Royal Dutch Shell has cut operating costs for some of its North Sea fields by 70 per cent since the price of crude crashed, the oil company said. Andy Brown, Shell’s head of upstream, said it was able to make “significant money in the North Sea at $50 [a barrel oil prices]” thanks to the reductions, which analysts said were among the steepest by any company. Mr Brown said he had been shocked by some of the inefficiencies Shell found when it reviewed operations worldwide after oil prices fell.
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In Aberdeen and Southern operations In the eighties and nineties low oil price periods were quickly reacted to by reducing operating costs mainly maintenance and inspection which equates roughly to 70 percent of OPEX expenditure in a steady state operation with no drilling ongoing.. It is relatively easy to do. That you suffer for these cuts further down the line with serious integrity issues is the reality of the situation where the Management team making the cuts have long since moved onwards and usually upwards. For example a major audit in 1999 found 20 temporary clamps fitted to corroding hydrocarbon pipes offshore. Nothing was done. By 2003 there was some 600 temporary clamps and the failure of one of them caused a major incident and two fatalities. To try and recover the irrecoverable situation Shell Expro expended some £800 m over the next 6 years, their data not mine.This criminal neglect of maintenance caused the premature abandonment of Brent facilities by 4 years or so.
Back to the article, there is ABSOLUTELY no way you can cut operating costs by 70 percent without slashing to the core maintenance and inspection, including testing activities, I just hope by some miracle we do not suffer for this in the future.