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8. The Efficiency Task Force
After a period of reactive change where survival was the
priority, costs were cut and efficiencies sought to ease cash-flow
pressures, the industry is now reaching the stage where there
is little further opportunity to remove costs from the business
without fundamentally changing company processes, standards
and behaviours. As businesses accept the ‘lower for longer’ price
environment, they recognise that strategic long-term change
in how they operate is going to be critical to sustain an industry
where revenues have fallen by around 40 per cent over the last
two years.
Figure 48 below shows the path industry has followed since
the fall in price. There is a limit to what more can be done on the
cost reduction side, with significant progress already achieved
in that area. Efficiency improvements are now well under way
and the associated knowledge sharing is vital to help ensure the
gains are delivered basin-wide. Radical change is ongoing as some
companies make more structural adjustments through adaptation,
differentiation and diversification in both sector and geography.
Figure 48: The UKCS’ Cost Structure
Impact
Time
Cost
Efficiency
Change
Progression
Adaptation
Evolution/Revolution
The industry is now
reaching the stage
where there is little
further opportunity
to remove costs from
the business without
fundamentally changing
company processes,
standards and
behaviours.