tations on the challenges facing new exploration and production developments during the Energy Institute’s International Petroleum (IP)

Week in London this spring.

“In recent years the complexity and the scale of exploration activities have resulted in tremen- dous cost pressures in the industry in terms of both operat- ing cost and capital expenditure,” said

John Martin, senior vice president, World

Petroleum Council, who chaired the event. “The recent postponement of many large projects,

Yves-Louis Darricarrère, which were rendered

Total’s president upstream uneconomic, seems to and deepen the major group-wide cost-cutting me at least, to be more initiative launched last year. We plan to reduce driven by the scale of operating expenditure by US$1.2 billion; the the capex involved capital expenditure by 10% from $26 billion in rather than the cur- 2014.” Total has also announced that it plans rent low commodity to reduce its exploration budget by 30%.

prices.”

Tullow Oil’s exploration director, Dr Angus McCoss

Darricarrère cited Total’s Edradour project, “Today costs have

Images from the Energy Institute.

west of Shetland, as a recent example of creat- become unaccept- ing value through cost reduction and capital discipline. Total ably high,” agreed Yves-Louis Darricarrère, Total’s president upstream. “A number of projects have been postponed, rede- had been able to cut the initial cost by a third. Edradour is a subsea tie-back to the Laggan-Tormore development.

fned, suspended or even stopped worldwide… Our industry has to react. Total is no exception. In 2015, we will accelerate “Until 2011, the steady increase in the prices of crude oil oedigital.com April 2015 | OE 31 031_OE0415_Analysis2_inDepth_IP Week_v2em.indd 31 3/23/15 2:14 PM