Deepwater Drilling in the Gulf Bounces Back
The infamous BP oil spill caused chaos in the US deepwater oil industry, but now drilling in the US Gulf of Mexico (GoM) is making a comeback, according to natural resources experts GlobalData.
The new research states that despite increased US government restrictions which followed the Deepwater Horizon explosion – combined with the risks and high costs involved in deepwater drilling – climbing crude oil prices will see GoM oil production surpass its former records.
BP plc’s Macondo well experienced a blowout in April 2010, resulting in the destruction of the Deepwater Horizon drilling rig, a 5 million barrel (MMbbl) oil spill, and a six-month moratorium issued by the US government for certain areas of the GoM. However, a recent surge in issued permits indicates the return of large-scale deepwater drilling to the area.
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The US government issued 44 drilling permits in Q1 (January to March) of 2012 -a promising figure considering that throughout all of 2011 and 2010 the US government issued only 79 and 74 permits respectively. This growth suggests that deepwater drilling in the GoM will return to levels seen before April 2010 by the end of 2012.
One major attraction for deepwater oil exploration in the GoM is the stable political climate and clear regulations, while many other parts of the world see oil and gas investment opportunities marred by regime changes or nationalization. The US and Mexican governments entered into an agreement in February 2012, which set a framework to facilitate hydrocarbon exploration and production in the GoM. The agreement enables lease operators in the US GoM to coordinate with Petroleos Mexicanos (Pemex), the Mexican National Oil Company (NOC) for joint exploration and production of hydrocarbons in the GoM in the Mexican maritime boundary of GoM. The agreement allows a greater level of freedom for US oil corporations, and is expected to increase investment and drilling in the GoM.
Major International Oil Companies (IOCs) such as BP and Chevron Corporation have always dominated the deepwater drilling in the GoM, and are at the forefront of the drilling resurgence. Out of the 44 deepwater drilling permits issued in Q1 2012, BP (with 13) and Chevron (with 14) garnered the majority. IOCs hold the required technological expertise, and the capacity to fund high capital expenditure and potential multi-billion-dollar liability risks in the event of another oil spill.
However, the dominance of IOCs in the GoM deepwater exploration is enhanced by an apparent lack of interest from some small independent US operators, as regions such as the Bakken and Eagle Ford shales offer attractive opportunities without the levels of risk involved in deepwater drilling.
Technology revolution for water retailers
In April 2017, the UK’s water retail market in the world opened for business – the single biggest change to the water sector since privatisation. This development allowed businesses, charities and public sector organisations to shop around for the best deal.
However, like any industry, this change hasn’t been without its sticking points; here, Paul Williams, CTO at Everflow Tech (pictured far right), discusses how retailers can harness technology to their advantage
Quotations could take up to a week to produce, billing software had to be manually updated and brokers were unable to manage the complete customer journey in one place – all of which took time, cost money and allowed for human error.
The more complexity that was involved in billing or quoting, the more contact end customers needed to have with their retailers, pushing up the cost to serve for every SPID. This meant retailers – ourselves included – found themselves in a situation where profits were simply eaten up by service costs.
We also note that it can traditionally be hard for retailers to stay on top of balancing what they are charging their customers with what they are being charged by the market. To further exacerbate this, the longer a change goes unnoticed, the more trouble it can be to balance the issue.
It was these issues that Josh and his (at the time) small team wanted to ameliorate, creating their own technology in the absence of anything else.
This technology evolved into our award-winning retail sales, billing and customer management platform for the water retail market, and Everflow Tech was launched as a standalone venture in 2018, selling the software externally for other water retailers and their customers to benefit from.
What retailers want
As a relatively new entrant to the world of utilities competition, the water market could be seen to be lagging behind, particularly when it comes to innovation.
In fact, as recently as 2019, Ofwat said it expected the industry to be making technological advances and to be working with a culture of innovation, collaborating with companies both within and outside of the sector.
And with cost-savings for consumers traditionally lower than for other utilities, retailers need to be offering something more – whether that’s better support, energy-efficiency advice or more accurate data.
What’s more, consumers have had a taste of the power of technology, and they’ve come to expect nothing less from retailers across the board.
Another key issue – thrown into sharp relief during the past 12 months (and counting) of a pandemic – is rising levels of arrears, which are likely to increase bad debt beyond margins that retailers originally allowed for when the market was created.
In such a low-margin industry, there is a limit to the amount of debt retailers can take on, especially as recovering costs can be a very slow process. Ofwat has signalled that this issue could be addressed as early as this year, with a mechanism for recovering bad debt to be established during 2021/22.
The market needs simple solutions to better serve the end user, and we were perfectly placed to develop those solutions. At Everflow, our software is designed for the water retail market, by the water retail market.
As well as simple billing, clear-to-understand workflows, and a revenue assurance system to allow retailers to quickly compare market charges, Everflow has also introduced a complete debt solution, allowing missed payment dates to drive late payment charges and escalations automatically.
Retailers are able to design and put out their own bill and quotes, tailoring customer journey and overall experience – whatever the circumstances.
What does the future hold?
Automation is key to any industry; we’re heading into an age of driverless cars and smart homes, and this drive for tech will filter through to our industry, and we need to catch up.
The Internet of Things – a network of physical objects connected to each other – means human error (and effort) can effectively be removed from many everyday tasks, which goes for meter readings too. However, in the 21st century, the water market is still not leveraging previously emerged technology in the form of smart meters to provide accurate billing.
Consumers are also becoming more empowered, both to ask for information and change their preferences if they don’t like what they learn. Retailers need to be armed with this information, not next week, not tomorrow, but now – and, at Everflow Tech, we’re putting that information at their fingertips.
But the retailers themselves need to speak up too, and we will always work with them to get the best ideas on what needs to be developed and when.
Our strong bond with Everflow Water, along with other key customers, means we have a direct interest in making sure our systems serve the water market in the best way they can.
For us, the goal is to make sure retailers on our platform can grow as much as possible, leaving behind laborious daily processes to focus on their own strategic growth and, most importantly, helping their customers.