THREAT
The rise in well costs not only challenges recovery from mature fields, Ruså notes, but also poses a threat to new field developments.

“Not counting Johan Sverdrup and Johan Castberg, there were about 90 discoveries on the NCS in February. Two-thirds of these contain less than 62 million barrels of oil equivalent (boe), and half are smaller than 27 million.

“Achieving profitability in a discovery with less than 19 million barrels of oil is challenging today, and a gas find must be even larger since gas prices are relatively lower than for oil.

“Well costs account for almost 50 per cent of total investment on the NCS, and are accordingly crucial for making both new discoveries and mature fields pay. The sharp rise in costs per well also challenges profitability.”

Petoro’s ambitious goals call for radical new ideas, a completely different approach, and methods other than improvements in the order of 15-20 per cent.

The most important instrument will be to boost efficiency, and Petoro’s view is that significant progress can be achieved here without increasing risk.

Asked why wells are taking longer, Ruså says that attention in drilling has concentrated for many years on delivering quality in relation to planned time and cost.

   “This has driven the commitment in the various specialist teams and at contractors towards avoiding errors. The position now is that every fault has equal weight in terms of prevention.

   “That in turn breaches an important principle of risk management – prevent the errors which are most likely to happen and/or which have the worst consequences for meeting targets.”

DETAILED
According to Ruså, pursuing the goal of fault-free processes results in detailed operational procedures where everything is regarded as a requirement.

Such a system provides little freedom to make effective adjustments to operational execution – in practice, following the procedure becomes more important than doing the right thing. Creativity and innovation also get hampered because they are regarded as boosting risk.

“This is a self-reinforcing process, where good intentions create creeping inefficiency over time,” maintains Ruså, who also finds part of the explanation in historical trends on the NCS.

“The number of oil companies and drilling rigs in these waters has increased substantially in recent years, and a change of generations in the industry will reinforce these effects.”

“It’s undeniable that training offshore personnel is challenging with today’s working time arrangements. And we must recognise that good times and high oil prices have helped to conceal creeping inefficiency.”

MANAGEMENT
The solution to these problems is first and foremost to be found in management. Ambitious goals can quickly lose much of their motivating force in an organisation, because they challenge well-established work processes and solutions.

Besides, speeding up the pace of well completions is not an issue confined to the drilling community alone. Petoro wants to see a greater commitment among reservoir specialists and operations teams on the fixed installations, Ruså says.

“Solutions for enhancing efficiency need to be sought in technology, in the way we work, and in organisational aspects such as expertise, requirements and types of contracts.”

He takes the lack of technological renewal on the NCS as a case in point. “New ways of doing things and innovative technology have occupied a key place in developing our offshore resources.

“The drilling and well side has been one of the beacons, and helped to win the NCS a reputation as a technology lab. Applying innovations to Norwegian fields has been important for suppliers in introducing them globally.”

One indicator of how fast new solutions are adopted is to measure sales of technology available on the market for less than five years as a percentage of total turnover, says Ruså.

In a global analysis conducted by one of Petoro’s major suppliers, Norway now ranks in 40th place among 80 countries. Sales of new technology to the Norwegian market for the same supplier were twice as high in 2005, which made the country one of the five leaders worldwide for speedy adoption of innovations.

“That’s like buying old versions of mobile phones once new models are available,” says Ruså. “We must recognise that we’re a conservative industry. A big potential exists for renewal.”

He believes the oil sector must become much more open and hungry to adopt alternative vessels or temporary, modularised rigs for jobs done by drilling units today. Jobs suited for this approach include top-hole drilling, completion of subsea wells, plugging and readying shut-in wells.

“Simplifying today’s procedures is very demanding,” Ruså acknowledges. “It calls for a good grasp of health, safety and environmental aspects as well as of operations and commercial priorities.

“It’s important to look at the total effect of new individual demands and measures, and you have to understand the overall risk-reducing effect of the requirements and procedures which are to apply.”

Ruså also believes that suppliers to the petroleum industry must be brought on board, both for technology deliveries and in the provision of services.

“Where drilling is concerned, the operator, the service provider and the rig contractor have different incentives for reducing well costs and increasing the pace.

“The financial incentives for contractors are largely directed at avoiding errors and downtime, and only to a varying degree at other forms of efficiency.

“That applies particularly to the drilling contractor, who is largely paid by the day almost regardless of progress. It’s important here to create the right incentives and relationships between shaping and applying contractual terms.

“Ultimately, this is about challenging our own familiar behaviour. That’s difficult – just try it. We all have a job to do with ourselves, and then one we must do together.”