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50 $/bl, many more new tight oil fields can enter
into the play, thus tempering eventual upward pri-
ce pressures; likewise, at lower oil prices, many
producers may exit the arena, even temporarily,
thus developing a floor price at about 40 $/bl. Af-
ter being a net importer of energy for decades,
the USA will shortly become self-sufficient and
probably a net exporter in the near future.
However, it would be a big mistake to consider
the future oil price as the only factor determining
the rate of future investments. In order to be cost-
effective, all investments will have to reduce their
costs drastically. In reality, we are entering a new
era: a “new normal”.

The industry will invest only in projects
offering good returns under the “new
North Sea will have a high chance of delivering normal” market scenario
new projects economically, under the new mar-
ket scenario with the oil prices in the 40 – 60 $/
bl range. On the other hand, new investments in Over the last two years, a cost deflation of appro-
higher cost areas, such as in Canadian oil sands ximately 20% has already taken place. Indeed, this
, in deepwater in West Africa and in the rest-of- has accounted for part of the investment reduction
the-world, even in shale gas projects in Argen- mentioned above. But far bigger cost reductions
tina, will have many difficulties in delivering sati- will be required in the future, as asked by the end
sfactory returns. users, the Oil Companies: frequently we see a tar-
The US shale and tight oil industry will remain for get of at least 30 % cost reduction vs. the levels of
a long time a “swing supplier”, able to have a de- 2014, whereas many clients are clamoring – and
cisive influence in determining the global oil price, achieving – for reductions of even 50 %.
similarly to the role which the Kingdom of Saudi We believe that further supply chain savings ba-
Arabia played in the past: at oil prices higher than sed on “squeezing” the manufacturers and service
companies are possible, but probably limited. In-
stead, major structural supply chain improvements
will be needed to achieve the desired targets. We
should all take example from other industries, such
as automotive, which have made huge breakthrou-
ghs in automating production, standardizing desi-
gns and components, moving to lower cost pro-
duction environments, etc.
Major structural supply chain
improvements and technology
breakthroughs will be needed to achieve
the desired cost reduction targets

Indeed, we believe that concept changes, design
simplifications, widespread standardization par-
ticularly of norms, reduction of occasional “gold-
plating” and sometimes needless complexity, could
– altogether – bring costs down on the average by
another 20 %. Furthermore, in our mature indust-
ry, there is ample room for major breakthroughs
in both supply chain and technology innovation,
which could reduce the capital cost required for a
given unit of output by another 15 – 30 %. Therefo-
re, reaching the overall target of a 50% capital cost
reduction per unit of output should be realistic and
indeed possible.
A recent example proves the point: a few weeks
ago BP has approved the new $9-billion, 140,000

24 Impiantistica Italiana - Gennaio-Febbraio 2017