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Aruba, June 3, 2015 - Even before Craig May, a longtime Chevron executive, moved to this North Sea port city two summers ago, he knew that the oil wealth in Britain’s waters was on the steepening slope of a decades-long decline.
Along with other Big Oil players that make Aberdeen their North Sea hub, Chevron had let its aging offshore operations become inefficient. There was still plenty of oil and gas out there. But the rising expenses, Mr. May said, no longer justified the diminishing revenue from the undersea wells.
“We recognized we weren’t structured the right way,” said Mr. May, who now leads the company’s exploration and production in northern Europe. “Cost always matters.”
And that was when oil was selling for more than $100 a barrel.
Now, with oil’s price per barrel down about 40 percent from a year ago, and with some operators shutting down aging platforms, Mr. May and Chevron are in a race against irrelevancy for their North Sea operations.
The Organization of the Petroleum Exporting Countries, which meets on Friday in Vienna, is unlikely to provide any sort of relief to the North Sea industry by cutting production to prop up prices. Instead, OPEC — which does not include Britain or any other North Sea producer — hopes that a spell of low prices will discourage new investment in high-cost regions like the North Sea, reducing their output.
Even before the price of oil began collapsing last summer, Mr. May was taking steps to trim Chevron’s North Sea costs and planning new technologies — including a $3 million integrated operations center in Aberdeen — to wrest renewed efficiencies from 20- and 30-year-old offshore oil and gas rigs.
There is much more at stake than one company’s profitability. The efforts are a test of the continued viability of an energy region that, if nurtured, could continue to give Europe a hedge against its reliance on oil and gas from Russia and the OPEC nations.