Over the last 30+ years—that is, the period during which I have observed the oil and gas industry closely as a journalist—there have been a number of notable price “corrections” that have to some extent altered industry practices.

The current sharp decline of more than 50% is significant; it is different than what has occurred before as it follows several years of chest-thumping by operators over the cost of new developments. Funny thing that. Apparently it has been the contracting sector’s fault that project costs, notably those in deepwater, have skyrocketed.

So reins have been tugged on and the scheduling of new developments has been slowed because operators want the contracting and supply sides to review their cost basis.

This does require some careful analysis. Whose fault is this cost escalation?

Several benchmarking specialists have noted the ongoing failures by operating companies to succeed with megaprojects, i.e., ones with more than $1 billion in capex. These involve cost overruns of more than 30% and missing onstream dates by six months or more.

The reasons are complex, but one major issue is the failure of project management. Some companies have a habit of moving senior managers before a project comes to a close, often citing the need to get their most experienced people on their most important projects. It might seem like a good plan, but the disruptions in management processes and oversight caused when project teams are in flux are cited for not keeping on schedule and/or budget.

At one time, operator personnel and contractors were seen as very different beasts, almost in the category of “men are from Mars and women are from Venus.” Operators plucked most of the best people straight from university and indoctrinated them into “their way.”

Now it is all change. There is no such thing as a “job for life,” and engineers jump from operators to contractors and back again, depending on who is paying the most at any given time.

And, of course, there continues to be a shortage of experienced hands. When, for example, Chevron needed to man up for its string of big Gulf of Mexico deepwater projects—something like 180 new subsea engineers were needed—it went straight to the contracting and manufacturing side to fill the slots, to the chagrin of those who had been “asset stripped.”

Or when BP found itself short on in-house experience to execute its Angolan projects, it had to go to the market and pick up several very senior people and take them on as staff to ensure they would see the projects through to completion.

The dearth of high-quality personnel resulted in a bidding war for available talent that has sent the cost of labor through the roof and was at least partly responsible for the project hiatus that preceded the price crash.

Operators stop training their own people and poach talent from the supply side, and this results in a talent competition and price hikes. Add this to project management failures, and you have a recipe for rising costs. And whose feet can these problems be thrown at?

If anything, the current slowdown that has seen personnel being let go will achieve at least one good thing. Some seriously “senior” (I mean old) engineers, who probably should have retired about a decade ago, can now deservedly put on their slippers or waders and either take a nap or go fishing. About time, too…

Editor’s note: Steve Sasanow is the founding editor of Hart Energy’s Subsea Engineering News and has been covering the offshore industry since 1981.