Sensible observations during a downcycle: deepwater construction and engineering firms need to cut costs, curtail investment and work together.

Except that those statements weren’t made in a downcycle. They were made at OTC 2014, when oil costs were $110 per barrel.

For years, cost overruns and delays have plagued deepwater projects. In 2013 and 2014, they began slowing or stopping projects even while oil prices were strong.

The industry has been fraying for decades. About six years ago, the average time between a discovery and first oil was five years. Now first oil production takes seven years—32% longer—and it’s increasing.

On May 5 at OTC 2015, CEOs from equipment, construction and services companies expressed a determination to overcome overruns and delayed deliveries and collaborate with their competitors.

As in the past, industry collaboration and standardization were touted as keys to lowering costs as they face more difficult demands from E&Ps in more challenging waters around the globe

Jean Cahuzac, CEO of Subsea 7, said the past 30 years have seen the same discussion during downturns that evaporate once oil recovers. But the prevailing winds have been pushing change for a long time.

“I think this time we’re going to do it,” Cahuzac said. “We have no choice.”

John Gremp, chairman, president and CEO of FMC Technologies, said much is at stake this time. “It’s not about $50 oil,” he said.

Rather, it’s about future oil needs and reversing everyone’s fortunes. In the past five years, during the most stable, highest oil price environment in decades, E&P companies reported declines in returns every year, he said.

One factor is expenses. An EY study of 470 projects costing at least $1 billion found that overruns totaled $400 billion.

In the years ahead, Gremp said an additional 40 MMbbl/d of oil production growth is needed. About 80% of substantial hydrocarbon discoveries have been made in deepwater in the past few years.

That leads to a serious problem, Gremp said. “Those projects are not going to be developed unless the industry can substantially improve the returns on those projects,” he said.

Thierry Pilenko, chairman and CEO of Technip, said cost has been a problem for too long. Pilenko said even paperwork is creating a money pit. A piece of equipment used in 1990 used to require three pages of documentation. Now it requires 70% more man hours to document.

“For the same piece of equipment, you now have 18 pages,” he said.

The oil and gas industry should also apply the lessons learned by the auto and airline industries, starting with a reevaluation of integrating the supply chain, he said.

Pilenko said the industry must strengthen the relationship across the supply chain and find ways to standardize.

“Otherwise, we don’t have a solution,” he said.

The answer is not to turn to the typical downturn tactic of squeezing the supply chain.

“I can tell you this is not enough,” Pilenko said. “There is not enough profit in the supply chain to make the changes that are needed to make the project viable structurally and sustainably in the long term.”

Standardization, however, has been talked about for years without success. “Until maybe now,” Gremp said. Instead of talking about it, it might actually get done.

He cited an example of four operators agreeing on a single part number. While it took 9 months to reach consensus, single part numbers reduce lead times in Gremp’s experience by a third.

“It’s just intuitive. If you’re doing something over and over again, you get good at it, reliability goes up, lead times go down, costs go down,” he said.

Bruno Chabas, CEO of SBM Offshore, said the industry’s problems are decades old and plagued with projects that are over budget and inefficient.

Traditionally, contractors have been blamed and the terms and conditions of a job have become more and more stringent over the years.

“I don’t think it has worked—in fact, the opposite,” Chabas said.

Instead, service firms need to have upfront involvement in a project and freedom to help design platforms and undersea equipment. In one case, Chabassaid a project was delivered two months ahead of time with almost no problems.

“Some of the best success stories we have seen for our company is when we got involved in the design engineering portion with the industry,” he said.

Offshore