There was a time when buying a high-quality suit meant having it tailor made. Though that may still be the preference for those with the luxuries of time and money to spare, for most, times have changed. Saville Row has faded; the high street has taken over and we’re accustomed to quality and variety available right off the shelf – even with rentals.
The same is happening in the global offshore oil and gas sector and it is a trend to be welcomed.
A moving market
In the days of $120/bbl oil, operators had those luxuries of time and money. Margins weren’t squeezed, standards were gold-plated and fortunes were spent developing and operating wells using bespoke equipment.
But the good times didn’t last forever. The late 2014 price crash saw offshore rental equipment replace a CAPEX-heavy, purchase-based model. With prices going as low as sub-$30/bbl, many planned projects were not economical. Those who did continue to develop wells were forced to adopt tighter operating models with fewer staff engineers and a diminished appetite for CAPEX spends.
The response was to shift to a different operator/supplier relationship. This entailed two major shifts: purchase to rental and the growth of vendor expertise.
First, it meant a switch from purchase-based model to one focused on offshore rental equipment. The operator therefore avoids an unnecessary CAPEX spend and any ongoing costs relating to owning equipment. Additionally, the operator benefits from speed. It is much faster to rent appropriate offshore rental equipment from an agile supplier than to initiate a procurement process. This means reduced time to first oil, less rig time as engineers wait for equipment or shorter downtime for repairs. All translate into a healthier bottom line and, crucially, less risk.
The downturn also led to operators moving to smaller core engineering teams rather than niche specialists. However, those specialists are still crucial to the industry’s functioning.
Instead, there has a been a shift to vendors investing in stronger engineering teams according to their specialisms. This model has the advantage that every operator doesn’t need to duplicate expertise as it is centralised with the vendor.
This leads to a more efficient distribution of resources and better specified projects. This expertise is crucial, too, for making sure the job is done right first time. The fastest delivery in the world is still slow if a supplier misdiagnoses a problem and sends the wrong thing. Our Aquaterra Express solution provides a combination of both agile product and expertise – intelligent thinking coupled with efficient engineered solutions.
Of course, there will always be projects that require bespoke engineering and always a place for a purchase model, but the fundamentals of the industry have shifted in favour of offshore rental equipment options.
This shift is worth celebrating: as the oil price climbs again, the sector won’t repeat past mistakes but will instead be more flexible, profitable and resilient.