Offshore Aberdeen March 2015

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Oil & Gas UK report paints bleak picture, prescribes action

MARCH 2015 Statoil chooses unmanned platform for Oseberg FD1 Statoil said it had decided to choose an unmanned wellhead platform for the Oseberg Future development phase I project in the North Sea, which will be controlled from the Oseberg field centre. The choice was made on cost basis, and a final investment decision is expected next winter.

Unmanned wellhead platforms without facilities, helicopter deck and lifeboats are new for Norway, but they have been used for some time internationally, for example on the Danish and Dutch continental shelves. Statoil and its licence partners will now carry out pre-studies of the unmanned wellhead platform.

BWE sets up new explorer OIL & GAS UK’s new report on offshore exploration, investment and production was published on February 24th, providing what it called “striking evidence of how rising costs, taxes and inadequate regulation have taken their toll on the UK industry’s international competitiveness.”

The organisation’s annual Activity Survey 2015 highlighted the urgency with which measures are needed to secure new investment and address the collapse in exploration, if the UK is to maximise economic recovery of its still significant untapped resources.

“Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground.”

Malcolm Webb, Oil & Gas UK’s chief executive, said: “This year’s Activity Survey paints a bleak picture but also identifies this region’s potential, emphasizing the importance of Government and industry now putting the right measures in place to secure its long-term future. This is crucial not only for the energy security that domestic oil

and gas production provides but also for the hundreds of thousands of highly skilled jobs, advanced technology and billions of pounds of exports which the industry underpins.

“Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground.”

The survey reports that 6.3 billion boe are sanctioned or under development.

There are another 3.7 billion boe of potential investment opportunities, although companies indicated at the end of 2014 that less than two billion boe of those were likely to be developed.

Operating expenditure rose by almost eight percent to £9.6 billion in 2014 and on a unit of production basis, reached a record high of £18.50/boe. Falling oil prices meant that revenues fell to just over £24 billion for the year, the lowest since 1998, and this, combined with rising costs, resulted in a negative cashflow of £5.3 billion for the basin, the worst since the 1970s.

Cost over-runs and project slippage on several large projects pushed capital investment in 2014 beyond expectations to £14.8 billion, with half spent on just 12 fields. As these large projects move from the investment phase into production there is very little new investment lined up to replace them; indeed, it is expected to fall in 2015 by around one third to £9.5 – 11.3 billion, the report concluded.

Annual investment in sanctioned projects alone is forecast to decline

rapidly and could collapse to £2.5 billion by 2018. Equally alarming is the threeyear (2015-17) outlook for projects yet to get company sanction, in which planned investment has fallen from £8.5 billion in last year’s survey to just £3.5 billion in current forecasts. The basin is not generating new projects and as a result, there is very little fresh investment, according to the report findings.

“The basin needs sustained, high investment - £94 billion alone to recover the 10 billion boe in known reserves. This is why a concerted effort on three fronts is needed – tax, regulation and cost...”

It found that exploration for oil and gas in the UK last year was significantly worse than anticipated with only 14 wells drilled out of the expected 25.

“This continues the downward trend of recent years with no improvement in sight,” said Mr Webb. Between eight and 13 exploration wells are forecast for this year as price uncertainty adds to the existing difficulty explorers still have in accessing capital.

“Even at $110 per barrel, the ability of the industry to realise the full potential of the UK’s oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and

inappropriate regulation. At current oil prices, we now see the consequences only too clearly,” Mr Webb said.

“The industry recognises that its cost base is unsustainable. Cost and efficiency improvements of up to 40 per cent are required to give this basin a viable future. This adjustment is now underway but cost control alone is not the answer.

“The basin needs sustained, high investment - £94 billion alone to recover the 10 billion boe in known reserves. This is why a concerted effort on three fronts is needed – tax, regulation and cost – to make the basin more attractive to investors and ensure that significant sums of muchneeded capital come to the UK.” Mr Webb concluded by welcoming current efforts to improve cost efficiency, and government moves towards implementing the Wood Review recommendations and conducting a comprehensive tax review.

“We need to see full delivery of the Wood Review recommendations as well as a permanent reduction in the headline rate of tax, a simplification of the tax allowance structure and stimulus for exploration.

We must, together, do what is needed to reduce costs, encourage investment, and avoid premature decline.”

Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its members, who number over 500, are companies licensed by the Government to explore for and produce oil and gas in UK waters and those in the industry’s supply chain.

UK-BASED INVESTMENT firm Blue Water Energy (BWE) is spending £163 million on establishing Wellesley Petroleum, which will focus on exploration in the Norwegian North Sea through licensing rounds, farm-ins and acquisitions.

The new company shows that some long term equity investors still see potential in the North Sea, despite depressed oil prices. Wellesley is expected to begin acquiring Norwegian acreage over the next few months. BWE was founded in 2011, and the company raised around $861 million during 2014.

Brent Delta to end life in Hartlepool Decommissioning of the Brent Delta platform’s 23,500 tonne topside is to be carried out at Able UK’s Seaton Port site in Hartlepool, where more than 97 percent of the material will be reused or recycled, according to operator Royal Dutch Shell.

Weatherford to cut jobs in Aberdeen Weatherford International has confirmed it is making job cuts at its Aberdeen operation in response to falling oil prices. The oilfield services company would not comment on speculation that 100 jobs would go. It said it was aligning its cost structure to match the market environment. Weatherford added that it will continue to adjust that structure as market conditions evolve.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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BP: North Sea oil output to drop to 500,000 b/d in 2035 NORTH SEA OIL production will decline to around 500,000 b/d by 2035 as fields in the mature basin deplete, BP CEO Bob Dudley said at the launch of the BP energy Outlook 2035. “The North Sea is a very mature oil and gas province and it will inevitably go through a decline. It peaked in 1999 at around 2.9 million b/d and our projections are that it will be half a million barrels in 2035,” Dudley said.

Statoil begins producing at Oseberg Delta 2 STATOIL AND ITS partners have started producing oil at the 77 million boe Oseberg Delta 2 field in the Norwegian North Sea. The field is tied back to the Oseberg Field Centre, 14 km to the north, and was developed using two subsea templates.

Statoil hopes to improve recovery rates at the field by using gas reinjection, and two of the five wells so far drilled are for that purpose rate to be achieved. Operator Statoil holds a 49.3 percent stake in Delta 2, alongside Petoro, Total and ConocoPhillips. The field’s recoverable reserves include 32 million barrels and 45 million boe of gas.

Reef Subsea AS files for bankruptcy NORWAY’S REEF SUBSEA AS has filed for bankruptcy, as low crude prices continue to challenge the sector. Its UK sister company, Reef Subsea UK, remains in business. Reef Subsea AS was already struggling financially and underwent restructuring last year, splitting into three units; X-Subsea, Reef Power & Umbilical and Technocean Subsea.

Norway rules out oil tax cuts AS THE UK prepares for North Sea tax cuts, Norway’s government has rejected the idea of any cuts whatsoever in response to lower oil prices, instead insisting that the nation’s largest industry cut costs to weather the slump.

“We don’t think you should answer lower oil prices by changing the tax system,” Prime Minister Erna Solberg said. “One of the really good things in Norway has

been the stability in our systems.”

As in the UK, a Conservative-led government in Norway is still considering tax incentives for marginal projects and increased-recovery efforts at mature offshore fields, though nothing has been proposed “the short term,” she said. Oil and gas make up 20 percent of Norway’s economy, and the falling prices has cut both tax income and jobs.

Norway’s oil directorate said its oil industry would shrink this year and might decline faster thereafter unless crude prices recovered. Oil companies in the country are preparing to cut investments by an average of about 15 percent this year.

Solberg said: “For now, there are no strong indicators among those things that would be parameters for action [on tax], such as significantly higher unemployment.”

UK approves biggest wind farm yet PLANNING PERMISSION HAS been given for the Dogger Bank Creyke Beck offshore wind project to be developed by the Forewind consortium - comprising SSE, RWE, Statoil and Statkraft. The project is more than twice the size of the UK’s current biggest offshore windfarm and will be located 80 miles off the Yorkshire coast in the Dogger Bank.

The project comprises up to 400 turbines, and is expected to cost £6 to £8 billion and could fulfil 2.5 percent of the UK’s electricity needs. Originally projected to develop up to 9 GW of power as part of a planned nine zone project of 32 GW, the plan was later scaled down to a 7.2 GW installation, of which Creyke Beck project will contribute 2.4 GW. However, the Forewind consortium has yet to make a final investment decision, and development could still be shelved or delayed.

Although the UK does not manufacture large wind turbines, the Department of Energy and Climate Change says half

of the costs associated with building and operating a windfarm are spent buying services and products from UK businesses.

The project will be further offshore and in deeper waters than previous projects, to take advantage of preferable wind conditions and reduced visual impact.

It is as yet unknown which foundation typologies and turbine models will be employed, but the project’s approval should provide an exciting prospect for the designers and manufacturers of deeper water solutions.

Welcoming the decision, Ed Davey, energy and climate change secretary said: Making the most of Britain’s home-grown energy is creating jobs and businesses in the UK, getting the best deal for consumers and reducing our reliance on foreign imports. Wind power is vital to this plan, with £14.5bn invested since 2010 into an industry which supports 35,400 jobs.”

Tarald Gjerde, general manager for

Oil & Gas UK predicts production rise in 2015 PRODUCTION SHONE OUT as the biggest positive from Oil & Gas UK’s Activity Survey 2015, released late February. This year up to 15 new fields could begin production with many expected in the first half of the year. If there is no major project slippage, oil and gas production could increase to around 1.43 million boe/d in 2015.

In 2014 the UKCS had its best year-

on-year performance since 2000, falling just one per cent since 2013 to 1.42 million boe/d, according to the report. This was largely the result of investment in new project start-ups, enabled by targeted tax allowances, and a specific focus across the industry on improving production efficiency in existing fields which resulted in no major unplanned shutdowns.

Forewind said: “Achieving consent for what is currently the world’s largest offshore wind project in development is a major achievement and will help confirm the UK’s position as the world leader in the industry.”

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

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COMMENT AS WELL AS the regular postal deliveries of our first issue last month, many of you may have managed to read some of Offshore Aberdeen at the Subsea Expo in Aberdeen on February 11th-12th, an event that I had the pleasure of attending myself, along with my publisher, Shawn Coles. From what I saw and heard, the section of Aberdeen’s oil and gas community represented there was as energised as ever, despite the oil price fall. However, with costs in the region among the highest in the world, the over-riding theme of the exhibition and associated conference, was how to get those costs down now clients no longer have money to spare.

Dominated by smaller innovative service companies, many of the attendees had apparently still to feel much impact from depressed energy prices, with order books full for many months in advance, based on projects that were sanctioned and budgets that were allocated years ago. Others were providing new lower cost solutions that reduced costs, which may be in line to benefit as budgets are squeezed.

Speaking to Offshore Aberdeen, Steve Beddows, Business Manager, Life of Field Services at Technip said that his department had not seen work levels reduce yet, although he acknowledged that many clients were keen to cut contract costs. Indeed, as operators are put under more and more pressure there is an expectation that contract disputes are likely to

rise generally. We reflect on this with an article from Aberdeen solicitors, Brodies, who specialise in contractual dispute resolution in Contract disputes on the rise, on page 10). The biggest dispute threat of all could be between management and unions as inevitable cost cuts are pushed through, and we look at the situation and the damaging affect any action could have, in Attempts to improve efficiency challenged by threats of strike action, on page 8.

As if to underline the need for cuts, Oil & Gas UK’s latest report and survey paints a bleak picture for the North Sea (see full story on page 1).

It said the sector spent and invested £5.3bn more than it earned from sales during 2014, its worst performance since the seventies. And this year, the body’s annual survey predicted that investment in the industry is set to fall to £9.5-£11.3 billion from £14.8 billion in 2014 - which was higher than expected due to cost and project overruns. Worse still, annual investment could fall as low as £2.5 billion within three years, once the current wave of large projects enters production.

It finds that the cost per barrel extracted has risen to a record high of £18.50, although this should fall as the industry cuts back. The report said costs needed to be reduced by up to 40 percent per barrel to ensure a sustainable future for the UK’s offshore sector. It goes on to call on government for tax cuts, and a

day or so later the UK Government did announce that it was going to allow North Sea operators to offset capital expenditure against tax. This will cover new fields, significant redevelopment of existing ones, and exploration, and should reduce effective tax rate for new projects from 62 percent to between 45 and 50 percent, according to Murray Callander, chief technical officer at consultancy Eigen Ltd. “Without tax breaks, in the current climate the industry will inevitably start to withdraw from UKCS. However, these should not be handed out without conditions. The greatest threat to operators in the UKCS (and elsewhere) is their own inefficiency, which has been allowed to creep in during years of ever increasing oil prices,” said Mr Callander, who you can hear more from in our Opinion column on page 10.

REDUCING COSTS WILL also help better position Aberdeen-based companies that have built up expertise over the years in the North Sea, and are now seeking to export it overseas to a growing number of basins that are approaching maturity too. What was perfected locally can just as well be applied overseas as the opportunities begin to arise. This global potential is encouraging but it really requires a viable local application on the UKCS to keep the businesses headquartered in Aberdeen.

As could be seen from the Subsea Expo, it is likely to take a while for the recent cost cutting announcements from the majors and others to filter down through the industry’s entire food chain. But then there will inevitably be a lag once prices pick up again – unlike over in the US shale fields, where investment lead times are shorter, and investment is likely to bounce back quickly on any price recovery – a potential game-changer for the global oil market, according to some experts, which could make non-OPEC supply more responsive to price, stabilize the market and prevent too much of a price rebound when the time comes. In the past, long lead times for conventional projects have meant supply has been unable to respond to price in the short run. However, it’s important to say this is just one of many often contradicting predictions for the oil market over the next few years, with analysts unable to agree on price outlook or very much else at the moment. I will take a look at the latest competing theories in the next issue.

While analysts bicker over where prices are heading, countries affected are attempting to stimulate activity, and this is certainly true in terms of the number of license awards from both the UK and Norway at the moment, although they don’t look like resulting in much actual drilling, particularly in the UK, (see article, UK and Norway award licenses like there’s no tomorrow, page 10).

However, while the UK looks set to relieve pressure on the sector with tax cuts in its upcoming March budget - urged on by the SNP, Oil & Gas UK, Sir Ian Wood and many more - the Norwegian Conservative-led government has ruled out the option completely (see news article, Norway rules out oil tax cuts, on page 2). Those Norwegian Tories must be really nasty...

While tax cuts may help some, many companies that focus on low cost solutions are claiming the price fall itself is the opportunity they needed for their particular business model to thrive. Others have protected themselves by hedging – selling oil forward at prices guaranteed before the market slump. I look at why some companies did it and the advantage it has provided to them as the price has fallen (see Happy Hedgers on page 13).

Before that, and related to the subsea conference, we talked to Infield about their latest outlook for the subsea sector, which may provide sobering reading for many of the attendees, although at least it’s not quite as bleak as the Oil & Gas UK report.

(See Study: Oil price slide to hit subsea sector, below). We hope you enjoy our second issue, thanks for reading us.

Statkraft invests in UK offshore wind farm NORWEGIAN STATE-OWNED utility Statkraft has bought a 50 percent stake in the planned Triton Knoll offshore wind farm, which is to be built off the coast of Lincolnshire. Statkraft will develop the project with existing shareholder German utility RWE. RWE had been planning to develop the wind farm on its own, but last year indicated

an intention to reduce its investment in renewable energy in the UK because of policy uncertainty. Triton Knoll was given planning consent by UK energy secretary Ed Davey in 2013, initially for a capacity of up to 1.2 GW, but RWE later reduced the size of the project with capacity likely to be in a 600-900 MW range – possibly overtaking the 630 MW London Array as the world’s

largest offshore wind farm.

Statkraft has a strong interest in the UK offshore wind sector, having previously developed the 317MW Sheringham Shoal project with fellow Norwegian statecontrolled firm Statoil. The two companies are also to jointly develop the 400 MW Dudgeon project, which they gave the goahead for last year. Statkraft said Triton

Knoll was a good opportunity because of its close proximity to Sheringham Shoal and the planned location for Dudgeon.

RWE is close to completing the 576 MW Gwynt y Mor wind farm, located off the coast of north Wales. But its planned 340 MW Galloper project, which is an extension to its existing Greater Gabbard wind farm, is on hold after project partner

UK utility SSE withdrew last year. RWE cancelled its planned 1.2 GW Atlantic Array project at the end of 2013.

RWE and Statkraft will now work together towards making a final investment decision for Triton Knoll in 2017. Construction could then begin by the end of the same year and be completed during 2021-22.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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NEWS

BG spins a double duster Wood Group announces cuts NORWAY’S REGULATOR, THE Norwegian Petroleum Directorate (NPD), said BG Group had completed drilling at two wildcat wells in production license 373 S. The two wells, 34/3-4 S and 34/3-4 A, were drilled about 5 km east of the Knarr field in the northern part of the North Sea. “Data sampling and acquisition have been carried out in both wells… Both wells are classified as dry,” said the NPD.

It said the purpose of wildcat well 34/3-4 S was to investigate a large channel system in reservoir rocks in the Pleistocene. The well encountered a 250metre thick channel system, about 50 metres of which was of very good reservoir quality. Traces of gas were encountered in two thin sandstone layers.

The purpose of well 34/3-4 A was to prove petroleum in lower Jurassic reservoir rocks (the Cook formation).

Well 34/3-4 A encountered about 110 metres of the targeted formation, 53 metres of which was sandstone with good reservoir quality and traces of gas.

The wells will now be permanently plugged and abandoned. Wells 34/3-4 S and 34/3-4 A were drilled by the Transocean Searcher semi-submersible drilling rig, which moved on to drill wildcat well 34/3-5 S in the same production license.

Lundin targets Gemini with new well offshore Norway LUNDIN PETROLEUM HAS begun drilling at the exploration well 16/1-24 in PL338C southwest of the Edvard Grieg field. The well will investigate the hydrocarbon potential of the Gemini prospect. The well is located in PL338C, 10 km southwest of the Edvard Grieg field.

The main objective of well 16/1-24 is to test the reservoir properties and hydrocarbon potential of Lower Paleocene aged sandstones of the Ty Formation. Lundin Petroleum estimates the Gemini prospect to have the potential to contain unrisked, gross prospective resources of 93 million boe.

The planned total depth is 2,192 metres

below mean sea level and the well will be drilled using the semisubmersible drilling rig Island Innovator. The drilling operation is

expected to take 40 days. Lundin Petroleum is the operator of PL338C with 80 percent working interest, alongside OMV Norge.

AMONG COMPANIES TO cut jobs in the last few weeks, Wood Group said it would save more than $30m by reducing and deferring spending in the current financial year, and would cut its number of employees. CEO Bob Keiller told City analysts: “We will be reducing our headcount in areas of overhead spend.”

Keiller said the company would also limit employee travel, reduce spending with other companies and cancel staff conferences.

Chairman Ian Marchant said the company performed well in 2014, given the steep drop in prices: “I have confidence that my management team’s significant experience and long record of success in cyclical oil and gas markets will ensure we take the steps necessary to maximise performance in the new commodity price environment,” he said, adding that in 2015 the company would see the full benefit from completed

Trapoil relinquishes license, seeks partners TRAPOIL HAS DECIDED to relinquish Licence P.1556 Block 29/1c (Orchid), which it said was becoming unduly expensive to maintain. The decision to relinquish was taken in conjunction with its partner following extensive efforts to secure a potential farm-out. The impairment charge associated with the relinquishment of Orchid, is expected to be about £5.8 million.

Trapoil is also looking for farmout partners to develop the remaining exploration and appraisal assets in the group’s portfolio, including license P.1889, Blocks 12/26b and 12/27 (Niobe), for which a well is planned

for the second quarter of 2015. Also license P.1610 Block 13/23a (Magnolia), where seismic evaluation

is ongoing in respect of a possible extension of the adjacent Liberator discovery; Licence P.1666, Block 30/11c (Romeo), a discovery requiring further appraisal; Licence P.1989 Blocks 14/11, 12 & 16 (Homer) and Licence P.2170, Blocks 20/5b and 21/1d (Cortina).

Orchid slips from Trap

Wood Group CEO Bob Keiller

acquisitions.

Keiller declined to say how many jobs might be cut from Wood Group’s 38,000 workforce but indicated that some would be in the UK, where it employs 11,500 workers, including about 4,200 in the North Sea. Wood Group announced the spending cuts as it unveiled pre-tax profit excluding exceptional items up 2.9 percent to $424.2m for the year ended 31 December.

The company increased its annual dividend by 25 percent to 27.5 cents a share and said it expected the dividend to rise by at least 10 percent this year and beyond.

The company said its customers were trying to cut costs after the price of Brent crude fell from $115 in June to close to $60 this week. But Wood Group said it was positioned to withstand low oil prices because a big part of its business was advising energy groups how to operate more efficiently.

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

Sterling plugs Crosgan well STERLING RESOURCES SAID that the Crosgan appraisal well (42/15b-3) in the UK Southern North Sea reached a total depth of 8,401 feet. It encountered gas bearing sands in the Carboniferous Yoredale Formation with 35 feet of pay in the targeted Whitby Sandstone, and a further 26 feet of pay in various shallow sands within the overlying upper Carboniferous section.

The well has encountered a gas-

down-to deeper than the gas-water contact observed in the offset 42/10b2z well drilled in 1995. The Whitby formation, however, was encountered 265 feet deeper than expected and the sand thickness was less than expected for the well. On completion of logging activities currently in progress, the well will be plugged and abandoned. Sterling Resources UK holds a 30 percent interest in the Crosgan Licence.

Safety study finds anomalies NORWAY’S PETROLEUM SAFETY Authority has reported three anomalies at a Lundin facility. The Edvard Grieg field is being developed using a manned fixed facility comprising a processing facility, living quarters and drilling by means of an external jack-up drilling rig.

The field is located about 180 km west of Stavanger. The objective of the audit

Typical architecture of the Norwegian coast

was to assess how Lundin is ensuring compliance with regulatory requirements for barrier management in the Edvard Grieg development project. Nonconformities were identified in connection with the emergency shutdown system and evacuation routes. An improvement point was identified in connection with deluge system automation.

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Planning ahead: Getting Graduates into Oil and Gas Ritika Pawar, Student Development Committee Chair, Society of Petroleum Engineers (SPE) Aberdeen Section

WITHIN THESE TURBULENT times for the oil and gas industry, it is critical that we do not lose sight of the future, and to whom it will belong. The reaction to the drop in oil price has been severe in some cases, with budgets being cut and major projects being placed on hold, and perhaps most worryingly, the significant job losses.

It is understandable that this sharp price decline would cause panic, however last year’s Wood Review highlighted that there could be up to 24 billion barrels of oil and gas still to be recovered in the UKCS alone. This means that exploration and production is not going to cease at any time in the future. Likewise, recovery has moved into new frontiers such as deepwater and more remote environments, highlighting that although easily recoverable oil is fast diminishing, there are still plenty of opportunities in challenging environments.

It is imperative that we do not forget about the future, and the students and young people who will comprise the industry’s next generation workforce.

Now, more than ever, we must not lose sight of the efforts which have been made in terms of encouraging students to progress into the oil and gas industry.

It could be argued that due to the extra attention brought upon the industry from the drop in prices, it

is even more crucial to focus on the long-term strategy and part of this should still include encouraging young people to enter a career in the oil and gas industry. Current conditions will not last forever and we need to make sure we have a continuous stream of graduates entering the industry.

The Society of Petroleum Engineer’s (SPE) Aberdeen Section has remained committed to our ongoing funding and support for university and post-graduate students during these troublesome times, as we continue to take a long term view on what our industry needs to achieve. Through financial support, technical meetings and networking opportunities, we fully support students with everything they need to embark upon a successful career in the oil and gas industry.

We also recognise the need for a collaborative approach across the industry, between private and public sector and membership bodies. We work tirelessly to link up the knowledge possessed by experienced industry professionals and companies with academia, including teachers and career advisers as well as the students themselves. Sharing this knowledge is a critical step towards ensuring the longevity of our industry.

As part of our support for students, the SPE Aberdeen Section awarded 13

annual student bursaries in February 2015, amounting to £12,500. The SPE Aberdeen Section is particularly proud of its student bursaries programme, because it has not been affected by any industry or external factors since its inception. This brings the amount donated by the Aberdeen Section to more than £300,000 during the 15 years that the SPE Aberdeen bursary programme has been open. All of the recipients have shown academic merit, active involvement in SPE and intentions of working in the oil and gas industry, and we are always delighted to see them go on to excel in their post-university work.

In an increasingly competitive market, and with the added pressure of low oil prices, students will need to find new and inventive ways of making themselves seen in order to secure one of a limited number of elusive graduate jobs. If we can be seen to make the transition from university to industry as smooth as possible, it will surely encourage others students to follow suit, and ensure we have the graduate numbers needed to keep this industry afloat.

With all investments and future projects coming under increased scrutiny, our investment in the future must be made a priority, not just for the sake of the younger generation but also to bring an element of reassurance during these unsteady times.

International: Cedigaz expects European gas production to fall 2.1% annually to 2035 NATURAL GAS PRODUCTION in Europe, including Turkey, is expected to decline 2.1 percent per year to 170 bcm/year by 2035, while demand is forecast to inch up 0.6 percent over the same period, according to a study by the French international association for gas, Cedigaz.

By 2035 Europe is expected to import 71 percent of its gas in 2035 compared with 47 percent in 2013, both via pipelines and LNG. Europe and Asia will compete for LNG, lifting international spot LNG prices. They bravely forecast that Henry Hub would rise 87 percent to $7.10/MMBtu from 2013 to 2035, while European prices increase 6 percent to $12.50/MMBtu and prices in Japan decline 8 percent to $14.7/MMBtu. Gas imports from Russia to Europe via pipelines are also expected to grow, competing with LNG supplies. However the growth in European gas demand is slowing due to improved energy efficiency, competition with coal in the power sector and sluggish GDP growth,

the report noted. Coal will not suffer much from competition with gas in the power sector as the carbon price is not

Border delivery station at the natural gas pipeline near Rozvadov

seen above Eur10.5/mt in the next five years. The report projects Dated Brent crude will rise to $110/barrel by 2020.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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NEWS

GE Oil & Gas invests in manufacturing at Montrose OILFIELD ENGINEERING FIRM GE Oil & Gas announced that it has completed a $20.7-million investment at its manufacturing facilities in Montrose, Scotland. The company said that the site enhancements are in direct response to customer need and that they will provide advanced capabilities in manufacturing and the firm’s test and assembly activities in Montrose, where it employs 450 staff after recruiting 50 new people last year.

GE has completed the construction of a heat treat and cladding workshop at its Brent Avenue facility, with structural work beginning on a new 6,460-square foot administration block, scheduled for completion in June 2015. The firm has also finished the new high bay facility at its Charleton Road site, the result of a

US$4-million investment.

Plant leader at Charleton Road Scot Kelly said: “The oil and gas sector is going through a period of adjustment, but we have been through many cycles of this nature before, both as an organization and as an industry. What is most important is that we mustn’t lose sight of our customers’ needs and the long term viability of our industry. We are consistently advancing to offer the very best to our customers, and these latest upgrades are no exception. Investments like this position us well, enabling us to improve our speed to market and enhance our ability to respond so that we can successfully fulfil the present and future needs of oil and gas customers and developments around the world.”

Local MP welcomes GE expansion

Shell CEO predicts sharp price rebound ROYAL DUTCH SHELL CEO Ben van Beurden said in mid-February that oil demand may soon outpace supply growth, sending crude futures up. Van Beurden said that oil prices would increase in the next few years if production projects are cancelled.

Oil price recovery could “occur if projects are postponed or even cancelled,” he said in prepared remarks. “This would lead to less new supply—not so much now, but in two or three years. Combined

with economic growth, the market could tighten quickly in this scenario…. If output stays steady despite the drop in prices “prices could stay low for longer,” van Beurden said.

Van Beurden also said that big oil should have a louder voice on climate change. “In the past we thought it was better to keep a low profile on the issue. It’s not a good tactic. We have to make sure that our voice is heard by members of government, by civil society and the general public.”

Growing wind activity in North Sea raises shipping traffic safety concerns A PART-EU FUNDED project has suggested e-Navigation technologies and services will be crucial for offshore wind turbines, oil and gas platforms, and shipping traffic to co-exist safely in the North Sea region.

Research group, ACCSEAS (Accessibility for Shipping, Efficiency Advantages and Sustainability), which carried out the project, is predicting significant safety concerns as a result of excessive demands on the North Sea’s marine areas – especially as large swaths are sectioned off for wind farms.

The North Sea already hosts some of the busiest shipping lanes in the world.

The research indicates that navigable space allocated to wind farms could increase by up to 5,240 percent within just a few years. This would constitute about 5.5 percent of all navigable space in the region, with a further 0.1 percent taken up by exclusion zones around oil and gas platforms.

Crucially, the precise location of many planned and proposed wind farm sites means that they could have a significant impact on key shipping lanes in the North Sea Region. According to ACCSEAS, the size and location of such sites, coupled with projected increases in shipping traffic and vessel size, poses serious safety and efficiency concerns.

ACCSEAS is an EU part-funded project involving 11 partners from across the North Sea Region. Its aim is to research the extent of these issues and to develop and demonstrate e-Navigation technology solutions and potential service provisions that will be crucial

to ensuring future maritime safety and accessibility in the North Sea. It uses a Geographic Information System to assess maritime traffic trends and the issues that obstruct available safe access. E-Navigation is an initiative mandated by the International Maritime Organisation (IMO) to harmonise and enhance navigation systems by electronic means.

Alwyn Williams, ACCSEAS Project Manager, commented, “Renewable energy deployments such as the wind farms proposed in the North Sea Region will play a crucial role in reducing carbon emissions and decreasing the dependency on nuclear energy, but they could also pose a significant threat to maritime safety as shipping traffic continues to grow. The shipping community wholeheartedly supports the renewable energy agenda, and we believe that e-Navigation technologies have the potential to reduce these risks through safer, more accurate navigation in order for turbines, other offshore obstacles, and ships to co-exist safely in the North Sea Region.”

This latest research will set the agenda at the forthcoming ACCSEAS Annual Conference (participation is free of charge) at the Flensburg University of Applied Sciences in Germany, March 5-7th, which includes transnational stakeholders from the UK and Ireland, the Netherlands, Denmark, Sweden, Germany and Norway.

It is hoped that the event, which includes a series of collaborative workshops, will produce tangible outcomes for identifying and developing solutions to address the

concerns of all stakeholders.

Dr Thomas Porathe, Marine Human Factors Researcher at Chalmers University of Technology said, “One of the biggest problems is that there is no formal consultation programme with the transnational shipping community when projects such as offshore wind farms are planned. There needs to be much stronger collaboration and co-operation between industry organisations and governmental administrations in order to achieve solutions that reflect the interests of all parties.”

David Balston, Director of Safety and Environment at the UK Chamber of Shipping, added, “We share the support expressed by ACCSEAS for the offshore renewable energy agenda and also support their initiative to explore the potential benefits of e-Navigation and its associated technologies. “Greater navigational accuracy from e-Navigation technologies will help lead to safer seas but this alone cannot remove all risks associated with navigating in the vicinity of offshore wind-farms. Responsible planning that avoids co-locating turbines in areas of high shipping density is of paramount importance if the risks are to be minimised.”

ACCSEAS will be demonstrating of a prototype resilient PNT system, integrated into the bridge of a vessel for the first time in trials running from 26th February – 1st March at Harwich, UK. The purpose of this demonstration is to highlight GPS vulnerability and show the benefit of having a resilient PNT solution in mitigating against GPS service denial.

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

|7

NEWS Norwegian production up in 2014 THE NORWEGIAN PETROLEUM Directorate (NPD) said oil and gas output rose 1.4 percent in 2014 to 3.73 million boe/d. Of the total, oil output rose 3 percent to 1.51 million b/d, representing the country’s first increase in 13 years, although the figure was still less than half the peak levels recorded in 2000. “New wells have produced more than expected,” NPD chief Bente Nyland explained, “and this is the most important reason behind the growth.”

Overall activity on the shelf remains high, and four new fields came on stream in 2014.

At 56, the number of exploration well spuds was the third highest figure ever recorded, and they resulted in 22 new discoveries, two more than 2013. Eight of these were in the North Sea, five in the Norwegian Sea, and nine in the Barents. The NPD has predicted a slight fall in output in 2015, but believes levels will stabilise at around current levels until 2027 – provided that oil companies keep investing in new developments.

NPD forecasts 2015 decline in norwegian investment THE NPD EXPECTS a sharp drop in anticipated offshore investments in 2015, as high costs and low prices make readjustments necessary across the sector. The directorate warned that plummeting prices and high costs meant it might be forced to reassess and

downgrade its production forecast this year. “The start of 2015 is marked by low oil and gas prices, capital discipline or tightening, and, for some workers, layoffs and uncertainty,” Nyland said.

“The profitability of future projects is reduced.”

According to the NPD estimates, oil companies operating on the NCS are set to reduce their capital expenditure by 15 percent in 2015, and by 8 percent in 2016, but spending should rebound again in 2017. Despite the current uncertainty, Nyland described the

NCS as “well-equipped” to address the changing situation. NPD figures suggest that 55 percent of Norway’s oil and gas resources are yet to be produced, and the directorate said this should provide the basis for continued high activity levels.

Nigel Jenkins is Chief Executive of Decom North Sea, responsible for leading the representative body for the decommissioning industry. Previously a director with Decom North Sea from 2011 – 2013, he took up his current position in July 2014. Previous roles include board leadership positions with AMEC and AECOM, and most recently as board director with KDC Contractors – specialists in decommissioning. He is passionate about industry’s collective responsibility to efficiently manage and deliver end-of-asset life solutions.

Working Together Is Success

NPD chief Bente Nyland

Dana success at Danish appraisal well THE LILLE JOHN 2 (LJ2) well in Denmark, drilled by operator Dana Petroleum Denmark, along with partner PA Resources, has found oil and gas. The well was drilled to a depth of 1,384 metres, and produced oil at a stabilised rate of around 500 b/d of, along with around 250,000 cft/d during the main test flow period, which was deliberately conducted at constrained rates in order to avoid risk of sand production.

Test flow rates were raised to a maximum of around 1,400 b/d of oil, with no sand production experienced.

Subsequently, the well was side-tracked down-dip as LJ2A, confirming similar reservoir development and establishing an oil column height of around 300 metres from LJ1 to LJ2A. The well will now be plugged and abandoned.

BY ITS VERY nature, North Sea decommissioning is a developing business that is new to many, and misinterpreted by even more. It’s important right now to make it clear that it is not about the premature closure of the North Sea oil and gas industry.

Crucially, and more pertinent than ever just now, all decommissioning activity needs to take place within the context of MERUK (Maximising Economic Recovery in the UK), a strategy which was formally introduced almost exactly a year ago, through the Wood Review and is now being implemented by Andy Samuel, CEO of the Oil & Gas Authority (OGA).

In reality, decommissioning is a developing sector that is full of opportunity; to win business and problem-solve through innovation. As Henry Ford famously said, “working together is success” and all that activity needs incredibly detailed, collaborative planning. Bringing effective working groups together rarely happens instantly and therefore decommissioning is unlikely to be a knee-jerk reaction to falling oil prices. Rather it will continue to be the result of the long term, sector-wide understanding that some fields within the North Sea are inevitably moving towards the end of their lifespan.

Responsibilities around safety, finance and the environment are key challenges, achieving maximum cost efficiencies and benefits for both industry and the UK tax payer. Decommissioning activity involves such a degree of planning and cooperation that it simply cannot take place in isolation. It requires long term collaboration between operators, the supply chain and bodies such as Decom

North Sea, the new Oil & Gas Authority (OGA), the Department of Energy and Climate Change (DECC) and Oil & Gas UK. Decom North Sea makes certain of its involvement at every stage of the collaborative process, thus ensuring appropriate and relevant organisations are involved, decision quality improves, different perspectives inform creative solutions and that assurance, encouragement and support are always available to all potential players along the decommissioning journey.

Of course, historically speaking, information sharing has not been a popular pastime within the oil and gas industry. However, for decommissioning activity to succeed at reduced cost, that approach has to - and is - changing.

DNS has made significant strides in this, encouraging members to share learning and knowledge in a number of arenas, from conferences and DNS-led projects, to collaborative activity, the likes of which seek to promote multiparty projects.

The strong inclusive ethos generated by DNS is the context in which all successful future decommissioning activity must be set. Our experience tells us that this will deliver enthusiasm, commitment and involvement at all levels, which in turn will generate a streamlined output and collaborative attitudes. Decom North Sea has the credentials to ensure the optimum future for decommissioning and will continue to play a vital role in the industry, driving collaboration, removing barriers and encouraging the most efficient end of asset life solution development, so delivering real business benefits for its members and UK plc.

Save Save the the Date Date

Wednesday 27th May 2015 Wednesday 27th May 2015 Aberdeen Exhibition and Conference Centre, Aberdeen Aberdeen Exhibition and Conference Centre, Aberdeen Decom North Sea (DNS) is playing a vital 2014, is now underway for our 2015 role planning within the UKCS decommissioning annual event.

This event will together 250+ 2014, planning iscontext now underway for our 2015 market in the ofbring maximising ecodecommissioning professionals from all tiers250+ of annual event. This event will bring together nomic recovery (of oil and gas) for the UK the industry, providing the operators supply decommissioning professionals from and all tiers of andindustry, iswith thean only organisation solely focused chain excellent opportunity toand engage the providing the operators supply with one another. chain with an excellent important opportunitysector. to engage on this strategically The willinshowcase innovation, withEstablished oneevent another.

2010 inthe response to the The event will showcase the innovation, needs of industry, DNS bring people, ideas within the sector and consider how this and developments together within the sector and consider howto thisimprove

decommissioning solutions and project

faced with the current market challenges. execution efficiency.

DNS drives collaborafaced with the current market challenges.

tion for meaningful business benefits for our 250 members drawn from operators, SPONSORSHIP AND major contractors, service specialists SPONSORSHIP AND and

technology FOR FURTHERdevelopers.

DETAILS Please contact Izzie Bryce FORFollowing FURTHER DETAILS from the success of Decom ibryce@decomnorthsea.com Please contact Izzieour Bryce Offshore 2014, 2015 annual event will 01224 914044 ibryce@decomnorthsea.com bring together 250+ decommissioning www.decomnorthsea.com 01224 914044 professionals from all sectors of the inwww.decomnorthsea.com dustry, bringing operators and the supply chain together.

The event will showcase the innovation, collaboration and entrepreneurial flair required within the sector and consider how this contributes to decommissioning efficiency and cost effectiveness at a time when the industry is faced with enormous economic and operational pressures.

EXHIBITION OPPORTUNITIES EXHIBITION OPPORTUNITIES AVAILABLE FOR FURTHER DETAILS, please visit www.decomnorthsea.com AVAILABLE

or contact Izzie Bryce on ibryce@decomnorthsea.com or 01224 914044.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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FOCUS

Attempts to improve efficiency challenged by threats of strike action

O

ver recent weeks two major unions representing oil and gas workers – Unite and the GMB - have threatened strike action over terms and conditions, as companies move to cut costs in the face of lower oil prices.

Any action could involve thousands of contractors, including electricians, plumbers, mechanics and riggers.

Unite has claimed that the Offshore Contractors Association (OCA) is using the slump in oil prices to “railroad through” changes to working practices, and that their coincidence with falling prices is “blatant opportunism”.

The OCA looks after the interests of dozens of companies that employ offshore workers in mechanical, electrical and allied services, construction, maintenance, design, project engineering, fabrication and decommissioning.

With the average salary in the industry at £64,000, much higher than the UK national average of £27,200, and the oil price having halved in the last six months, striking may seem a little out of place to many people in the country – you can’t force people to give you pay like that, you have to be able to justify it. The oil price fall and high costs in the North Sea mean oil companies are making less money, so they have to cut costs in line, and the pay and conditions of contractors are a major part of that.

Expenditure has been allowed to drift higher during times of plenty, making the North Sea one of the highest cost operating environments worldwide.

If it is to survive and prosper, cost per barrel need to be reduced by up to 40 percent, according to Oil & Gas UK. Shell has announced that it is cutting rates for direct contractors by 15 percent, and for agency contractors by 10 percent. This followed Petrofac, Wood Group and Amec, which have all reduced contractor rates by 10 percent in an attempt to halt cost rises and begin reducing them. A spokeswoman for BP said: “It has been well signalled around the industry that costs have been rising and we need to respond to toughening market conditions in line with our competitors and move our cost structure into a competitive and sustainable position.”

The unions claim that the oil

companies are simply imposing changes on the workforce, through the OCA, without any discussion. But OCA chief executive Bill Murray said: “The need for productivity enhancements and efficient working is well understood by the industry and was highlighted to union negotiators in talks in December…. For some time we have experienced unsustainable levels of cost inflation and whilst recognition of the need to reduce this is not new, the dramatic fall in the price of oil has

accelerated the need to address this.

The industry is now facing a particular dilemma where operators are looking to reduce costs promptly, especially for those with operations where costs are outstripping revenue.” He added that talk of strike action was “premature”, with further meetings between the three parties still to take place.

One of changes proposed is to return shift patterns from two weeks on and three weeks off, back to three weeks on and three weeks off. Other

proposed cuts will affect pensions, sick pay and holiday leave. GMB Scotland regional officer John Kelly said there were health and safety concerns over the proposed changes to shift rotas.

“There is a ‘blatant opportunism’ on the part of some of the oil companies and contractors in seeking to fundamentally attack the terms and conditions of our members employed in the offshore industry,” he said.

Of the 8,000 to 10,000 people covered by the OCA, Unite claims a membership

of around 5,000, with GMB Scotland covering many more. If a ballot were successful, any industrial action at this point would be a major blow to the sector – including the jobs and prospects of all involved. It would add to a range of reasons not to continue producing from loss making fields and to cut back on further UKCS investment. In 2012 the oil-services sector generated £20 billion worth of revenue in Britain, and a further £15 billion in export of goods and services.

GMB union members on the march

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Offshore Aberdeen | March 2015 | offshoreaberdeen.com

10 |

FOCUS

UK and Norway award licenses like there’s no tomorrow…

B

oth the UK and Norway are claiming their current licensing rounds are among the biggest ever, in terms of number of licenses, at least. This could be seen as a sign that authorities may be hoping to partly address falling production by issuing vast amounts of low quality opportunities onto the market, although some of the acreage clearly has potential. However, with only a few wells committed so far on the UK side, we may never know one way or the other.

The UK’s latest (28th) offshore licensing round resulted in 134 licenses being issued for the North Sea in late 2014, with more expected in a second and possibly third tranche this year. The 134 licences stretched across 252 blocks on the UKCS, but most of the licences were awarded on the basis of obtaining or reprocessing 2D and 3D seismic data, with only six firm and four contingent wells included

over the next few years. Without well commitments, the conveyer belt of new licenses leading to successful wells and onto new developments may end up being interrupted.

This year, Oil & Gas UK members expect between eight and 14 exploratory wells to be drilled, and only five wells to appraise initial discoveries. Although drilling of 25 wells was expected last year, only 14 took place. All this points to a steep drop in investment in developing new reserves and extending current offshore fields, despite the high number of new licenses.

Awards included acreage in frontier areas in deeper water, while over a third of blocks are in, or close to, areas under special protection and conservation, which require the government to carry out environmental assessments in order to proceed with any developments.

In the previous round in 2013 the UK awarded a record number of 219 licenses.

Further licenses will be awarded in this

round when the Department for Energy and Climate Change announces a second, and possibly third tranche this year, once environmental assessments are complete.

DECC were unavailable to comment on the prospect and timing of further awards.

Among the successful applicants, BP won licenses in seven new North Sea blocks, maintaining its interest despite selling assets recently, although this was half the number of blocks awarded as part of the previous 27th round, which had been the company’s most successful since the 1990s.

Statoil expanded its presence on the UKCS – alongside the establishment of a new regional office in Aberdeen last year - by picking up 12 licenses. Enquest, which claims to be the largest independent producer in on the UKCS, received eight licenses. Other winners included Hungary’s MOL with four, Canada’s Nexen with seven, and Maersk Oil with five (for more detail please see: Choosing to cluster on page 11.

Contract disputes on the rise - Brodies outlines the options:

H

igh costs, a punitive tax regime and a low oil price have conspired to present a serious challenge to all those working in the UKCS. A low oil price puts everyone under greater pressure and it is not unreasonable to expect that the courts and arbitrators will be in for a busy time if matters continue on their current path. There have been many recent examples of contractor rates being cut, redundancies, orders being cancelled or re-priced and, in some instances, attempts being made for historic rebates.

This is not surprising. In difficult times the temptation is to cut costs wherever you can. All too often, however, this leads to a zero sum game. Tensions rise between operators and contractors, members of the supply chain and employers and employees, spilling over into disputes that risk damaging valuable relationships, with severe consequences when the good times finally return.

It is important to remember the need for greater co-operation and collaboration highlighted in the Wood Report, as well as the lessons of the past. The industry has

lived with the reality of price volatility since its inception. The oil price will recover but by then it could be too late to repair relationships damaged during the lean times on which future growth and prosperity might well depend.

Of course, the best strategy is to avoid entering into a dispute if you can, however disputes are a part of life and there are circumstances in which they are unavoidable. Nevertheless, there are many ways of resolving disputes in a mutually agreed fashion that don’t carry the same risk of simmering resentment that could ultimately damage your business in the long-term.

Before you embark on a dispute it is important that you take a good hard look at your needs and interests. If you drive too hard a bargain do you risk damaging a relationship forever or driving out of business a critical supplier, whose services you may well need in the future?

Look carefully too at the likely outcomes of court action versus arbitration, both of which result in an imposed decision. It is all too easy to forget in the heat of the moment that if you go down the court

route and do not reach a deal then you could be waiting a very long time to get what you want and it will cost you time and money to get there.

By far the cheapest and most effective method of resolving disputes is through direct negotiation. Having legal and other specialist advisers behind the scenes to help you get the best out of that process is an effective way of getting the best results.

If that does not work mediation is a sensible alternative. Within the space of a few weeks, you can resolve your dispute and reach a legally binding deal.

This can be achieved through the simple commitment of a single day during which you meet the other side and discuss the dispute with the assistance of an independent mediator whose only role is to facilitate a mutually agreed settlement.

This confidential process is great for saving time and cost, understanding the relative strengths of positions and maintaining (if important) long term working relationships.

If confidentiality is important to you, and mediation is not an option, then taking your case to arbitration and avoiding the

glare of the publicity of a court action is a good choice. Arbitration works best where specialist knowledge is necessary for a successful outcome as parties can choose the judge and procedure for running the dispute. It is often easier to enforce arbitration decisions abroad (in order to get paid) than court judgements, giving arbitration another significant advantage when chasing money or assets abroad.

Sometimes, however, court is the best or only option - particularly if you need an urgent remedy to prevent a breach of your rights or interests. Going to court does

not prevent off -the-record negotiation or mediation, both of which are regularly used alongside court action.

The current climate is challenging but with the right approach to avoiding or managing conflict, there are opportunities out there to achieve positive results, and help maintain valuable relationships.

Ken MacDonald is a dispute resolution partner with Brodies in Aberdeen and a member of the Legal Issues Forum ADR Work Group of Oil & Gas UK. For more information, contact Ken on 01224 392 170 or at kenneth.macdonald@brodies.com.

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

| 11

FOCUS

Choosing to cluster: Investors focus on licenses near existing assets

L

ooking at the detail, many of the licenses were obtained around or close to existing prospects or acreage, with companies seeking to keep costs down by building clusters of small fields, or by adding to reserves in existing finds. Statoil, for example, acquired acreage neighbouring the Bagpuss and Blofeld prospects (Blocks 13/24c and 13/25), which are held by its wholly owned subsidiary North Sea Energy (UK). Statoil acquired the acreage (that includes Blocks 13/30b(Part), 14/21, 14/22, 14/26b (Split) & 14/27 (Split)), by committing to a contingent well in addition to geoscience work. This suggests a strong

commitment by Statoil to the potential of the Bagpuss and Blofeld prospects.

A group including PA Resources, E.On as operator, Cairn Energy’s wholly-owned subsidiary Nautical Petroleum and First Oil and Gas, were awarded Blocks 22/18c and 22/19d, which contain the large Ekland prospect into which the group has committed to drill one firm exploration well in the initial four year licence term. The blocks lie adjacent to PA Resources’ Block 22/19a which contains an undeveloped gas and condensate discovery, although with the company facing bankruptcy proceedings it’s stakes may end up on the market.

Elsewhere, Independent Oil Group was

awarded a license between the Cronx and Blythe discoveries, containing the Elgood discovery – discovered by Enterprise Oil in 1990 - and Tetley and Rebellion prospects.

The quick award of this block allows IOG to consider co-development options with Cronx and Blythe. IOG’s estimate of the recoverable reserves in Elgood is 2.5 million boe, with additional prospective resources of 5.3 million boe in the Tetley and Rebellion prospects. Reprocessing of existing 3D seismic is required to determine whether Elgood connects to Cronx which would boost recoverable reserves significantly.

Faroe Petroleum, along with equal partners Parkmead E&P, Verus Petroleum

SNS and CalEnergy Gas, said it had picked up licenses covering the Fynn prospect in Blocks 15/11 and 15/16d. Faroe also won licenses covering the Perth Field extension, in Block 14/25, with partners DEO Petroleum, and Atlantic Petroleum. The two licences extends Faroe’s acreage position around the strategically important Perth/Dolphin/ Lowlander development opportunity.

Enegi Oil was awarded an exploration licence for Block 21/28b near the Fyne prospect, covering the Crinan and Dandy discoveries. Enegi will have a 50 percent stake in the license, alongside equal partner Antrim Energy (UK) Ltd. Enegi said it targeted the license because it had

discoveries in “close proximity to our existing Fyne Project”, with the potential for their development using its “buoyant technologies”.

Parkmead was awarded six new operatorships covering a total of nine offshore blocks. Three of the new licences build on the company’s asset base around its large Perth Dolphin Lowlander (PDL) oil hub development project. (For more on Norwegian awards, see Norway pushes ahead with license awards, page 12). Expanding clusters are also the focus of much recent exploration, see Smattering of new discoveries add weight to clusters, below)

Smattering of new discoveries add weight to clusters

W

hile many offshore exploration companies targeted acreage close to existing prospects or discoveries, in order to add to nearby reserves or utilise existing infrastructure, and bring costs per barrel down, companies have also been adding to reserves around existing hubs with a smattering of recent discoveries. Those fortunate enough to have made such discoveries last year include Centrica, Statoil and GDF/BP, improving the prospects for field life extension, and marginal field development near the finds.

GDF and BP made a discovery in the central North Sea last November, which could significantly improve the economics of developing nearby stranded assets. The discovery well straddles two licenses, one operated by GDF alongside RWE DEA and Maersk (P1588 in block 30/1f), and the other

by BP, alongside Total (P363 in block 30/1c). It was drilled by GDF in P363 and involved a side-track into P1588 to prove the westerly extent of the field. The well flowed at a maximum test rate of 5,350 boe/d and is estimated to contain about 50 million barrels of recoverable reserves. The discovery has been named Marconi by GDF and Vorlich by BP. Ruud Zoon, Managing Director of GDF Suez E&P UK said at the time: “This is an

encouraging exploration discovery in a part of the Central North Sea that needs additional volumes of hydrocarbons to open up development options for several stranded discoveries.”

Nearby discoveries that could have their development economics improved through joint development with the find are believed to include the HTHP 100 million barrel oil and gas condensate Kessog field. A low-cost development option would be to feed production into existing infrastructure as levels decline elsewhere. The oil could flow north into the Forties pipeline system, alongside the recent Stella-Harrier development.

The well was drilled by GDF as operator, under a joint well agreement between the two license groups. This collaboration prompted the UK government to hail the discovery as evidence of what could be achieved by companies working together under its current attractive regulatory environment, and that further fields straddling license areas could be in the pipeline.

Also last November, operator Centrica, along with partners Atlantic and Third Energy Offshore, made a gas discovery at its Pegasus West prospect in the UK’s southern North Sea, which flowed gas at a combined rate of about 2.6 million cm/day. The Pegasus project builds on Centrica’s exploration hub, close to the GDF-operated Cygnus gas development,

and while no reserve estimates were provided it is thought to be around onetenth the size of Cygnus. At 18 billion cm, Cygnus is one of the biggest gas finds in 25 years and is projected to meet 5 percent of UK demand once production begins in 2015. The Pegasus partners are now examining options for full-scale development.

The Vorlich/Marconi find came a day after Statoil announced the discovery of another North Sea accumulation in the Grane region off the Norwegian coast. It was found as a result of the re-drilling of an oil well originally created by Norsk Hydro in 1992, and found 30-80 million barrels - more than 10 times the amount Norsk Hydro had estimated 22 years ago.

Having faced delays and frustration in its exploration programmes in pioneering new areas further north, Statoil said it is putting effort into realising the full potential of more mature areas, both by boosting recovery rates in producing fields, and by introducing targeted exploration programmes in the surrounding areas.

In December Statoil and partners, Svenska and Det norske oljeselskap, found more resources in the Krafla area of the Norwegian North Sea, in license PL035, which had “increased the robustness” of the Krafla field development project as a whole, the company said. Since 2011, Statoil has made five discoveries in the Krafla area, which is located around 25

Ruud Zoon, Managing Director of GDF Suez E&P UK

km southwest of the Oseberg South field.

Together their recoverable reserves are estimated at 140-220 million boe, with the latest appraisal well raising the estimate for Krafla Main to 50-82 million boe.

Other recent finds include Lundin, with partners Petrolie and EON, striking hydrocarbons with the wildcat 26/10-1 well in the Zulu prospect, 30 km northeast

of the giant Johan Sverdrup development.

The find is 100 km west of Stavanger, and holds a gas column of 36 metres. The well was targeting resources of 153 million boe.

Lundin has a further nine wells booked for 2015 and, unlike many North Sea operators responding to low oil prices, at time of printing it still had a substantial exploration budget of $470 million.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

12 |

FOCUS

Norway pushes ahead with license awards

I

n Norway the government awarded 54 blocks in mature areas of the North, Norwegian and Barents Seas to 43 companies in its latest 2014 Awards in Predefined Areas offshore licensing round, with Statoil gaining the right to operate eight, Lundin Petroleum six and Total five. Faroe Petroleum, Wintershall and Cairn Energy were among other award winners. Oil Minister Tord Lien said that, despite industry cutbacks expected this year, the government

would carry on awarding large numbers of new licenses.

Overall there was record interest, with Wintershall claiming there were emerging opportunities offshore Norway, where it is one of the largest stakeholders. Wintershall said it won eight exploration licenses, serving as the operator at three, adding to the 50 licenses it already holds.

Norway also invited firms to drill for oil and gas further inside the Arctic Circle, with awards expected

in 2016. This included 57 blocks in the previously unexplored eastern part of the Barents Sea, which had been free of ice since 2004.

“Satellites show the ice has moved further north, then we have to take care of nature in this area. What we are doing will ensure that,” Prime Minister Erna Solberg said.

Energy Minister Tord Lien said the results show Norwegian waters remain an attractive investment opportunity, although he acknowledged cut backs

were inevitable this year. “We must honestly admit that there will be a drop in investments and that it will be a bigger fall than had originally been expected,” he said.

Statoil’s new CEO Eldar Saetre confirmed the company plans to reduce capital expenditure and step up cost-cutting measures this year, after poor financial results for the fourth quarter of 2014.

Capital expenditure will be cut by 10 percent in 2015, from US$20 to

US$18 billion, and an ongoing costcutting programme, will take effect as of 2016, and will also be expanded to US$1.7 billion per year, up from US$1.3 billion.

Statoil did not say which projects might be delayed or abandoned, and job losses have not been ruled out. Saetre said the company may postpone a decision on how to develop its Johan Castberg field in the Norwegian Arctic, which was due this summer, until the following summer.

Oil price slide to hit subsea sector

A

new report from research firm, Infield, forecasts that activity in the subsea sector is going to slide over upcoming years, despite the buoyant atmosphere at Subsea Expo this year.

Among their findings is an anticipated fall in the level of subsea tree orders – a major indicator of more general activity - of almost 30 percent between 2014 and 2019.

Infield told Offshore Aberdeen: “Because of the fall in the price of oil and the huge levels of uncertainty around the

industry at present we are expecting a contraction in the subsea market. Subsea developments tend to be more capital intensive, whether they’re marginal fields that are produced via subsea tiebacks, or deep-water fields with subsea trees tied to an FPSO.” These developments will tend to be delayed or shelved when the oil price falls, whilst conventional, large shallow water or onshore fields will continue to go ahead, they said.

Infield expects sanctioned projects to continue to go ahead, while those not

already approved are likely to be delayed.

“Most fields in the North Sea are profitable at $50/bl so will continue to produce, and as the price of oil recovers towards 2020 we do expect an increase in demand for subsea equipment.” This would reverse the medium term downturn, with demand returning to 2012/13 levels.

“Subsea developments, particularly in deepwater and ultra-deepwater are where production increases and reserve additions will need to come from in the future to replace fast depleting onshore

and shallow water fields,” Infield said in an email reply.

So despite some hardship in the medium term, the report does predict long term, sustainable growth for the subsea market over the coming years.

It stresses, however, that the UK subsea sector will need to embrace innovation and new technology to become more competitive in the current low price environment, if it is to maintain its competitive position.

After a strong 2013, existing orders kept

the industry going through the second half of 2014, but, as this dries up and projects are abandoned or postponed until the oil price recovers, major challenges are anticipated. The UK has one of the largest concentrations of subsea expertise and capabilities in the world, which is estimated to support about 60,000 jobs in the UK. Infield normally publish similar reports on an annual basis, the last being summer 2014, but decided to publish an interim report on the Subsea market in response to the fall in the price of oil.

Murray Callander, chief technical officer at Eigen Ltd, talks about tax and costs

I

n an emailed response to questions about tax and government support for the UK offshore oil and gas sector, Mr Callander said that Government and the new regulator should ignore the inevitable calls for tax breaks on profits, and focus primarily on cost reduction: “Tax breaks on profits would amount to national sponsorship of the industry’s current inefficiency. The majority of tax should be levied, as before, on production, leaving improved efficiency as the only means of increasing net profit.”

“The main recommendation of the Wood Report was the creation of the new Oil and Gas Authority (OGA) as an arm’s length regulator. With the Government

clearly accepting the need for tax breaks this gives the OGA a significant carrot with which to encourage efficiency.”

“This is the real issue for the UKCS, and the current slump in prices has simply brought the scale of problem into focus.

The priority of the new Oil & Gas Authority must be to target the issues that have caused the spiralling costs first.”

Mr Challander cited a recent report from management consultants, McKinsey, which showed significant cost inefficiencies in both OPEX and CAPEX and suggested that many operators have lacked the capabilities to combat cost escalation. “Average lifting costs are now around £17/boe and capital efficiency

down to 20 percent of what it was in 2002.

So you need to spend 5 times more to get the same output.”

“Meanwhile, the OGA should be used as the mechanism for distributing significant tax breaks for investment in new projects. The regulator could administer and vet applications for tax deductible schemes, which use technology, innovation and collaboration, to improve operating efficiency. This would also raise operator profits and achieve the main stated objective of the Wood Review itself: “maximising economic recovery” and improving the long term sustainability of the UKCS.”

“Tax breaks on profits would amount to national sponsorship of the industry’s current inefficiency...”

Murray Callander, CTO

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

| 13

FOCUS

Market focus: Happy Hedgers A

number of oil companies will be congratulating themselves for heavily hedging their positions now that crude prices have tumbled. Among European producers these include Tullow, Talisman, Ithaca, Premier and EnQuest, which all have substantial proportions of North Sea production locked in this year at prices as high as $109/bl. Much of this hedging took place before any sign of the current price collapse, and has therefore proved to be well-timed and prudent risk management, although that might not have been the consensus at the time - while hedging helps producers stem losses when prices are low, it also caps their potential gains.

It is too late now to hedge at anywhere near these levels as forward markets have also fallen sharply, although reports from the US indicate companies are still locking in prices, albeit at lower levels.

High levels of hedging could soften the impact of low oil prices on supply, offsetting OPEC’s goal of shaking out high cost production, in the near term at least. According to Ed Morse, head of commodities research at Citibank, the impact of low prices on production this year “is being attenuated significantly by producer hedging.” This could encourage OPEC producers to avoid supply restraint - in order to keep prices low - for longer than might otherwise have been the case.

Whatever it is doing to supply, well hedged companies are generally better placed than their unhedged counterparts to ride out the downturn and continue to attract investors. After warning the price slump may last some time, Barclays recently recommended several with heavily protected cash flows in 2015, as good options to invest in, including Tullow, Premier and EnQuest.

EnQuest claims its hedged positions will protect short-term revenue flows from crude sales in 2015. In the second quarter of 2014 it bought a 2015 swap for a million barrels at $109/bl, and in the third quarter it hedged another million barrels using a costless collar, with a floor of $105/bl and a ceiling of $116/bl, according to company statements. By last November the company said that it had hedged around 65 percent of its projected 2015 oil production “at the higher end of between $80 and $90 a barrel”, and

some reports suggest that figure had more recently risen to 80 percent. In 2014, EnQuest said its hedged position had ensured a realised average price for the year of $97/bl, based on hedges put in place during 2013.

So, for the next twelve months, Enquest is unlikely to run into any financial trouble, but beyond that it is less well positioned, and could be vulnerable due to its relatively high debt obligations and operating costs. With Brent below $50/bl, some analysts believe that part of Enquest’s existing production is not profitable, leaving the company seeking major cost cuts before the hedges run out.

Premier Oil claims to be in a strong financial position, with its cash flows protected by forward hedges. It said about 43 percent of liquids production had been sold forward at an average of $101.5/bl for

Trading rooms: selling forward has softened the blow of oil price collapse for some

15 months until the end of 2015. Tullow too, is well positioned, with about 60 percent its 2015 allocation hedged, with an average floor price of around $86/ bl. It is particularly well positioned for a more drawn out period of low prices, with further hedges already in place for 2016 and 2017.

Other well hedged companies not mentioned by Barclays include Ithaca Energy, which has contracted to sell more than half its current production at $102 until 2016. With a cost per barrel of around $40, the company said this means it only requires a price of $20/bl to breakeven on existing production, so with prices above that it can still fund its £150 million investment program using cash generated from production.

The company recently borrowed heavily to fund ambitious North Sea

growth, including the purchase of three producing fields from Sumitomo for $163m in July 2014, and it may have been that the need to reduce lending risk was at least partly behind the heavily hedged position.

Talisman is another heavy user of hedging. The company said it continually monitors commodity prices and has been successful in using its hedging strategy “to protect our capital program.” CFO, Paul Smith, said Talisman’s hedging program would help dampen the impact of lower prices in the medium term.

“We have 55,000 b/d of oil hedged [in 2015], representing around 65 percent of our economic exposure. Of these hedges, 45 percent were completed through swaps and 55 percent through collars, with an average weighted floor of $95/bl and an average weighted ceiling of $104/

bl,” he said in a company statement.

Nevertheless, with high operating costs, Talisman’s North Sea assets – like EnQuest’s - remain vulnerable longer term, making their pending sale to Repsol more likely.

Elsewhere, over in the US, companies such as EOG Resources, Anadarko Petroleum, Devon Energy and Noble Energy hedged some of their 2015 production at prices of $90 a barrel or more, according to their last filings. The positions of the bigger oil companies are less clear, although Exxon has always said it never hedges, and others that they are naturally hedged, with improved margins downstream as crude falls. Whatever the positions of individual companies, relief for most is only likely to be temporary and partial, and it could even end up prolonging the price slump for all.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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INFORMED Stork wins major Apache contract STORK, A GLOBAL provider of knowledge-based asset integrity management services focused on the oil & gas, chemical and power sectors, has been awarded a significant three year contract extension with two one-year extension options, for global oil & gas operator Apache.

Stork will provide Apache a full range of integrated Fabric Maintenance support services including: scaffolding, insulation, coatings, passive fire protection, deck support, environmental and decontamination and rope access.

This reinforces the strength of Stork’s services portfolio delivering a fully integrated asset optimisation approach across Apache’s Forties field and onshore SAGE Terminal at St. Fergus.

The initial contract was awarded to Stork in 2009 and has now been extended until 2017.

Stork’s VP for Contract Delivery, Mike Duncan, said, “We are proud to continue working in partnership with Apache. We have worked closely with the Apache team since 2009 and together have achieved a strong track record in quality and safety.”

“Stork remains committed to improving efficiencies and productivity, whilst maintaining a strong safety performance, and will work with Apache to deliver projects on time and on budget.

We look forward to delivering a range of Fabric Maintenance services in 2015 and collaborating in the management of the Forties field and SAGE terminal.”

Stork at work on Buzzard

SRGH to showcase oil spill recovery capabilities at Interspill 2015 A NUMBER OF Spill Response Group Holland (SRGH) members will be showcasing their oil spill recovery capabilities at the Interspill 2015 conference and exhibition in Amsterdam from March 24th to 26th.

The SRGH association represents 20 Dutch companies in supplying equipment, services and knowledge for all aspects of marine, inland waters and coastal pollution control worldwide.

Fourteen SRGH members will be exhibiting on stand A40 at the event.

Interspill 2015 brings together industry, academia and government to hear about the latest developments in spill prevention and response and will showcase the most ground-breaking technologies helping to speed up response times and protect the environment. In the biggest exhibition to date, more than 100 exhibitors will demonstrate latest innovations.

Wierd Koops, chairman of SRGH and a professor at the NHL University of Applied Sciences, is hopeful of attracting a number of new industry players to the pavilion.

“We have exhibitors from a variety of areas, including service companies, oil spill response producers and academic institutions,” he said. “As a country, we are known for developing new systems.

The government created the ‘sweeping arm system’ more than 40 years ago to remove oil from the water surface and, now in cooperation with Koseq, this system is deemed to be the most effective oil recovery equipment by the European Maritime Safety Agency (EMSA).

“Although we are a small country, I view the Netherlands as one of the leading countries in the field, especially in the chemical spillages and high recovery capacity of oil.”

Wierd Koops, chairman of Spill Response Group Holland Under the theme of ‘working together’ Interspill 2015 aims to not only reflect on past events, but consider the likely future issues for oil and chemical spill prevention, response and restoration.

In addition to the conference programme, spill industry seminars and scientific workshops are being held on the exhibition floor and are free to attend.

The spill industry seminars feature presentations from a wide range of well-known spill industry players, both manufacturing and service companies, highlighting their latest developments.

The scientific workshops, led by Cedre will include sessions on dispersant breakthroughs, bioremediation, HNS pollution and spill impact assessment.

The well-established programme of educational short courses on a variety of spill related topics will run at the venue on Monday 23 March, the day before the conference opening.

Interspill 2015 takes place at Amsterdam RAI Convention Centre. The last event in 2012 attracted over 1,300 delegates, visitors and exhibitors from over 70 countries. To find out more visit www.interspill2015.com.

North-east firm aims to help seafarers sail through training A LEADING NORTH-EAST recruitment firm is encouraging seafarers to undertake new security training ahead of mandatory deadlines in July 2015.

Genesis Personnel, which has offices in Aberdeen and Peterhead, has recently expanded its specialised training for the shipping/maritime industry to incorporate new training requirements, following amendments to the Standards of Training, Certification and Watchkeeping (STCW) by the International Maritime Organisation (IMO).

The new regulations, which first came into effect in 2012, states that everyone employed or engaged on board ships of any kind, whether deck, engine/technical, hotel, superyacht or concession, must complete a formally recognised STCW security training courses by 1 July this year.

The two levels of training include, ‘Security Awareness’, intended for seafarers and crew who do not have

designated security duties but need to recognise and understand security threats; and ‘Security Duties’ which expands on the awareness course with additional and practical information for crew members with designated duties who are more likely to face a security threat, such as bridge watch-keepers and gangway staff.

Genesis Personnel is one of the only approved test centres in the North-east to provide and deliver Marlins’ online STCW Security training courses and assessments, which are recognised by UK MCA. The firm has partnered with Marlins for several years on English language testing, using the ISF Marlins English Language test for seafarers and the ISF Marlins Test of Spoken English (TOSE).

Marine and Offshore Manager at Genesis Personnel, Andrea Paterson, said: “Whether you work on board a ship or employ people who do, the STCW

security training must be completed by July. Importantly, the training will need to be certified by an approved test centre for UK MCA purposes. We now have more than 10 members of staff fully qualified to support candidates, administer tests and certify crew for our clients from both of our offices in Aberdeen and Peterhead.”

Catherine Loggie from Marlins, said: “Security at sea and in ports is an ongoing concern for the maritime industry and the IMO is working to improve awareness of the issues. The UK MCA have approved Marlins’ online STCW security training, requiring the test component of Marlins’ online STCW Security courses to be carried out under strict exam condition, within a Marlins Approved Test Centre. We are delighted that Genesis Personnel now offer this service for maritime personnel in the North-east, demonstrating their commitment to supporting training standards.”

Genesis Personnel, which has a

specialised marine division, has been a Marlins approved test centre since 2011, is fully up-to-date with all the latest regulations and now has 50% of staff on-site to deliver the training.

The ISF Marlins English Language

test for Seafarers, and the ISF Marlins test of Spoken English (TOSE), are assessment tools used to test seafarer’s understanding of both written and spoken English, vital for safety when working internationally.

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

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INFORMED Atlantic Offshore Rescue Appoints UK Managing Director LEADING STANDBY VESSEL operator Atlantic Offshore Rescue has appointed a new managing director for its UK division to lead the organisation from its Aberdeen base.

Matthew Gordon joined the company at the start of the year and replaces John Bryce, who is retiring after playing a key role in the growth and success of the company’s UK division. Mr Bryce will continue to be involved in Atlantic Offshore Rescue in a consultancy capacity.

Mr Gordon’s previous roles include a general manager position within Viking Seatech and an eight year employment span with Subsea 7 - world leading providers of subsea construction services -where his roles included account manager for key clients in the UK, Dutch and Irish sectors; and regional manager

for Veripos Division EAME region.

Atlantic Offshore Rescue is part of the Atlantic Offshore Group, which is headquartered in Norway. Atlantic Offshore Rescue employs 350 people (approximately 330 seamen and 20 office-based staff) and provides multirole offshore and emergency rescue and response vessels for many of the oil majors operating in the North Sea. Inclusive of Atlantic Offshore Rescue’s 11vessels, Atlantic Offshore Group currently operates a fleet of 24 ERRVs and PSVs and manages further PSVs on behalf of third parties. The Group’s aim is to continue to expand its capabilities within both the Norwegian and British sector of the North Sea and to be able to provide cross-border solutions reflecting the needs of its clients for both ERRVs and PSVs.

Safety training experts lead the way to measure up A WORLD LEADING survival and health and safety training firm is offering passenger measurement solutions, ahead of new regulations set to come into force in April.

Falck Safety Services (Falck), which has training centres in Aberdeen and Teesside, will provide the service at both centres, ahead of new UK Civil Aviation Authority (CAA) deadlines. The new regulation will affect helicopter passengers travelling to and from offshore installations.

The measurement strategy which was first announced by Step Change in Safety in October 2014 following a review by the CAA, states that all passengers travelling offshore by helicopter will be required to sit in a seat where the nearest push-out emergency exit window is compatible with their body size.

As part of the new regulations, all helicopter passengers will now be measured by the width of their shoulders by specifically-trained trainers and medics, and those with a shoulder width of more than 55.9cm (22”) will be classed as extra broad (XBR), and will have to sit in helicopter seat next a window compatible with their shoulder size. Those with a shoulder width of 55.9cm or less will be classed as regular.

Industry group, Step Change in Safety, has worked with the Passenger Size Work group and Dr Arthur Stewart, an expert on anthropometry at Robert Gordon University, to create the strategy and training based on a passenger’s shoulder width, which has been found to be the most reliable and appropriate measure of body size.

Falck, which globally delivers over 200 safety and survival training courses to more than 340,000 people each year, will have 31 trainers across both centres on hand to carry out measurements, as well as offering on-site measurement solutions to clients if required.

Managing director of Falck Safety Services UK, Colin Leyden, said: “Since the measurement strategy announcement, Falck Safety Services has proactively worked with the appropriate groups to ensure we are fully qualified to provide the highest quality of training in time to help meet the deadlines. As a firm that lives and breathes safety, it is our duty to ensure we have the products and capacity available to help our customers comply with these new requirements on time.

“The new helicopter safety regulations means more than 60,000 offshore workers are in need of measurement, and we plan to work closely with our clients to ensure their employees can continue to travel safely to and from offshore installations.

As from today, we are able to conduct the bideltoid measurements at both our UK sites, as well as offering to conduct measurements for clients on-site and delivering ‘train the measurer’ services which means customers can conduct the measurement internally, if required.”

Falck Safety Services is the global leader in health, safety and survival training, providing realistic training in a safe and controlled environment to the global oil and gas, shipping, renewable energy, military and aviation industries. The firm has recently secured the British Safety Council’s (BSC) OHSAS 18001:2007 certification, an internationally recognised five-star award for its health and safety standards across all of its UK sites.

New Haskel-designed equipment set to speed up oilfield spill shutdowns A GAS BOOSTER system developed

by Haskel will play a key part in new equipment that can quickly shut down subsea oilfield leaks. The Sunderlandbased company is a world leader in the design and manufacture of high pressure pumps and valves, and has an office in Aberdeen.

The Haskel-designed equipment is a new concept that will play an integral role in a complex unit designed and delivered

by Norwegian subsidiary of Oceaneering, a global provider of engineered services and products to the oil and gas industry.

Haskel Aberdeen business development manager Jim Millar worked with his contacts in Scotland to win the contract for the company. The new system was then designed and is now being built by Haskel’s team in Sunderland.

He said: “When there is a subsea oil spill, you have to be able to shut it off very, very quickly. Oil companies have blowout preventers (BOPs) that can shut down the

well on the sea bed.

“In case the BOP fails it may be possible to shut it down, using subsea accumulators, which is where the gas booster system we have designed comes in. It charges up large accumulator tanks which are then attached to the BOP. It uses the energy from the high pressure nitrogen to push large volumes of fluid into the BOP in order to attempt to shut down the flow of hydrocarbons.”

“This is a new design, using six pumps working in tandem to create sufficient pressure to close down the system. It is the kind of equipment that is hardly ever needed, but when it is, it is crucial.”

The Haskel-designed equipment will be shipped to Norway to be incorporated into the complete fast response unit being built by Oceaneering. Once the first unit is completed and operational, it is hoped the system will be rolled out to major oil and gas companies globally to ensure better security worldwide.

Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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INFORMED

Total E&P and Talisman to open Technology Showcase LEADING OIL AND gas industry figures will give their views on the growing importance of technology in helping the sector tackle cost and efficiency challenges in a difficult business environment at the Technology Showcase in Aberdeen on March 4th.

The conference, organised by the Industry Technology Facilitator (ITF) in partnership with Oil & Gas UK, will take place at Aberdeen Exhibition and Conference Centre and aims to highlight the emerging technologies needed to improve production efficiency and curb rising operating costs in the UK Continental Shelf. The exhibition will showcase latest innovations from companies, universities and technology institutes across the UK. The opening session will include presentations from Paul Warwick, executive vice president Europe Atlantic for Talisman Energy and Philippe Guys, managing director of Total E&P UK. In his role as chair of the UK Technology Leadership Board, Mr Warwick will present on evolving technology priorities for the North Sea industry. He said: “Our industry faces many challenges operating in the mature environment of the UKCS and beyond. This creates opportunities for us to develop and deploy new and existing technologies to deliver greater capital efficiency, improved safety and reliability, and operational excellence.

“To be successful, we will require renewed creativity, ingenuity and innovation and focus on how we recognise and apply new and emerging technologies. This change in approach will help to attract the next generation of technical graduates and apprentices.”

Mr Guys will speak about Total’s

technology roadmap and its support of the UK Technology Leadership board.

He said: “Total takes a long term view when it comes to technology and we are looking to a future where innovation and the adoption of new technology will play an ever more vital role. Total has built on its many years of experience in the North Sea and also made use of the research and development work our company has generated across the world.”

Other organisations set to present at the event include GE Oil & Gas, BP, Shell, Chevron and Baker Hughes. The event is also being supported by the Department of Energy & Climate Change and the Department for Business Innovation & Skills.

The four focus areas are: • Drilling Efficiency, Well Intervention and Abandonment • Efficient Water Injection, Handling and Processing • Better Imaging, Targeting & Recovering our Reserves • Digital Monitoring, Robotics and Autonomous Systems Dr Patrick O’Brien, CEO of ITF said: “There is no doubt of the vital role that technology will play in maximising reserves and creating cost efficiencies in a price decline. The Technology Showcase aims to bring to life some of the areas where innovation can make the most dramatic difference from drilling more efficiently to supporting better imaging to target recovery. It’s the ideal platform for pin-pointing practical solutions and collaborating to address the ongoing cost pressure challenges.”

Oonagh Werngren, operations director at Oil & Gas UK, said: “The industry is operating in a difficult business environment which means that we must accelerate the

Dr Patrick O’Brien, CEO of Industry Technology Facilitator

development of innovative technology specifically to ensure the long-term future of the UKCS. Technologies need to be wide-ranging but deliver greater levels of efficiency and reduced cost. The advantage of the Technology Showcase is that it allows the technology research and development

community to more accurately understand operators’ technology needs while industry gains a deeper insight into cutting-edge innovations which could contribute to a productive life of the North Sea beyond 2050.”

The conference programme includes

interactive sessions in which operating companies and developers will highlight specific technology needs and solutions for discussion. Alongside the conference programme, technology companies and academics will give ‘Tech Talks’ within the exhibition arena.

Shetland harbour expansion awards major quay contract PLANS FOR SIGNIFICANT further expansion of Lerwick Harbour’s extensive deep-water facilities for the offshore oil and gas industry have advanced with the award of a major contract to extend the quay at Dales Voe South to support subsea developments and decommissioning.

Lerwick Port Authority has commissioned the Scottish business unit of civil engineering contractor BAM Nuttall as main contractor for an £11.95 million investment to lengthen the quay to 130 metres. Part of the Dutch construction group Royal BAM, BAM Nuttall specialises in complex marine construction, with a strong track record working around Scotland and on the Western and Northern Isles.

Lerwick has been servicing the offshore industry for over 50 years and now also has an established reputation as a location for decommissioning.

The extended quay will provide deep-

water, versatile berthing and heavy load capacity to take an offshore structure in a single lift, with a substantial, expanded laydown area.

Captain Calum Grains, Port Authority Deputy Chief Executive and Harbourmaster, said: “The contract marks an important step in further developing Lerwick’s role as a leading centre of offshore industry operations.

Dales Voe South is another value-added expansion and reflects our confidence in future activity, including ongoing subsea projects, particularly west of Shetland, and the developing decommissioning and offshore renewable markets.”

As previously announced, the Scottish Government and agency, Highlands and Islands Enterprise, are providing £2.39 million in grant for the project, with Bank of Scotland supporting the Port Authority’s investment.

Work will begin in April, with completion due in April 2016. At peak,

BAM expects up to 40 people to be employed directly in the construction of the new facility, with wider benefits spreading to local suppliers and subcontractors.

Commenting on the contract award, BAM Nuttall’s Business Unit Manager for Scotland, Dougie Grant said: ‘We’ve been tracking the proposals for Dales Voe for over a year now and we’re delighted to have been chosen by the Port Authority as their construction partner. We understand the positive impact this scale of investment can have locally and we look forward to engaging proactively with the Shetland community to ensure this benefit is fully realised.”

Civil Engineers, Arch Henderson LLP, is responsible for design and project management of one of the largest infrastructure developments in recent years in the Port Authority’s on-going programme.

The contract will extend the quay by

around 75 metres, with a load-bearing capacity of 60 tonnes per square metre, making it unique in Scotland. It will have 12.5 metres water depth alongside, like the existing quay, amongst the deepest of its type in Scotland. The sheltered voe, located between oil basins east and

west Shetland, has 24-hour access to the North Sea. The extension will be complemented by increased, adjacent laydown for equipment and materials. A phased expansion underway in recent years will total 45,000 square metres by 2016.

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Offshore Aberdeen | March 2015 | offshoreaberdeen.com

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INFORMED

OEG Offshore Shadow energy minister buys Australian consults with industry leaders

TWO WEST AUSTRALIAN-based oilfield services providers have been purchased by global offshore equipment firm OEG Offshore. OEG Offshore is a leading provider of specialist offshore cargo carrying units, A60 cabins and other equipment. Headquartered in Aberdeen, OEG provides one of the most customer driven fleets of equipment on a sale or rental basis from a network of worldwide bases.

The acquisition of Oilfield & Resource Rentals (ORR) and Offshore Cryogenic Services (OCS) provides OEG with a significantly enhanced presence in Perth, expansion into the North West region and new offerings in the offshore aviation services and cryogenic tanks markets.

“We’re excited about being part of a bigger company with a broader revenue base and a reputable name in the global industry,” said Oilfield & Resource Rentals Managing Director and coowner Patrick Hanna.

Established in 2012, ORR and OCS have operations in Perth, Karratha, Broome and Darwin providing a range of products and services including DNV 2.7-1 offshore equipment for sale and rental alongside certified inspections of heli-decks, helifuel tanks, ISO tanks and offshore chemical tanks.

“We were attracted to ORR and OCS due to their experienced and dedicated team and, in particular noted that all of the technical staff are accredited with the National Australian Testing

Association to provide the highest level of competence to the oil and gas industry, which allows us to offer an excellent service to our Australian and overseas customer base.” said OEG Offshore Chief Executive John Heiton.

Other recent Australian acquisitions undertaken by OEG Offshore include OPC Australia Pty Ltd and Fuel Installation Services, trading as Tank and Pump Services, enabling the OEG group to provide a truly Australia wide offering with depots in Perth, Darwin, Melbourne and Barry Beach in Gippsland.

“Over the last 15 years the offshore oil & gas industry has grown from zero investment in DNV rental equipment to one worth five hundred million dollars on the ground in Australia and I expect this to expand even further as Perth becomes a strategic hub for supplying services to the North West Shelf and Browse Basin,” said Mr Hanna.

OEG Offshore’s range of DNV 2.7-1 transportable offshore chemical and heli-tanks, containers, baskets, waste units and A60 cabins are available across Australasia. They offer the same varied range of equipment for sale as well as rental, alongside a bespoke design service.

OEG Offshore is on a growth strategy funded by investment firm Kohlberg Kravis Roberts as it expands operations across Europe, Africa, Caspian, Asia Pacific, North America as well as Australia. Currently the business has operations in 25 countries worldwide.

CENTRICA ENERGY AND Bibby Offshore, the subsea services provider to the oil and gas industry, were visited in February by Tom Greatrex MP, Shadow Energy Minister, as part of an oil and gas industry fact-finding initiative providing the opportunity to consult with industry leaders on how to best support the sector.

Mr Greatrex visited Centrica’s Aberdeen offices to find out more about how the company’s new and existing developments on the UK Continental Shelf are creating jobs and boosting the economy across the country. The MP for Rutherglen and Hamilton West was given an update on the £1.5 billion Cygnus project, where Centrica has a significant interest and is creating nearly 5,000 jobs in the UK supply chain, as well as the company’s major assets like Morecambe, which produces enough gas for 1.5 million homes daily. Mr Greatrex also met with some of the teams working across Centrica’s UK operations, including geologists, engineers and HSE experts.

Mr Greatrex also toured The Hangar, Bibby Offshore’s 50,000 ft² purpose built state-of-the-art workshop and warehouse facility in Westhill. With diving and ROV equipment on site, Mr Greatrex learnt about Bibby Offshore’s capabilities and development since inception in 2003.

The company also highlighted its strong commitment to people development and training, introducing two of the company’s young ROV apprentices, Alexander Tice (17) and Edward Beattie (19).

David Sheret, General Manager, Global Business Development at Bibby Offshore, said: “Political engagement is vital for the continued investment in and the development of the energy industry. We were delighted to demonstrate Bibby Offshore’s innovative and important work, and to discuss with Mr Greatrex the challenges and opportunities facing the sector.

“We realise our success is down to our people, and understand fully the importance of valuing and investing in our

staff. Our training programmes often act as a way to build a bridge from education to industry, and as a company we aim to help provide and improve opportunities for ambitious and talented individuals.”

Mark Lappin, Exploration and Subsurface Director for the UK and Netherlands at Centrica Energy, said: “It was great to meet Tom again and give him an update on our current projects.

It is vital that we work closely alongside our partners, service companies like Bibby Offshore and the Government to bring these projects to life and continue investing in the UK, especially in an environment of low oil prices.”

Tom Greatrex MP, said: “Visiting both Centrica Energy and Bibby Offshore provided a great insight as to how companies work together from both the operator and supply chain perspective.

It’s fantastic to see such positive and successful collaborative work within the industry, and the wealth of skilled and dedicated people that work within it.”

offshoreaberdeen.com | March 2015 | Offshore Aberdeen

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Wood Group PSN appoints new CEO DAVE STEWART HAS been appointed as CEO of Wood Group PSN (WGPSN).

Effective April 2015, Dave moves into this role from his previous position as UK managing director of WGPSN’s UK operations.

Dave has more than 38 years of oil and gas experience and joined Wood Group 17 years ago. During this time Dave has been responsible for the establishment of Wood Group’s duty holder business and creating WGPSN’s industrial services capability through the acquisition of Pyeroy Group Limited in 2013.

Dave is also on the leadership team

of Step Change in Safety, co-chair for Human Factors and Competence steering group and board trustee for the Oil and Gas Chaplaincy. In his new position, Dave will focus on continued business efficiency and support WGPSN’s growth in the global oil and gas industry.

Dave said: “I am passionate about the company and committed to focusing on how we deliver collaborative, competitive and cost-effective solutions that enhance value for our clients in these challenging times.

“WGPSN is leading the charge in terms of understanding the measures required

to safeguard the future growth of the oil and gas industry globally, and I look forward to taking on this challenge.”

Dave will report to Robin Watson who will take up his new position as CEO of Wood Group in April. Mr Watson said: “Dave’s achievements during his time with WGPSN are testament to his passion and commitment towards the company and the wider industry. In 2014 WGPSN’s North Sea business, led by Dave, achieved over $1.5bn, accounting for 40 percent of Wood Group PSN’s overall revenue. I look forward to working with Dave to further strengthen and grow WGPSN’s global operations.”

INFORMED

New international research highlights Scotland as major centre of innovation THE SCOTTISH ENTERPRISE survey of senior global oil and gas industry figures has highlighted Scotland as a major centre of research and innovation. The research, which took the views of more than 260 industry leaders from businesses employing about 2.2 million people globally, showed that 74 percent of respondents believed Scotland was one of the world’s leading training grounds for the industry, with 71 per cent agreeing that Scottish employees are some of the most dependable in the sector.

Welcoming the findings, First Minister Nicola Sturgeon said: “This poll comes at a time of change for the global energy sector.

Turbulence in the oil markets is leading to some uncertainty about future work flows, but these results reinforce the value that Scottish businesses deliver to partners, particularly in deepwater and offshore exploration areas.”

“Decades of innovation, cultivated in the North Sea, are being deployed globally and transferred to new and emerging exploration and production locations around the world, including West Africa.”

“Our objective is to make clear that Scotland’s oil and gas wealth is not just in the resources that we extract, but the expertise that we have built up. We are working with the industry to continue to strengthen Scotland’s position as a global leader in the sector and these figures mark further growth in this important part of our economy.”

David Rennie, Head of the International

Oil & Gas Sector at Scottish Enterprise said: “This research quantifies what we’ve long known and heard – that Scotland has a world-leading reputation when it comes to developing skills and experience in the oil & gas industry.

Commenting on the findings, Melfort Campbell, Chairman & CEO of IMES Group and Chair of the Independent Expert Commission on Oil & Gas, said: “It is essential that Scotland maintains its competitive edge in oil and gas and these new figures highlight, reassuringly, the value that our supply chain continues to create, as well as identify a number of strategic opportunities and challenges that can be developed further. Scotland’s role in the global oil and gas industry has long been characterised by constant evolution and development, but ultimately, this continued role relies on its ability to maintain its position within the global exploration and production market.

“To have the quality and capability of our industry endorsed by such a high percentage of our international partners is encouraging and enables us to identify new opportunities to enhance our position further. And while market conditions remain challenging, our capacity for innovation becomes ever more important.

It will be our ability to adapt to these changing conditions – while supporting customers and partners elsewhere in the world to do the same – that will ensure a lasting legacy well into the future.”

Video and Data Monitoring - Can you see clearly?

“GETTING THE MONITORS right is fundamentally important” says Stuart Cameron, MD of Cache Media, a supplier of Monitoring, Server and Mini Camera solutions to the offshore industry for over 10 years. “As more and more people are used to high quality pictures in their homes, surely the same should apply to Offshore? “ says Cameron, who spent 12 months of Industrial Training with Esso Petroleum.

For offshore use, there are commercial reasons for choosing the “best value” monitors. There are also quality constraints and increasingly, ergonomic reasons as some operators can spend much of their shifts staring at screens. If it is easy to see information and the picture quality is good, it makes the job easier, faster and much more rewarding. It also cuts down on fatigue and the ability to see potential problems is made easier.

Traditionally, the offshore industry used composite video and VGA sources. These

are still used today and Cache Media sells a range of monitors dedicated to composite and with VGA/DVI inputs. However, that range of monitors also has a higher resolution meaning that the pictures are cleaner, crisper and easier to interpret.

In addition, the viewing angle is better,

therefore, the pictures are easy to see and understand even if you are slightly off axis.

In addition, some 5 years ago, it became clear that in some situations High Definition will be required. In such situations, adding a HD Module (or fibre) to the monitor makes it a simple step to

move the monitoring from Composite to HD without adding too much cost.

Following a lot of discussions and research the Marshall “MD series” was introduced.

As standard the 19” rack monitors have a composite input and a rack mount kit included. This keep the costs down, while

at the same time its high resolution screen it improves the image. To this base model, it is possible to then add modules for VGA/DVI and HD. If no HD is planned, then it gives the option to future proof the solution or even to swap modules depending on the job requirement.

| March 2015 | offshoreaberdeen.com

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INTERVIEW

THIS MONTH OFFSHORE ABERDEEN INTERVIEWED MR ERIK-JAN BIJVANK, SVP (UK & AFRICA) AT THE INTERNATIONAL ASSET INTEGRITY AND MAINTENANCE MANAGEMENT SERVICES PROVIDER, STORK.

Q

Do you have any plans for the development of your company over the next year or more?

Development comes in a number of forms. The first is in response to an increased call for higher levels of efficiency against lower overall cost. We are just about to complete our transformation from multiple operating companies into a single entity; capable of delivering each individual service flawlessly as well as packaged services in one seamless delivery stream.

Secondly, there is geographical development. In 2014, Stork continued to expand its operations in the UK & Africa region. In light of a number of Global Framework Agreements for service delivery with some of our Subsea clients, Stork established an operational base in Stavanger, Norway. We are also expanding our presence in the Southern North Sea, with the opening of new premises in Great Yarmouth.

This will allow us to serve both our existing client base as well as new clients in the SNS sector.

Q

Are there any particular contracts you’d like to talk about that stand out at the moment?

Stork is very proud to be a part of the team delivering services to two new ventures in the North Sea. First of all, a significant contract win for Stork in 2014 was with Norwegian Oil & Gas Operator, Statoil.

This multi-year contract is estimated to be valued at £25million and will see Stork deliver a range of integrated fabric maintenance services throughout Statoil’s Mariner field.

Secondly, Stork will provide a range of services during the hook up and commissioning phase of a prominent gas field development within the UKCS. We very much look forward to working with these clients, as they develop their presence in the UKCS. Equally as important are our long term client relationships. Recently, Stork was awarded a three year contract extension with two one-year extension options, with Apache (see article on page 14). This reinforces the strength of Stork’s services portfolio, delivering a fully integrated asset optimisation approach across Apache’s Forties field and onshore SAGE Terminal at St. Fergus. We are proud to continue working in partnership with Apache. We have worked closely with the Apache team since 2009

QUICK CROSSWORD ACROSS DOWN 8 Horizontal structure housing oil rig, etc. (8) 1 Transparent sheeted material used in

construction, architecture, etc. (5,5) 9 Mistakes (6) 2 Layers of rock (6) 10 Vehicle running on rails (5) 3 Go --------; to deteriorate, worsen (8) 11 Military town with resident body of troops (8) 4 Thick, polluted fog (4) 12 ‘The ------- City’; nickname for Aberdeen (7) 5 Patron saint of England (6) 14 Happenings; occurrences (6) 6 Types of naval vessel; warships (8) 16 Snake’s tooth (4) 7 Group of three (4) 18 Furious; enraged (5) 13 Iconic American singer; ‘The King’ (5) 20 Bed or vein of rock viable for mining (4) 15 Electronic component; semiconductor (10) 21 Requesting; posing question (6) 17 Industrial process of pulverizing or

reducing to powder (8) 23 Arachnids (7) 19 Shaft or rod used to bore holes (5, 3) 25 Unrefined petroleum (5, 3) 22 Game bird, shot for sport and food (6) 28 Raises; hoists; elevates (5) 24 Famous Parisian tower (6) 29 Structures or vehicles used for industrial lifting (6) 26 Uncommon; unusual (4) 30 Glowing; at an extremely high temperature (5, 3) 27 Rules; regulations; statutes (4)

emergency evacuation. ERBAS allows the wearer to refill their empty cylinder in just 20 seconds using a single, simple connection.

and together have achieved a strong track record in quality and safety.

Q

Are companies hit hard by the oil price fall asking for lower prices for your services?

Stork is committed to the North Sea basin and we are working hard to continue finding costefficiencies for our clients. We have seen a number of companies being hit very hard in the current circumstances, with differing approaches to these challenges. While we see this as a time to ensure the most cost-effective solutions, we are equally committed to finding new ways of working; to increase operational efficiencies as well. It is under these circumstances that, collectively, we may find different solutions to problems that have existed well before the current oil price fall; but have been put into much sharper focus because of it.

It goes without saying, that in these challenging times we remain fully committed to our values in safe working. Our core values do not change when times are tough.

Q

What do you see as your biggest challenges in the years ahead??

We need to continue to drive cost out of the supply chain and operate at the highest quality while maintaining our safety record. This is the most effective way to ensure a long future in the North Sea. In the short term, we need to protect our skills base, in order to be fighting fit for the future.

Stork is confident that market conditions will rebound, but we do not know when. In preparation for this time, we will make sure that Stork is ready to continue on our path of further development.

Stork is a global leader in the delivery of asset integrity and maintenance management services to the Oil & Gas, Chemical and Power industries. With over 4000 clients worldwide, Stork has been working in long term partnerships with many of the major global Exploration and Production companies for over 40 years. Stork has a global workforce of over 16,500 individuals and locations across a number of key regions – UK & Africa, Europe, Middle East, Americas and Asia Pacific.

Q

What new technologies/approaches are most helping you achieve your goals more efficiently?

Stork has an unrivalled portfolio of services and we deliver efficient solutions to reduce interfaces, taking responsibility for the end result. Increasingly we do this within performance contracts, taking a tangible stake in achieving the right results. We have achieved significant cost savings by taking a fresh look at existing issues, ranging from eradicating standby cost, through to increased platform productivity and by bridging the gaps between Assess, Inspect, and Repair services to significantly reduce Integrity issues against lowest overall cost.

Apart from this, Stork has built a reputation for product innovation. First of all, and as a direct response to industry safety concerns surrounding uncontrolled pressure releases from stud-bolt failures and corrosion we have developed our Hot Bolt Clamp solution; it enables the safe removal and replacement of corroded bolts on live four-boltflanged connections with no disruptions to ongoing production.

Stork’s Extended Reach Breathing Apparatus System (ERBAS) is another good example. Stork has the largest number of confined space operations in the North Sea and has actively sought to improve and support these operations in the last two years by creating an in-house Breathing Apparatus and Gas Detection department.

The ERBAS system increases safety during these operations, as it has been designed to allow for the quick and simple refill of empty cylinders during an

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Across: 8 platform 9 errors 10 train 11 garrison 12 Granite 14 events 16 fang 18 livid 20 seam 21 asking 23 spiders 25 crude oil 28 lifts 29 cranes 30 white hot Down: 1 plate glass 2 strata 3 downhill 4 smog 5 George 6 cruisers 7 trio 13 Elvis 15 transistor 17 grinding 19 drill bit 22 grouse 24 Eiffel 26 rare 27 laws

Q

What makes Stork a good company to work for?

Stork has a long history in delivering high quality services. We operate in a number of areas for Blue Chip clients. We can offer an exciting career in a large range of services, where people can develop themselves into specialists in a particular field, hone their contract and project management skills or shape the company’s future as part of the General Management team. We have a strong track record in providing opportunities for new entrants to the Oil & Gas industry, as well as experienced players.

Safety is our core value and we are fully committed to our REACH programme (Stork’s award-winning global health and safety platform) as a means of driving health and safety improvements across the business. REACH is an employee-focused initiative for both our onshore and offshore workforces.

We are committed to providing training and development to all our employees, ensuring they have the opportunity to progress in their careers.

Many courses are provided by our in-house Training Centre, located in Aberdeen, which offers a variety of industry recognised accreditations, in disciplines including Rope Access, Mechanical and Working at Height. In 2014, Stork was awarded the OPITO Employers accolade for our commitment to the development of our employees as a safe and competent workforce, in line with OPITO standards.