* Years of cost overruns and delays
* Oil price plunge adds urgency to the move
* ENI says industry needs in-house engineering again
By Dmitry Zhdannikov
DAVOS, Switzerland, Jan 22 (Reuters) - Global oil majors saythey are demanding cheaper but better services from engineeringand service companies, or simply taking work back in-house,after losing hundreds of billions on cost overruns in the lastfive years.
Cost overruns and delays were the main reason why oil majorsgenerated less cash than shareholders expected when oil was over$100 per barrel.
With oil now half that price, the urgency of addressingcosts and delays rises by the day for the producers.
While keen to avoid accusations of ganging up to force termson suppliers, they are exploring measures that are likely to putfurther pressure on services companies such as Schlumberger and Halliburton, which have already cutthousands of jobs as business shrinks.
"In the 80s and 90s, we were very close to the projects andcontrolled costs and execution. In 2000s, when we became rich,we became less cost-efficient," said Claudio Descalzi, chiefexecutive of Italy's ENI, one of the oil majors thatmeet in Switzerland every year on the sidelines of the WorldEconomic Forum in Davos.
The group includes the listed BP, Royal Dutch Shell, Total, Chevron and Statoil and state giants Sinopec from China, Pemex from Mexico andAramco from Saudi Arabia, making it the world's most powerfulgathering of oil companies.
The boss of Aramco, Khalid Falih, said the group had held aclosed-door meeting to discuss how to change the nature ofrelationships with oilfield services and engineering firms todeliver projects on time and on budget.
Industry research shows that over 100 large projectsexceeded initial costs by a cumulative $400 billion in the pastfive years, according to participants.
"Last year, when oil was at $100-110 per barrel, manycolleagues already spoke about cancelling projects as they werenot able to justify them, even at that price," Falih said.
Emilio Lozoya, head of the Mexican oil giant Pemex, said:"We simply need to bring costs down in line with the currentlower oil prices."
Participants in the meetings said a range of ways tocollaborate had been suggested, including having a shareddatabase that would list the best and worst service companies byregion, and a 'rule book' for systems and components.
Falih said the industry could push for common standards forequipment such as pipes or valves.
Descalzi said the industry as a whole was actively moving tocontracts where payments are based on timely execution.
He said lower oil prices offered a good opportunity for theindustry to renegotiate some existing contracts or move workin-house:
"In the 1980s, we didn't use EPC(Engineering-Procurement-Construction) contracts. We did a lotof things in-house. In the 2000s, we outsourced a lot of thingsand became weaker in engineering."
ENI recently hired 2,000 people to bring work in-house,Descalzi said. "Ultimately, you save billions of dollars if theproject is delivered on time and without cost overruns." (Editing by Kevin Liffey)
