Oil Field Standardization? A Pipe Dream or Reality?

            For a long time, many people have discussed and debated the issue of oilfield part standardization as a method of overall cost reduction for drilling. So much, in fact, that in January of this year, the heads of Saudi Aramco, BP Plc, Statoil ASA, and Repsol SpA, as well as senior executives from Royal Dutch Shell Plc, Total SA, and Chevron Corp met behind closed doors at Davos in a push to cut costs by standardizing some of the equipment used in exploration and production. (http://www.bloomberg.com/news/articles/2016-01-20/in-private-davos-meeting-oil-chiefs-push-plan-to-reduce-costs). Few people seemed to notice. This was a signal the industry may be looking to move away from the bespoke kit designed on a project-by-project basis that currently dominates our industry. These industry leaders seem to believe they can reach a technical consensus with their suppliers so everyone in the industry uses the same kind of kit in some areas thereby reducing costs for new wells.

            Oil Companies have been experimenting with this type of standardization on their own. For example, Anadarko used its “design one, build two” philosophy for its Lucius and Heidelberg spars in the deepwater Gulf of Mexico. Replicating the design reduced engineering man-hours and the cycle time to first production. LLOG also used a similar platform design for its sequential deepwater GoM projects - Who Dat and Delta House - to reduce costs and accelerate cycle time. While the Anadarko and LLOG approaches are different, they share design efficiency as a key project enabler. In fact, Almost half (44 percent) of the upstream companies responding to a recent survey said they would increase standardization in 2016 (http://www.automationworld.com/lower-prices-push-oil-and-gas-industry-further-standardization-big-data).

            Entire mergers are being built on this philosophy. In fact, FMC and Technip have cited the ability to standardize as a reason to merge.

            On Thursday July 07, 2016, National Oil Varco and GE Oil & Gas announced their plan to partner to standardize the floating production, storage and offloading (FPSO) package to drive efficiency, lower costs and eliminate scope changes while accelerating the time to first oil thereby improving returns for FPSO operators (http://www.businesswire.com/news/home/20160707005434/en/National-Oilwell-Varco-GE-Oil-Gas-Cooperate).

The companies believe they can offer an integrated FPSO topside package by early 2017. While the current industry practice is to bid on a component-by-component basis, NOV and GE executives believe that they will be able to offer the complete package by combining their technologies. This is a major announcement!

            Ty’s Take. While this announcement seems a small drop in the bucket of overall oilfield equipment, I believe it marks a significant shift in strategy. Major oil companies are clamoring for standardization and help reducing costs. I think OEMs will start to pay more and more attention to those demands. The GE/NOV partnership is forward thinking and is a bellwether of what is to come. I believe all of us, from bar suppliers to machine shops, to OEMs need to be conscience of this trend and continue to monitor it. We at the Five Star Standard will strive to keep you up-to-date on the latest information concerning standardization.  

            Bryan and Ty are actually working on a secret project that may help bring some standardization to our major OEM customers and their subcontractors. If we are right, we may be able to help everyone reduce costs and operate more efficiently. We aren’t yet ready to disclose any details. But if things go as we plan, we will probably be asking to meet with some of you before the end of the year to present our ideas and get your input. We hope we can change the game…

By: Ty Chapman
Five Star Metals, Inc.
Raising the Bar for Customer Service and Quality