Cost reduction, CRINE, and the UK Continental Shelf
In the early 1990s, in the face of punishingly low oil prices of USD 12 a barrel, a new mantra emerged -CRINE. This stood for Cost Reduction In the New Era. This was a collaborative effort to find ways of reducing waste and inefficiency in platform construction and had a radical impact on the safety, efficiency and economics of developing and operating oil and gas fields in the North Sea. But are CRINE’s critics right to highlight it as a reason for falling efficiency in the North Sea?
The publication of the CRINE Report in 1994 saw recommendations for functional rather than prescriptive specifications, shared working practices, a sole industry body for prequalification and a reduction in paperwork through the procurement process. Acting on these objectives, the industry was able to reduce costs by 40 percent.
The drive allowed access to assets previously considered uneconomic, and meant mature assets at that time were kept in operation.
With many commentators in the North Sea highlighting cost inflation as a particular problem, some might think that the time is right for another CRINE wave.
There is evidence that platforms still in production from before the CRINE era are actually more efficient than those built with the cost-cutting initiative in mind. Production efficiency has fallen close to 20 percent since 2005.
Data indicates that a platform’s age is not a direct indicator of its production efficiency. Indeed, some industry commentators have gone as far as stating that CRINE platforms are less efficient, and even less safe. Platforms originating in the CRINE era include: Andrew, Harding, Piper B, Scott, Alba and Britannia.
Malcolm Webb of OGUK stated to Energy Boardroom that he did not expect companies to get tough on costs whilst the price of oil remained relatively comfortably around USD 100 per barrel. However, at the moment, oil companies are in the bind of suffering rising prices and falling production efficiencies. Something does need to change.
Cutting costs as harshly as CRINE required may indeed have caused a reduction in efficiency, and restoration of production efficiencies to levels seen ten years ago will require extensive investment in new infrastructure and repair of existing infrastructure and aging assets.
To achieve this improvement, producers need to plan. Planning can improve work patterns and directing labor to where it is most needed represents a key route to improving productivity in the North Sea. This relies on access to information and the knowledge of how to act on information.
Any deficiency in CRINE was likely caused by a lack of data and information. In the context of the low oil prices on the 1990s, predicting a period of relatively stable, high oil prices within the lifespan of the assets being installed at that point may have seemed like a less than safe bet.
Whilst one can learn lessons from the cost-cutting imperative launched by CRINE at the detriment of other considerations on platforms, one must consider that the North Sea is now so integrated that any solution to increasing production must consider working across multiple assets, of varying age and integrity.
The CRINE report itself, now twenty years old, also still lends itself to more contemporary themes in the North Sea: those of cooperation and collaboration by emphasizing shared working practices and recommending a sole body overseeing prequalification. This imperative to work collectively is something stressed in the recent Wood Review.
Clustered patterns of production and further third party tie-ins will have to deal with the issue of equitable reward for the maintenance of infrastructure in the UKCS. Whilst CRINE can be cited as a reason for reduced productivity in some platforms, any answer to the UKCS’ efficiency crisis will have to be more holistic than simply targeting any singular platform. Key qualities of any solution delivering real progress will include a comprehensive outlook, collaborative ambition and be created with a resilience to changes in future circumstances.
Article by Fraser Wallace