growing our business to 2020+ - oilandgasuksharefair.co.ukoilandgasuksharefair.co.uk/wp-content/uploads/2016/11/BP-Sharefair... · A review of well cost escalation since ~2003-2005

OGUK Share Fair 2016

BP North Sea growing our business to

2020+

• Introduction • BP’s North Sea Strategy • Procurement and Supply Chain Management

(PSCM) Process • Context and Challenges

– 50% Cost Challenge – Wells Decommissioning

• Questions

Agenda - GWO

3

Forward-Looking Statements During the course of this presentation we may make forward-looking statements regarding future events or the future performance of the company. No reliance should be placed on forward looking statements which are included only to provide indicative information and should always be considered in conjunction with an assessment of the political, economic, social and legal environment in which BP operates. Such forward looking statements speak only as of the time of this presentation today. Accordingly BP does not undertake any obligation to update or revise them, whether as a result of new information, future events or otherwise, other than that as required by applicable laws.

Cautionary Note

• Lower for longer but demand steadily increasing to 2035

• Greater focus on competitive incumbent positions

• Significant potential remaining in UKCS

• Norway – repositioned: focus the business in the UKCS

• UK strategy evolving Shetland

Central North Sea

Decommissioning

Oil Pipelines

Natural Gas Pipelines

OBO Pipelines

Value focus & growing production

North Sea Region Portfolio

BP North Sea growing our business

Share Fair 2015 – now executing and strategy evolving…

Focus Maximise Invest

Safety Focus on our people Deliver the plan to 2020 Modernize & Transform Build our future

• Safety remains No. 1

• No accidents,

• No harm to people,

• No damage to the environment

• Control of our hydrocarbons every day

• Continue to invest in and compete for capability & skills

• Technical development

• Clear career paths

• Leverage global workforce

• Build leadership skills

• Recognition & inclusion

• Delivery never compromises safety

• Clear plans, KPI, milestones by asset

• Every team, every person understands how they contribute

• Drive efficiency, continuous improvement.

• Communicate and recognise progress

• Leverage strong incumbent resource base

• Develop position WOS

• Invest and sustain CNS

• Strong medium term opportunity set

• 3-5 exploration wells 2017

• Active participation in licence rounds

• Simplify & lighten the load

• Use technology to create a transformation

• Improve IT and communication equipment.

• Get our existing systems working for us.

• Prioritised technology plan for the region to identify new technology

• Transform our business culture

• Direct supplier relationships for more critical activity

BP Supply Chain Process

Sp

end

$

Criticality/Complexity

Supplier Engagement Matrix

• We need supply chain help to improve efficiency and meet challenges

• We’ll listen to all credible offers

50% Cost Challenge Chris Brown

Draft : For review and discussion purposes only. Requires legal review for consistency and fact checking.

9 BP Confidential 2 November 2016

Year of Spud

Cos

t $M

M/1

000f

t

Year of Spud

Average dry hole cost / 1000ft rose from $0.5mm in 2000 to $3.5mm in 2014

Average completed well cost / 1000ft rose from $1mm in 2000 to $6mm in 2014

Cos

t $M

M/1

000f

t

BP North Sea Context

Industry Context



50% Cost Challenge – Region Objective

Continue work on previous initiatives and seek opportunities to reduce every component of well cost. A review of well cost escalation since ~2003-2005 identified the following areas as having particularly high increases and are being scrutinised

• Tangibles: 2x increase

• Mud, Chemical and Engineering Support: 2x – 4x increase

• Cement, Additives and Engineering Support: 2x – 3x increase

• Casing Running Services: 0x - 3x increase

• Directional Drilling, MWD and LWD: 2x – 4x increase

• Diving and ROV: 2x – 3x increase

• Wellhead Maintenance: 2x - 4x increase

• Mud Logging and Wellsite Geo – 2x - 3x increase

• Logistics: 3x - 5x increase

Focus not limited to these areas, but these are the most significant

What further opportunities are there to reduce costs?

• We know we’ve drilled the same wells for much less cost before

• More of this is coming from different scope and choices than inflation

• If you only had 50% of the budget how would you deliver the well?

• What are we doing differently in terms of well design, specification, equipment / bulk selection, re-use, personnel, operational practices or contingencies?



50% Cost Challenge – Scope Clarity & Active Management



50% Cost Challenge – Progress & Needs

Our Challenge:

• Continue and build on the work done to date and reset expectations on cost targets.

• Target reduction in well costs by 50% from end 2015 baseline

We are:

• Using a Minimum Technical Scope approach from the start to explicitly justify in design choices.

• Rigorously assessing what we really need to purchase and rent for equipment and services to execute the design - and how long we need it for

• Keeping detailed information on spend and progress towards the 50% target from 2015 baseline

• Making progress on our aspiration of top quartile delivery on all our wells

We need:

• Early engagement with you to identify:

• Where we can eliminate unnecessary cost and scope, or do things a different way

• Ways to achieve the same design outcome with less expensive or more efficient equipment and services – including appropriate use of technology

It’s not all about cheaper rates – there is much more scope for cost reduction in efficient use of appropriate equipment and services, and judicious choices of when and how much of them we use

We already have great examples where good ideas from suppliers have resulted in a cheaper, simpler and safer outcome on well activity - without talking about rates. We need more.

Decommissioning Challenges Tom Gillibrand



Decommissioning Expenditure

-

200

400

600

800

1,000

1,200

1,400

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

$ m

illio

n gr

oss (

est)

Decommissioning Spend 2016 – 2025*

• 125 platform wells

• 80 subsea wells

• Wells range from 5-40 years old

• Mix of oil and gas producers and injectors

• Current estimate >15 years wells activity *Based on current expected CoP dates



Risks/Opportunities (Wells)

+ -

Technology Development

Well integrity

Scope Identified

Work Platform

Contracting strategy

Efficient Campaigns

Develop and deploy priority technology to market

Existing tech not optimised for P&A, access reduces as P&A activity ramps up

Early surveillance helps descope P&A ops

Well conditions increases P&A workscope

Reduce Workscope through early subsurface characterisation & risk based isolation strategy

Workscope larger than forecasted

Alternative rig strategy/SIMOPS plan developed

Rig requires start-up/ refurbishment/recertification

New contracting strategy drives better performance

Rates higher than estimated. Supply is tight as demand increases

Batched operations, people/process/equipment efficiencies through bundling activity

P&A operations performed ad-hoc without strategic planning and integration



Decommissioning Technology Focus Areas

We need help in developing & deploying the following areas: • Efficient Material Removal

• Lasers, Milling, Melting/Corroding, Cutters, Swedging, Tubular Deposit Removal

• Logging / Surveillance • Through tubing logging, Multistring gas detection, Solids ID, Alternative barriers verification

• Subsea Annulus Access

• Pressure Monitoring, Annular remediation,

• Effective Barrier Creation & Verification • Shale, Salt, Barite, Thermite Tools, Cementing Around Control Lines

• Riserless Subsea P&A

• Well Control Systems

• Pressure Monitoring • Remote Annulus Monitoring, Deep Barrier Monitoring, Long Term Suspension, Riser less

P&A, Dual Deep Plug

Questions?



Feedback

All enquiries should be addressed to; [email protected] We will endeavour to respond to all enquiries within 30 days

Documents

growing our business to 2020+ - oilandgasuksharefair.co.ukoilandgasuksharefair.co.uk/wp-content/uploads/2016/11/BP-Sharefair... · A review of well cost escalation since ~2003-2005