Rising to the challenge
It’s well known that supplies of easily extractable oil and gas around the world are running out, forcing oil exploration companies to look to more difficult sources. But could the challenge faced by today’s oil industry be tomorrow’s opportunity for UK SMEs?
Oil exploration companies have been pressing the pause button this year due to the dramatic fall in the price of oil and the supply glut, and seem unlikely to take on new large scale projects for the foreseeable future. Nonetheless, in the long-term, steps will be necessary to boost flagging oil production. Many of the so-called “giant” oil fields are mature and declining, whilst fewer are being discovered each year to replace declining output. As a consequence, oil companies are being obliged to turn to more challenging sources of oil.
The Kashagan oil and gas field, situated in Kazakhstan on the Caspian Sea, certainly falls into this category – millions of dollars have already been poured into the field, which has huge potential as a source of oil, but presents ongoing technical and operational difficulties in terms of extraction. When it was identified in 2000, Kashagan was feted as the biggest discovery of such magnitude for decades. A consortium of companies, including Total, Exxon Mobil, Royal Dutch Shell and Eni, as well as the Kazakh government-owned oil company, formed to manage the project, has found itself hit by setbacks and soaring costs. These have been caused by the technical and engineering complexities of bringing the oil reserves to the surface.
The consortium has had to build artificial islands, work in the harshest conditions, from icy winters to searing heat, and drill at great depths and pressure. Even more of a challenge has been the toxic nature of the hydrogen sulfide gas being extracted, which has eaten through pipelines and presents a deadly problem for operators. All these factors have combined to make Kashagan the most expensive oil project in the world. Production was shut down in 2013 and is currently not projected to resume until 2017.*
Opportunity for innovative UK SMEs
In spite of the drop in oil price, oil companies in Kazakhstan still have capital budgets and are more keen than ever invest, especially if companies can come up with ways of reducing operating costs or increasing efficiency, productivity, innovation or safety. UK products and technology remain highly regarded across global markets. If UK SMEs can rise to the challenge faced by the oil companies, they could be well placed to capitalize in the current climate.
This is why we’re particularly interested in innovative UK SMEs who can help drive up efficiency or solve problems with new products or technologies which are not readily available in Kazakhstan.
If you think your SME has got what it takes, we’re waiting for you to get in touch!
*Royal Dutch Shell Annual Report 2014 RoyalDutchShell.plc.com