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GOVERNMENT REPORT SHOWS SHARP DECLINE IN NORTH SEA PROFITABILITY UK CONTINENTAL SHELF (UKCS) companies’ net rate of return fell to 10.4 percent in Quarter 4 (Oct to Dec) 2014, according to a quarterly report from the Office for National Statistics (ONS). This was the lowest estimated rate since the series began in Quarter 1 (Jan to Mar) 1997, while at times the internal rate of return has been as high as 50 percent (see graph). The figure is only slightly lower than the UK non-CS companies’ net rate of return, which was 12.0 percent in Q4 2014. But due to the nature of the capital assets employed, net rates of return for continental shelf companies are not directly comparable with those for other industries, according to the ONS. UKCS companies are defined as those involved in the exploration for, and extraction of, oil and natural gas in the UK. Q4 2014 was the third consecutive lowest estimate, and was 2.0 percentage points lower than the previous quarter. The sharp recent decline is clearly due to the fall in oil prices, but a steady decline had set in before that, largely reflecting rising costs. Oil & Gas UK’s chief executive, Malcolm Webb, commented: “These shocking figures underline the very serious challenges the sector faces. After more than a decade of spiralling costs, overtaxation and weak regulation, the UK offshore oil and gas industry is now
bottom of the league in terms of the cost of producing a barrel of oil and gas. The UK’s difficulties have been greatly exacerbated by the sudden drop in oil price but it would be a grave mistake to believe that the price fall is the cause of the problem. A recovery in the price, even to $100 per barrel, would not resolve matters. “The restructuring of the tax regime announced by the Government in the Budget and the establishment of the Oil and Gas Authority can encourage the muchneeded future investment. However, unless the underlying cost and efficiency challenge is first tackled and overcome, the productive future of the UK North Sea will be severely constrained and there will be a very much smaller industry to tax, regulate and invest in. All companies are now working hard to address the cost base and to improve the efficiency of their operations. This is very important work because we need to see a 40 per cent improvement in unit operating costs if we are to secure jobs and investment for the medium and longer-term.” The IMF also voiced concern over North Sea costs in April, which it estimated were the highest for any region on the world. In its bi-annual World Economic Outlook, the fund said that current operating costs in the region stood at $40/bl – the highest of any region, and $10/bl above Canada, the second most
expensive market. At the other end of the scale, the report found that costs were as low as $5/bl in Iraq and Kuwait, and around $6/bl on average in Russia. “Canada, the North Sea and the UK are among the most expensive places to operate oilfields. As a result, the oil price slump will affect production in those locations earlier and more intensely than in other locations. Projections show that lower oil prices are expected to have a smaller impact on production of shale oil in the US than on deepwater and oil sand production, especially in Brazil, Canada and the UK,” it said. Earlier in the month, PricewaterhouseCoopers (PwC) issued a report calling for the North Sea to slash costs in order to remain competitive. It also said a strategic framework should be introduced to “create certainty under the auspices” of the Oil and Gas Authority, the new independent regulator formed following the recommendations of the Wood Review. “A new vision and new ways of working are urgently required,” PWC said. “We believe that for the UK North Sea to remain competitive, we need to reduce costs significantly – billions of pounds of costs – as well as increase production efficiency. To achieve this, we must engage, collaborate and build trust as an industry.”
NORWAY’S MINISTRY OF PETROLEUM and Energy has announced this year’s licensing round for geologically well-known areas on the Norwegian Continental Shelf, otherwise known as Awards in Predefined Areas (APA) 2015. The objective is to award these new production licences at the beginning of 2016. The application deadline is 2nd September 2015 at 12:00 pm. Norway’s Minister of Petroleum and Energy Mr. Tord Lien said: “History has shown us that the APA-rounds have been very important for the value-creation and for the
activity-level on the Norwegian Continental Shelf. I am therefore very pleased to be able to announce this year’s APA-round where a significant number of blocks have been added. APA 2015 is yet another example of how this Government delivers on its promises from the Sundvolden-declaration with regards to maintaining a predictable and high pace of new awards.” APA 2015 expands the predefined area by 35 blocks in the Norwegian Sea, including blocks close to the Aasta Hansteen field and the Pil and Bue discoveries at Haltenbanken.
In the Barents Sea, the area has been expanded with 11 blocks close to the Alta and Gohta-discoveries (see maps). The announcement has been subject to a public consultation process. “The expansion of the APA-area in the Norwegian Sea and in the Barents Sea in APA 2015 opens up for effective exploration of the areas near several discoveries and close to the Aasta Hansteen-field. This is good resource management, and will be important for the activity-level and the value-creation, especially in the northern
NET RATE OF RETURN OF UKCS COMPANIES, Q4 2006 TO Q4 2014 % 60
50
40
30
20
10 2006 Q4
2007 Q4
2008 Q4
2009 Q4
2010 Q4
2011 Q4
2012 Q4
2013 Q4
2014 Q4
For more information see report at: http://www.ons.gov.uk/ons/rel/ pnfc2/profitability-of-uk-companies/q4-2014/stb-profitability-of-ukcompanies-q4-2014.html
NORWAY ISSUES NEW LICENSING ROUND region,” said Mr Lien. Awards in Predefined Areas (APA), is one of two equal licensing rounds on the Norwegian continental shelf. The scheme was introduced in 2003 to facilitate exploration of geologically well-known parts of the shelf using current methods. The APA area includes the geologically best known parts of the Norwegian continental shelf, and anticipated discovery size in these areas is decreasing. Exploration largely focuses on smaller discoveries that may not justify an independent development but could
be profitable if developed in conjunction with other discoveries and/or by utilising existing or planned infrastructure, said the NPD. Timely exploration of these areas is therefore important. Effective exploration requires predictability regarding areas that may be applied for under the APA system, and a steady stream of new acreage. The APA rounds are therefore organised annually. An evaluation of whether the APA area should be expanded is undertaken every year, using technical petroleum assessments as new areas are explored.
Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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Jeremy Bowden editor@offshoreaberdeen.com 07766 035 613
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iThACA COMplETES fifTh pOliTiCiANS CAll fOr STEllA dEvElOpMENT wEll EXplOrATiON CrEdiTS ANd NOrTh SEA pOwEr MArkET
ithaca eNergy haS reported the successful completion of flow test operations on the fifth and final development well on the Stella field, with the well 30/6a-A3Y (A3) achieving a flow rate of over 8,000 boe/d. The well was drilled to a total measured depth subsea of 14,267 feet, with a 2,137 foot gross horizontal reservoir section completed in the Ekofisk chalk reservoir, the secondary reservoir underlying the primary Stella Andrew sandstone formation in which the first four Stella wells have been drilled. The Ekofisk well intersected a net reservoir interval of 2,073 feet, equating to 97 percent net pay. The A3 well
is currently in the process of being suspended and operations are scheduled to be completed in the coming days. As with the previous Stella development wells, the suspension configuration is such that the well can be brought on to production without the requirement for any further well intervention activity once the FPF-1 floating production facility is on location and hooked up. The five Stella wells that have been drilled have achieved a combined maximum clean-up flow test rate in excess of 53,000 boe/d. This well capacity significantly de-risks the initial annualised production forecast for the Greater Stella Area hub of 30,000 boe/d.
Ensco Drilling rig at Stella
highlightS oF the various policy offerings in the run up to the UK general election include demands for exploration tax credits from the SNP, and a North Sea power market from the Tories. Callum McCaig, leader of Aberdeen council’s SNP group, and his colleague Kirsty Blackman said exploration tax credits would be a top priority for them if they are chosen to represent Aberdeen south and north constituencies at Westminster. They claim the credits could help boost the flagging sector, alongside tax reforms announced in the March Westminster Budget.
Conservative MEP Ian Duncan had earlier called for an “electricity free trade zone” in the North Sea. He said the envisioned trade zone would involve energy being generated in the best geographical location and transmitted freely to where demand was greatest. “Scotland has significant scope for renewable energy, but importantly it has huge resources of offshore and onshore gas to generate electricity,” he said. “Without interconnectors, essentially large cables, both consumers and our energy producers are at a disadvantage.”
Calls for North Sea power market
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NOrwEGiAN Ship OwNErS prEdiCT SlOwiNG GrOwTh the NorwegiaN ShiPowNerS’ Association (NSA) Outlook report for 2015 anticipates a slowdown in growth rates and turnover in the year ahead. Among ship-owners, 42 per cent thought they would do worse than last year, up sharply on 8 per cent last year. Those expecting to do better also fell, with 35 per cent expected improved operating results compared to the year before, down on 72 per cent on 2014. Sturla Henriksen, CEO of the NSA, said: “We have seen a marked negative shift in just a short time. 2015 will be a challenging year for Norwegian maritime companies, but we must be prepared for
2016 to be even more challenging.” Nevertheless, overall a growth in turnover is still expected - at 2.3 per cent in 2015, compared to 6 per cent last year, although the offshore service sector does expect a drop, of about 4 per cent, due to the weak oil markets. “This would mark the first drop in turnover since 2002 for this segment,” said Henriksen. “Growth in turnover for offshore service shipowners was 9.9 per cent in 2014, so the negative development is significant.” Surprisingly, rig owners expect growth in turnover of 9.1 per cent, which is reported to be largely down to work initiated last year, although it looks challenging with Norwegian Continental Shelf investment expected to fall by 10 per cent this year. Other sources, including McKinsey’s, expect floating rig utilization rates to fall this year and next in Western Europe, and worldwide. Heading into 2015, NGA members had 26 vessels in storage, of which 20 were ships and six were mobile offshore units. “Our members expect the number of vessels in storage to rise, to 42 by the end of 2015 – 29 ships and 13 rigs,” Henriksen reports. “The industry itself is doing all it can to survive in these challenging times, and we are encouraged by the signals sent out by the government before Easter indicating changes in the rules governing paid leave. We also have high expectations for the new maritime strategy, which the government has said
will be released during the spring. We consider four items to be of particular interest in the strategy: a competitive shipowning tax; strengthening the Norwegian flag by relaxing Norwegian cabotage rules; a strong net wage scheme to encourage employment of more Norwegian seafarers; and improved terms of private ownership. One thing we know: Proactive policies yield good results, even in challenging times,” said Henriksen. Norwegian rig-owners surprisingly optimistic
Norway has the world’s 6th largest shipping fleet measured in market value, and is among the most modern, with the average age of ships having fallen by nearly three years since 2007, down to 11 years. The offshore service fleet has grown over the past decade by 354 ships, to 637 ships today, a growth of 80 per cent. Investment levels are now showing a declining trend, and rig companies are facing challenging times.
offshoreaberdeen.com | May 2015 | Offshore Aberdeen
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NEWS
Shell buys BG Group COMMENT for $70 billion Shell has bought BG for $69.6 billion (£47 billion) - a 50 percent premium to the share price at the time. Shell expects to create $2.5bn of synergies a year from the deal, giving a payback on the premium of under eight years. The combined entity will create the world’s biggest liquefied natural gas producer, and the company will be the largest on the FTSE exchange. BG’s CEO, Helge Lunde, is expected to depart after less than four months at the helm, having joined the company last year form Statoil. Analysts say there is a complimentary fit in 15 countries of operation, with enhanced positions key growth areas of LNG and deep water in Brazil, Kazakhstan, US shale and North Sea mature assets – which could be a promising development for Aberdeen, as it may provide the scale to justify investment. However, North Sea operations at the two companies are expected to result in job losses as they are merged. Commenting on the deal, Jorma Ollila, Chairman of Shell said: “This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders. The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world. BG shareholders will receive significant value through the premium being offered for their shares. They will become shareholders in Shell, accessing an attractive dividend policy, a share in the significant synergies and the compelling upside and enhanced operating capability of the combined group. We believe that the combination is in the interests of both our companies and their shareholders.” Shell CEO Ben van Beurden said: “Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on the industry landscape around us. At the start of 2014, Shell embarked on an improvement programme, including divestments and the restructuring of underperforming businesses, whilst at the same time delivering profitable new projects for shareholders. This programme is delivering, at the bottom line. BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell’s growth priorities and areas where the company is already one of the
industry leaders. Furthermore, the addition of BG’s competitive natural gas positions makes strategic sense, ahead of the longterm growth in demand we see for this cleaner-burning fuel. This transaction will be a springboard or a faster rate of portfolio change, particularly in exploration and other long term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios. Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace.” Andrew Gould, Chairman of BG commented: “This offer represents an attractive return for BG shareholders. BG has a strong portfolio of operations including growth assets in Australia and Brazil and a highly competitive LNG business, as well as an enviable track record of exploration success. The BG Board remains confident in BG’s long-term prospects under the leadership of Helge Lund. Shell’s offer, however, allows us to accelerate and de-risk the delivery of this value. The structure of the offer will provide BG shareholders with an attractive premium and substantial cash return as well as enabling them, if they wish, to
Shell gobbles up BG
participate in the benefits of the combination through the share component. For these reasons, the BG Board recommends the offer.” Helge Lund, BG CEO said: “The offer from Shell delivers attractive returns to shareholders and has strong strategic logic. BG’s deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell’s scale, development expertise and financial strength. The consolidated business will be strongly placed to develop the growth projects in BG’s portfolio. The transaction will take time to complete, during which my team and I will remain committed to BG and our shareholders, and to safely delivering our 2015 business plan.” BG said in February it was writing down the value of its oil-and-gas assets by nearly $9 billion, while Shell announced spending cuts of $15 billion. Shell replaced only 26 percent of the oil and gas it pumped last year, but acquiring BG ensures a robust replacement ratio this year. The takeover is the latest sign of how tumbling energy prices are shaking up the global oil-andgas industry. Before the price collapse, Shell acquired much of Spanish oil company Repsol’s LNG business in January 2014.
Although overshadowed by the UK general election, last month saw several major developments in the world of UK oil and gas. Firstly, an oil reserve almost half the size of Saudi Arabia’s was ‘discovered’ – or at least hinted at – beneath the well-tended lawns of southeast England (see story on page 4). Unfortunately, the odds of getting much of it out, when developers are up against several million well-healed suburban residents, backed by Greens, and interested groups like EdF (and the EU), Opec and Gazprom, is not high. The bulk of what is said to be a similar shale to the prolific Bakken in North Dakota, will require fracking to extract, and to do that in such a heavily populated area could prove too much of a political and technical challenge. That’s too bad, as it could provide an alternative market for many companies involved in the offshore North Sea oil and gas sector, where the second of the month’s major events has clearly illustrated escalating competitive pressures. In early April, Shell announced the takeover of BG, bringing two of the biggest North Sea operators under a single banner (see story on page 3). The deal came just a few months after the world’s second-biggest oilfield services company, Halliburton, agreed to acquire its rival, Baker Hughes, for about $35bn, sparking concern that the weak oil markets would precipitate a spate of further mergers and acquisitions. BP is high among those potential targets, according to many observers, with ExxonMobil and Chevron, the two largest US producers, seen as possible suitors, while Shell reportedly took a hard look at buying BP before deciding on BG. But, speaking at the IHS CERAweek conference in Houston in April, BP CEO Robert Dudley said that a merger was unlikely. “I don’t see forces at work for a wave of consolidation, unless oil stays low for longer,” he said. However, as we were going to press the UK government said it would intervene to prevent any takeover of BP, saying it wished to retain two large UK-owned multinational oil and gas companies (BP and Shell/BG – albeit Shell being part-Dutch owned). The UK government rarely intervenes in such a way, so the announcement came as quite a surprise to many. Whether or not more takeovers are likely, other companies are making alternative strategic choices given the changing oil and gas landscape. In the Norwegian offshore sector, for example, ConocoPhillips is reported to be looking to sell off some of its assets as part of an overseas divestment that will allow it to focus on US shale opportunities. The company is putting on the block its interests in the Det Norske-operated Alvheim and Statoiloperated Grane fields in the North Sea, and the Aasta Hansteen discovery being developed by operator Statoil in the Norwegian Sea, according to Bloomberg. If true, it adds to an already long list of assets up for sale in North Sea waters, a subject we will look at in next month’s edition. The negative talk surrounding oil and gas in the North Sea means more interest than ever is
focused on opportunities for offshore renewables. As a result, and as promised, we take a closer look at carbon capture and storage, with the help of input from the two main UK political parties (in articles CCS: An important piece of the low carbon jigsaw, on page 8, and Labour challenges coalition over Carbon Capture and Storage on page 9), and an interview with leading academic, Dr David Vega-Maza of Aberdeen University (see interview on back page). Alongside that we take a wider look at renewables, in particular tidal energy in an article Low oil price switches offshore focus to renewable projects on page 10. Among North Sea renewables, wind is the most promising, and we note the risk that the Aberdeen offshore services hub may be losing out to a new one in East Anglia, which is focused on up to 11 GW of approved and potential capacity in an area off the coast of Norfolk and Suffolk. When CCS, tidal and wind are combined, the North Sea could prove critical for Europe if it is to meet its climate change policy obligations, along with any further commitments that result from the upcoming COP21 climate change talks in Paris this December. In the all-important oil market, prices have rallied over 25 percent in the last few weeks, showing some strength amid all sorts of conflicting projections about oil production and demand. Direction remains uncertain, with bullish factors including falling rig counts, spending cuts and stronger demand, while on the bearish side, output is probably still outpacing demand by over 1 million b/d, inventories are at record highs and still growing, and Saudi Arabia – along with Opec more generally - is increasing production. Speaking at the same CERAweek conference, BP’s Dudley cautioned that the oil industry should brace itself for a “lower for longer” market as the US shale industry was proving “remarkably resilient.” In the North Sea, Dudley warned of a “painful” process of restructuring aging fields. “We have had to make some tough decisions ourselves in recent months about resetting BP for $50 oil,” he said. “We’re going to see massive restructuring… The North Sea is a very high-cost basin and it is going to be a painful adjustment.” That adjustment could be more painful than some expect, and may not be something that many in the industry can manage. Union action, for example, in opposition to any adjustment, could really throw a spanner in the works of efforts to improve efficiency, as we discuss in Strike threatens to further undermine UK North Sea’s competitive position, on page 12. We also look at the effect of cost pressures on companies in Price fall drives natural selection in offshore oil and gas sector, on page 12. While times may be tougher than ever in the UKCS offshore oil and gas sector, we still hope you will enjoy our fourth issue. By the time it lands on many of your desks, the UK election result will be known, although any result apart from Green victory, is unlikely to have much impact – the sector’s future largely depends on costs, technology and price.
Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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NEWS Dave Cox, Head of Market Development – Intervention Services, GE Oil and Gas and conference chairman of the 2015 SPE Aberdeen European Well Abandonment Seminar
Importance of well abandonment showcased at SPE Aberdeen seminar Well abandonment is not new to the oil and gas industry, having been a necessary activity since the beginnings of the search for oil and gas. One thing that is changing, however, is the number of mature fields, wells and infrastructure that are nearing the end of their economic life in the North Sea. This means that the number of installations that will eventually need to be decommissioned is rising. In the UK and North Sea alone it is estimated that a total of 475 installations will have to be decommissioned, with the 2014 Oil and Gas UK Economic Report stating that associated costs over the rest of this decade are expected to average at £1.3billion per year. The task of well plugging and abandonment accounts for over 44% of operator expenditure for decommissioning, making it the most significant aspect of the decommissioning phase. Recent reports have suggested this number may yet rise. However, a number of innovative technologies are available within the industry to assist with the process and there are further actions operators can take to minimise the traditionally high costs of plug and abandonment activity, without compromising safety. Key to successful decommissioning is to start planning early. The sheer complexity of the process results in long delays due to inevitable unforeseen problems and, therefore, planning early gives the best chance of efficiently overcoming these problems. Operators in the North Sea should be planning for well abandonment and decommissioning now if they are not already. The area of well abandonment is a little different from some industry activities in that the government is a key stakeholder through the involvement of the Department of Energy & Climate Change (DECC), Decom North Sea and more recently the Oil & Gas Authority (OGA). The Society of Petroleum Engineers (SPE) Aberdeen section hosted the 5th European Well Abandonment Seminar on Tuesday, 21 April at the Aberdeen Exhibition and Conference Centre. The seminar showcased a number of major operators, service companies and industry bodies who shared their new and existing aban-
donment techniques and case studies. We were delighted to welcome Bill Cattanach of DECC to deliver the keynote address, during which he outlined the background to the OGA and also challenged the industry to seriously consider cost-reducing innovations, both technical and commercial. Interestingly, Mr Cattanach believes that UK has the opportunity to establish itself as a ‘global decommissioning centre of excellence’ in the way it has done with subsea technology and that we should build on this perspective – personally, I completely agree. DECC followed up with a second presentation later in the day from Audrey Banner, technology development and briefing manager, who provided some interesting data in her speech. For example, I was surprised to learn that 401 wells in the UK sector of the North Sea have already been abandoned. The theme continued with an excellent collaboration challenge from Decom North Sea, which included some very useful spend data and also a profile of the collaborations being driven by DECC in the Southern North Sea (SNS). We welcomed the participation of Statoil which is in the process of taking up operatorship in the UK sector of the North Sea for the first time. They acknowledged that the UK sector is somewhat ahead of Norway in this space and are looking to learn from us whilst also sharing their best practices. The collaboration theme comes into play again – but extending across borders and seas. We also welcomed various technologybased presentations; rigless and well construction techniques and innovative logging solutions were all profiled. Technology awareness is one thing but the evidence relies in, actually, doing it and it was great to hear some really powerful case studies. Both Shell and Hess featured prominently as companies who have applied absolute best practice in this space and are exemplary in leaving the seabed as it was found. It was a fantastic seminar with a real sense of regulators, operators and service providers galvanising their teams behind the common goal of reducing the cost of abandoning wells, in a safe and environmentally responsible manner.
Society of Petroleum Engineers
www.spe.org
Bakken-like oil shale in southeast England could hold 100 billion barrels UK Oil & Gas Investments (UKOG) estimates that from studies at the Horse Hill-1 well near Gatwick, the Weald Basin could hold up to 100 billion barrels of oil in place (OIP), at an average of 158 million barrels per square mile. That is comparable with Saudi reserves of over 250 billion barrels, but far less easily extractable. Only a small proportion is thought to be obtainable through conventional operations, with fracking and other expensive techniques required to access the bulk of the find, over an area of very high population density. This is likely to make it expensive, and technically - and probably politically - challenging. Nevertheless, it could represent a substantial opportunity to those contractors hit by the downturn in offshore work, especially to those companies not able or inclined to expand overseas. The find is associated with the same rocks as Western Europe’s largest onshore oil field at Wytch Farm in Dorset, which has been producing for 30 years. Sited at the edge of Poole harbour near Brownsee Island, Wytch Farm lies in a wilderness area surrounded by forest, and is seen by locals as a blessing that keeps the land natural and out of the hands of farmers. The Horse Hill licenses cover 55 square miles of the Weald Basin in southern England, where UKOG has a 20.36 percent interest. When the discovery was first announced, UKOG CEO, Stephen Sanderson said: “We believe we can recover between 5 and 15 percent of the oil in the ground, which by 2030 could mean that
we produce 10 to 30 percent of the UK’s oil demand from within the Weald area.” However, UKOG later went on to say that its estimation of potential oil was untested, and that it had “not undertaken work... sufficient to comment” on the Weald Basin potential. “The company has not undertaken work outside of its licence areas sufficient to comment on the possible OIP [oil in place] in either the approximate 1,100 square miles or the whole of the Weald Basin.” It added that “further well testing and assessment of recovery factors will be required to seek to quantify net resources in relation to the... areas and to prove its commerciality”. Mr Sanderson added: “Drilling the deepest well in the basin in 30 years, together with the ability to use concepts, techniques and technology unavailable in the 1980s, has provided new cutting-edge data and interpretations to comprehensively change the understanding of the area’s potential oil resources.” “As a result, we believe that, in addition to the Portland Sandstone oil discovery, the Horse Hill well has discovered a possible world class potential resource in what is interpreted to be a new Upper Jurassic “Weald hybrid play”. “With the help of Nutech’s considerable global knowledge base and play library, we have identified that the Horse Hill Upper Jurassic rock sequence is analogous to known oil productive hybrid reservoir sections of the Bakken of the US Williston Basin, the Wolfcamp, Bone Springs, Clearfork, Spraberry, and Dean Formations in the US Permian Basin and
the Bazhenov Formation of West Siberia.” “The Company considers that the high pay thickness, combined with interpreted naturally fractured limestone reservoir with measurable matrix permeability, gives strong encouragement that these reservoirs can be successfully produced using conventional horizontal drilling and completion techniques.” “Nutech’s results combined with our extensive geochemical analyses strongly indicates that the Company’s Horse Hill licences lie within the likely sweet spot of the Weald hybrid play, which has the potential for significant daily oil production.” Bakken drillers: could southern England be their next target?
Ivar Aasen to move ahead with appraisal well The Norwegian Petroleum Directorate has granted Det Norske Oljeselskap a drilling permit for appraisal well 16/1-22 S, to be drilled from the Maersk Interceptor drilling facility in production licence 001 B, after completing the drilling of appraisal wells 16/1-21 S and 16/1-21 A. The well site is on the Ivar Aasen field, where Det Norske is the operator with a stake of 34.8 percent. The other licensees include Statoil with 41.5 percent. On September 1, 1999, production licence 001 B was carved out of production licence 001, which was awarded on September 1, 1965 (Round 1-A). This is the seventh exploration well to be drilled within the licence area and the ninth on the Ivar Aasen field.
Plan for Ivar
offshoreaberdeen.com | May 2015 | Offshore Aberdeen
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NEWS
Statoil adds to reserves near Aasta Hansteen
Statoil ASA
Statoil has made another minor gas discovery near the Aasta Hansteen field, as it completed a two-well program aimed at strengthening the economics of the costly project. The latest exploration well, 6706/12-3, was drilled to a subsea depth of 3,296 metres at the Roald Rygg prospect, Production Licence 602. It uncovered a 38-metre gas column in the Nise Formation with excellent reservoir quality. Early estimates indicate gas volumes of between 1.8 and 6.7 bcm at the Statoil-operated site. “Statoil has completed a targeted two well exploration programme around Aasta Hansteen, which aimed to test additional potential in the area and make the Aasta Hansteen project more robust,” said the company’s senior vice president of exploration in Norway, Irene Rummelhoff. “Both wells, Snefrid Nord and Roald Rygg, have resulted in
interesting discoveries, which will now be further evaluated for future tie-in to the Aasta Hansteen infrastructure.” Snefrid Nord, located less than 7 km to the east, was completed last month, making a comparatively larger find of between 4.7 and 6.7 bcm. Put together, the discoveries add an additional 25 percent of recoverable resources to the Aasta Hansteen project. Both wells were drilled by the Transocean Spitsbergen rig, which will now travel near to the Gulfaks field in the North Sea to plug Statoil’s 34/11-2S well. The Aasta Hansteen project, which now consists of five discoveries, is one of the largest developments in Norwegian waters, and is targeting a confirmed resource of 47 bcm, with first production by 2017. Located 300 km from land and outside established infrastructure, the $5.6 billion project will require the construction of the 480-km Polarled pipeline to connect it to the mainland.
Total and Faroe make gas discovery in Norwegian North Sea Faroe Petroleum reported a small gas discovery at a Total-operated licence in the Norwegian North Sea that contains the Shango prospect. Wildcat well 25/6-5 S was drilled to a subsea depth of 2,366 metres, just 7 km east of the Total-operated Skirne producing field in the central North Sea, in production licence 627. It encountered a 10-metre gas column in the Hugin formation with good to very good reservoir quality. It is the first exploration well to be drilled at the licence, which Total was awarded as operator following the 2011 APA round with a 40 percent stake. Project partners include Centrica, Det Norske and Faroe Petroleum, all with 20 percent each. “We are pleased to announce the result of the Skirne East well which, although smaller than predicted, is a promising discovery particularly in light of the nearby Atla field, which was recently developed within the resource range of
the Skirne East discovery,” commented Faroe CEO Graham Stewart. “During the coming months we expect to start drilling the first of two follow-up wells at the significant Pil discovery (Faroe 25%) on the Blink and Boomerang prospects, and also the Bister prospect to follow up on our recent significant Snilehorn discovery located close to the producing Njord field infrastructure. Our Norwegian position is now one of the most significant of any UK independent E&P company and with our robust balance sheet, despite challenging market conditions, the company is set for another exciting year in 2015.” Preliminary calculations estimate a discovery of between 0.4 and 1.5 mcm of gas, falling short of the 4 to 16.5 mcm hoped for, although the find’s convenient location next to the Atla and Skirne producing fields means it could be connected up relatively easily.
Location of successful well
Technip wins subsea contract on Triton FPSO Technip has been awarded a brownfield subsea contract for the Triton floating production storage and offloading (FPSO) vessel, operated by Dana Petroleum, located in the central North Sea. This FPSO vessel is located 193 km east of Aberdeen, at a water depth of about 90 metres. It produces oil and gas from different fields, Bittern, Guillemot West and North West, Clapham, Pict and Saxon, which are tied back to the FPSO vessel. As part of replacement of existing subsea assets, Technip’s scope of work covers project management and engineering, including: installation of two flexible risers; fabrication and installation of one dynamic umbilical riser; removal and recovery of existing assets at the FPSO vessel; and additional installation, repair and maintenance works. Technip’s operating centre in Aberdeen will execute this contract, which is a continuation of similar work successfully completed in 2014.
EVERY MONTH the EDITOR, Jeremy Bowden asks fqm a fact finding question... What is the difference between active and latent failure and what steps should I take to manage them? Hazard Awareness is very important however accident analysis suggests that hand injuries, for example, don’t occur because the victim ‘didn’t know it would hurt’, therefore they were fully aware it was a hazard. The study of such accidents has led to a better understanding of the various elements which are required to come together at the same time in order for them to happen. Although active failures are usually enacted in the ‘here and now’ contributory factors can be imported from recent or on-going personal and organisational events and concerns. These may take the form of distractions or fatigue, which can be enough to distract the individual, both the individual undertaking the task and the supervisor / manager need to have the intelligence to recognise this. Latent failures however develop from ‘…factors that are remote in time and space from the accident (often these will be decisions made by Managers and directors)’ HSG48. Decisions driven by factors such as financial or time constraints can and do have serious downstream effects. Normally generated at a more senior level and separated from the harm event it is sometimes very difficult to understand these ‘Human Factors’ as it may not be the humans we first thought. Unfortunately latent failure incidents generally have a larger organisational impact, and sadly, head count. The solution to both is Situational Awareness training and coaching - the only difference is perspective.
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Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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Trapoil close to collapse Strike edges closer Oil and gas firm Trapoil has warned that it is close to collapse. The company, whose interests in the North Sea include a stake in the Athena field, reported a loss of more than £44 million in the year to the end of December. It said it was “highly likely” that the group would become insolvent unless it secured further funding in the short term. Trapoil blamed its weak finances on the sharp fall in the price of oil. It also blamed adverse weather conditions experienced in the Athena field in the first half of the year and “significant impairment” of some of its licence interests. Trapoil’s only producing asset is its 15 percent share in the Ithacaoperated Athena field. Last month it relinquished its Orchid acreage. Trapoil is now bidding to advance the rest of its exploration portfolio, which includes a well expected to be drilled on the Niobe prospect during the current quarter. But it added that such activities had been “overshadowed by the significant cash outflows currently being incurred in respect of our interest in the producing Athena oil field, principally a reflection of the depressed oil price”.
Offshore contractors are to be balloted on possible industrial action in a row over changes to working conditions. Unite and GMB members of the Offshore Contractor Association (OCA) failed to agree with employers on proposals to alter shift patterns and cut pensions. Several oil and gas firms operating in the North Sea have announced plans to axe jobs and reduce salaries. Unite said “knee jerk cuts to jobs and standards” would undermine “future prosperity and safety” in the industry. Unite industrial officer Tommy Campbell said: “The downturn in oil price has seen our members’ terms and conditions
Going under?
under attack like never before and while the threat of severe cuts hangs over them, contractors are offering no safeguards in return. What we want is for the OCA to work with us to preserve jobs, skills and sustain offshore safety rather than impose these opportunistic, unsustainable and unworkable changes to livelihoods.” “Oil prices will recover but knee jerk cuts to jobs and standards will only undermine the future prosperity and safety of the industry in the long-term.” About 2,500 workers, including electricians, plumbers, mechanics and riggers, will be asked to consider a range of responses, including strike action.
Talisman Energy granted Wood wins contract permission for wildcat with EnQuest The Norwegian Petroleum Directorate has granted Talisman Energy Norge a drilling permit for a wildcat well, 15/12-24 S, which will be drilled from the Maersk Giant drilling facility, just northeast of the Varg field in the central Mearsk Giant at Hirtshals, Denmark
part of the North Sea in production licence 672. Talisman Energy Norge AS is the operator, alongside Ithaca Petroleum, Det Norske Oljeselskap and Fortis Petroleum – all of which have 25 percent each. The area in this licence consists
of parts of blocks 25/12 and 16/10. Production licence 672 was awarded on 8 February 2013 (APA 2012). This is the first exploration well in the licence, but two exploration wells have been drilled previously in the same area.
Wood Group has been awarded a new five year contract from EnQuest to provide engineering, design, construction, procurement and commissioning services to the Thistle, Heather and Northern Producer offshore assets in the North Sea. Enquest said the terms of the contract reflect its ongoing focus on reducing costs and improving the efficiency of its North
Sea offshore operations. Effective immediately, the contract includes extension options for up to a further five years. The contract adds to Wood Group’s scope of work with EnQuest in the North Sea; Wood Group Industrial Services (WGIS) holds a contract to deliver topsides integrity work on the Thistle platform.
offshoreaberdeen.com | May 2015 | Offshore Aberdeen
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NEWS
AziNor Catalyst buys UKCS licence AziNor Catalyst, the exploration and production company backed by Seacrest, reported that it had recently completed the acquisition of licence P.1946, covering block 15/12a, from Stavanger Petroleum, in exchange for undertaking all technical work commitments on the licence. Stavanger has retained a 20 percent option in the licence. Executive Director of AziNor Catalyst Henry Morris said that recently acquired
3-D seismic data has helped the company to improve its understanding of the region’s prospectivity. The deal follows AziNor Catalyst’s strategy of advancing and unlocking the potential of UK plays and prospects through new data and technology. The company said the UK North Sea will continue to be a core area for AziNor Catalyst and it is actively targeting further licence acquisitions in the region.
Decommissioning: Huntington field returns A Dynamic Future to full production E.on’s Huntington oilfield in the UK North Sea has resumed production after access to its Central Area Transmission System (CATS) was restored. The field is located in Block 22/14b in the central North Sea, 205 km east of Aberdeen. Huntington is currently producing an estimated 28,000 boe/d, in line with expectations for the project. Production had been reduced since October 2014 due to export rate restrictions by the CATS pipeline operators, resulting in production being held at 10,000 boe/d. On April 16, e.on’s partners Noreco and Iona Energy suggested further disruption could yet come at Huntington, with production expected to decline naturally throughout 2015, and temporary output reductions in June and July, due to more planned maintenance scheduled for the CATS terminal. “Production levels at the Huntington field will continue to depend on access to the CATS gas receiving terminal,” said Noreco in a statement. The field had been expected to come back on line last December 5, 2014 after a three-month hiatus because of restrictions at the BP-owned infrastructure but the outage was prolonged by an incident with the CATS riser platform.
The continued success of the UK’s oil and gas industry relies upon a mixture of experience and new blood. We need to ensure the vast knowledge accumulated over these past 40 years is passed on during a crossover period to the next generation, ready to take the industry on to its next phase. Safeguarding the future workforce is of particular importance to the UK decommissioning sector. At an aggregate estimated cost in excess of £50 billion over the next 35 years (2014 prices), it is imperative that the next generation of skilled workforce is in place to ensure this activity is undertaken as efficiently and cost-effectively as possible by the UK market. UK decommissioning excellence represents a very real opportunity for specialisation and international competiveness of the UK supply chain (equipment, services and facilities), thus having a significant impact on employment and the broader economy. Emphasising just how important we deem it to plan for a competent future workforce, Decom North Sea recently signed up to the Engineering Construction Industry Training Board’s (ECITB) Skills Charter. The Charter provides public recognition of commitment to skills development, ensuring the long-term competence of the workforce. Signing the Charter signals the start of an important new partnership approach between us, for collaboration across a range of areas that will benefit the decommissioning industry. This collective model has already found success in the offshore industry, helping to ensure skills and training are maintained throughout the sector’s highs and lows. It would be folly not to take this experience and model of portability to ensure an appropriately skilled and qualified workforce is available for decommissioning – right now and moving forward. As well as providing us with an extension of the range of approved training courses and providers available to members, it also provides us with the crucial ability to pioneer new industry standards. For example, we’re working together to develop decommissioning job role profiles within a proven ECITB framework and the first role under development is Decommissioning Engineering Manager. In addition, the ECITB will also support approval of
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. Delegate bookings are now open for May’s Decom Offshore 2015 and June’s training course “An Introduction to Decommissioning - From Planning through Execution”. For further information on both, please visit www.decomnorthsea.com
future training courses for decommissioning, such as the DNS course “Decommissioning – from Planning through to Execution”. Decom North Sea nurtures the skills that are the lifeblood of innovation and decommissioning. At its core is a drive to safely reduce decommissioning costs and reduce the liability for tax payers and future generations. Regular readers of this column will know that Decom North Sea is committed to developing the skills, standards and guidelines that will drive effective and efficient decommissioning activity which will ultimately benefit the environment and the UK tax payer. DNS is working with various key stakeholders including Scottish Enterprise, the OGA, DECC and OGUK. The collaboration with these organisations and most recently with the ECITB - is a great example of how Decom North Sea is raising the profile of decommissioning, whilst safeguarding the future of successful, efficient, cost-effective activity.
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 role 2014, planning is now underway for our 2015 within the UKCS decommissioning market annual event. This event will bringfor together 250+ 2014, planning is now our 2015 in the context of underway maximising economic decommissioning professionals from all tiers250+ of annual event. This event will bring together recovery (of oil and gas) for the UK and is the industry, providing the operators supply decommissioning professionals from and all tiers of theindustry, only solely focused on this chain withorganisation anproviding excellent the opportunity toand engage the operators supply with one chain withanother. an excellent opportunity strategically important sector. to engage The will showcase withEstablished oneevent another. in 2010 the in innovation, response to The event will showcase the innovation, the needs of industry, DNS bring people, within the sector and consider how this ideas the and developments together to within sector and consider how this
improve decommissioning solutions and
faced withexecution the current efficiency. market challenges. project DNS drives faced with the current market challenges.
collaboration for meaningful business benefits for our 250 members drawn SPONSORSHIP AND from operators, major contractors, service
specialists andDETAILS technology developers. FOR FURTHER 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 www.decomnorthsea.com industry, 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.
SPONSORSHIP AND 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.
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CCS: An important piece of the low carbon jigsaw
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ith most of the Carbon Capture and Storage (CCS) projects in Northwest Europe planning to use mature North Sea oil and gas fields as potential storage sites, the technique represents a major opportunity for the offshore sector, and a welcome potential supplement given its declining productivity as an oil and gas province. Supporters claim that what CCS has that other non-nuclear renewables don’t have is scale and consistency. Each project will prevent large quantities of carbon emissions without interruption, which keeps cost per unit of green power low in
Jim Watson, Jim Skea and Myles Allen - CCS in the UK Energy Landscape
comparison to intermittent alternatives such as solar and wind. It’s debatable exactly how green that power is, but the bottom line is CCS keeps most of the CO2 produced out of the atmosphere. Among emission reduction options, there is little doubt that CCS makes economic sense on paper. If it were to be excluded as a green option in the electricity sector globally, the International Energy Agency (IEA) says green investment costs to 2050 would increase by 40 per cent. What’s more CCS is currently the only viable way of dealing with emissions from industrial sources such as steel and cement production – making it an essential element in tackling global warming.
Despite this, the IEA complains that CCS is often not treated with the same supportive policies and funding as other low-carbon technologies, and this means that governments may not be pursuing the least cost route to lower emissions. A partial explanation is high up-front costs. CCS also does nothing to improve energy security, in the same way wind or solar does, and it is unfashionable among environmentalists. The UK has committed to legally-binding emissions reduction targets and CCS is earmarked to meet 7 Gt of the total 42 Gt to 2050 under a least cost scenario. The UK’s Energy Technology Institute estimates a 1 percent per year GDP saving to 2050 as a result of using CCS as opposed to other renewable technology to meet the targets. What’s more the UK’s decision to provide incentives for shale gas development and to push ahead with new gas-fired power plants has knock-on implications for CCS, making it even more important as a part of the country’s binding emissions reduction strategy. The Shell/SSE Peterhead plant, previously written about in this publication, will be the first in the world to sequestrate carbon dioxide from a gas-fired plant (for more details of UK plans please see interview with Aberdeen University’s Dr Vega-Maza on the back page). In the UK the CCS Cost Reduction Task Force (CRTF) predicts the sector will be able to generate electricity at a levelised cost approaching £100/MWh by the early
2020s, and at a cost significantly below £100/MWh soon after. The plan is that this will be done by transforming existing large offshore hydrocarbon gathering structures into CO2 storage clusters (possibly including EOR operations), which would take gas from multiple onshore CO2 emitters through large, shared pipelines, with high usage. “Third party access regulations are based on those of oil and gas in the UK, which is one of the most efficient and competitive regimes in the world. Access to storage is more difficult. The UK is unique in reforming markets to achieve results, which is why the first [EU] power to storage project will be here,” said Dr Goldthorpe, then CCS Program Manager for the UK Crown Estate. The CCS task force also expects capture costs to fall following the first couple of projects, and capital costs to fall as investor confidence in the sector improves. Longer term it expects EOR in some Central North Sea oil fields will further improve economics. “Eventually the central North sea will also be able to offer storage to Europe where paradoxically coal use is on the rise,” said Dr Goldthorpe. Others felt the direction of national environmental policy was as much about economic as environmental policy. “The UK has backed CCS, Germany didn’t. It went for an industrial strategy tailored around solar manufacturing that has been undercut by the Chinese. Our strategy
complements UK strengths in oil and gas engineering, and could provide a home for all the CO2 that the current ramp up in German coal use is creating,” said another senior academic. “Elsewhere carbon projects have proceeded on the basis of synergistic business models, whereas in the UK it is in response to carbon reduction targets enshrined in law, and is simply CCS,” said Dr Goldthorpe, who suggested a carbon tax of $70-100/t would put enough value on UK carbon to ensure its disposal until EOR became easier to work into projects from 2020. Prof Haszeldine of Edinburgh University agreed: “The UK has 3-7 billion barrels of additional oil that could make the [CCS] proposition more attractive”. But lengthy new pipelines will be required and developers are restricted to existing wells due to the prohibitive cost of new deep water wells. “New platforms will likely be needed and system flow management remains an issue”, said Dr Goldthorpe. He added that utilization could help project economics by attaching a value to the CO2: “Using some of the carbon as a raw material or for EOR is welcome to help facilitate storage projects... In some places there is also enhanced gas recovery, injection to assist coal bed methane production and uses in other unconventional hydrocarbon development,” that could also be complementary to CCS.
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Labour challenges coalition over Carbon Capture and Storage
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hile the main national parties are close on most aspects of environmental policy, the Labour party feels the current coalition government has been slow to develop CCS. The Conservative party, however, disputes this strongly, claiming to have pumped £1 billion of public money into research, leading to the development of first ever gas-fired CCS plant in Peterhead. Tom Greatrex told Offshore Aberdeen: “Labour supports Carbon Capture and Storage, which has endured five wasted years under the current Government. In our transition to a decarbonised economy, CCS is a necessity, not an option. But under this Government ambitions have been cut, progress has been stalled and non-competition projects have been left to wither on the vine.” “Labour will develop CFDs for noncompetition projects in parallel with competition projects, make CCS a priority funding area of the Green Investment Bank and give the Oil and Gas Authority the
powers to develop opportunities for CO2 storage and CO2 for Enhanced Oil Recovery.” In response, the Conservative party told Offshore Aberdeen: “We support CCS and are investing in exploring its potential. We have allocated £1 billion of funding
In our transition to a decarbonised economy, CCS is a necessity, not an option.
to support developing technologies to trap carbon emissions released by power stations generating electricity. We’ve provided funding for a carbon capture and storage project at Peterhead, which is set to become the first CCS gas fired power station in the world.” “We’ve also provided funding for the White Rose Project in Yorkshire, which will capture CO2 from a new super-efficient coal fired
power station at the Drax site, to be stored in a saline formation beneath the southern North Sea seabed. CCS could provide carbon dioxide storage for over a fifth of the UK’s electricity in the future. It is estimated that by 2050 CCS plants could supply over 20 per cent of the UK’s electricity, saving more than £30 billion a year. ” In July 2014, Labour set out its plans for the CCS Industry. The party said that by focusing on efficiency and getting costs down the UK has the potential to lead Europe in the commercialisation of CCS, particularly for industrial applications. The party’s Position Paper commits to 5 core principles: • Access to support • Effective financing of new infrastructure • Support for CCS on industrial emissions • Effective environmental regulation • Emphasis on cost reduction
said Brent Delta could be redesigned as part of a new CCS network in the North Sea. Jonny Hazell, senior policy adviser at the group, said this would “lower the cost of decommissioning and help to get CCS up and running sooner and more cost-effectively”. “Shell’s proposed Peterhead CCS
project already incorporates pipeline reuse, showing that it is a viable option,” said Mr Hazel. “To deliver this effectively requires master-planning of the links between potential sources and sinks, and collaboration across the oil and gas sector around the shared use of infrastructure.”
Shells Peterhead CCS project
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Low oil price switches offshore focus to renewable projects R educed activity in the offshore oil and gas sector is leading to a greater focus on renewable projects in the North Sea, helped by lower contractor rates. Other sectors such as decommissioning, coal-seam gas, carbon separation and storage, and even onshore unconventional production are also benefiting from the downturn in offshore oil and gas development. But Aberdeen based companies could end up missing out, particularly in the wind sector, as up to 11,000 MW planned off the east coast MeyGen will eventually total 398MW tidal turbines (Atlantis)
of England shift the centre of gravity of its engineering and support sector south the East Anglia and specifically Great Yarmouth. Nevertheless, a number of offshore renewable projects are making progress in Scotland. In February, for example, construction began on the onshore facilities associated with Atlantis Resources’ MeyGen tidal energy project in Scotland’s Pentland Firth. Crews started work on a 340-metre access road in a preparatory stage that will pave the way for the tidal array, which opens with a 6MW phase with
first power by 2016, and will eventually total 398MW, or enough to power around 200,000 British homes. It is set to be the largest tidal power project of its kind, anywhere in the world. Onsite welfare facilities will also be installed, which will allow for horizontal directional drilling to commence close to the foreshore as well as preparing the ground for the power conversion unit building foundations. MeyGen chief executive Dan Pearson said ABB shared its passion for tidal energy, and brought
expertise established in other renewable energy sectors such as wind and solar. The sharp drop off of drilling activity in the offshore oil and gas industry, has meant engineering and offshore services contractor day rates have come down, improving the economics of such projects, with industry experts reporting likely capex savings of 15-20 percent. “Nobody wants to see a downturn in any industry, but our industry sees direct benefits derived from low oil prices,” said Tim Cornelius, chief executive of tidal power firm Atlantis Resources. He said one of the largest
CAPEX costs is construction vessels, which are the same vessels used by the offshore oil and gas industry. Atlantis said contractors commenced horizontal directional drilling in April at the MeyGen site in Caithness, to create the bores for the cables that will link the onshore site at Ness of Quoys with the four initial sub-sea turbines. Construction work onshore began in January. The UK intends to set up a further six tidal schemes that will generate renewable power from tidal waters flowing in and out of lagoons, four in Wales and one each in Somerset and Cumbria. Together they will eventually be capable of providing up to 8 percent of the UK’s power. New sea walls stretching miles would be constructed at the proposed sites, where the weight of the water will be used to power installed turbines. One site, a £1bln project in Swansea Bay, is already in the planning system and is expected to generate enough power to electrify 155,000 homes. The lagoon would have an installed capacity of between 1,800 and 2,800MW. Developer, Tidal Lagoon Power, is currently in talks with the government about the charges to be fixed for the power supply to customers. The projects would be far cheaper and more productive than the £30bn Severn Barrage scheme which was first turned down by the government in 2010 amid huge opposition from many environmentalists. Power firms increasingly like the idea of tidal energy because, unlike power from the sun and wind, it is predictable.
Credit: Jeff J Mitchell
East Anglia challenges Aberdeen as hub for offshore wind sector
As the supply chain in the East of England prepares to compete for work with developers of the world’s largest wind farm, East Anglia One, to be built off its coast, some industry experts are suggesting that the region will soon become the centre of the offshore wind industry in Britain. Altogether approved projects in the area include 4.7 GW of confirmed projects and another 5.2GW is in planning stages – totalling 11GW of offshore wind projects. Dudgeon and East Anglia Array One are already taking shape alongside the established Greater Gabbard and Sheringham Shoal, with other planning approvals in place for further offshore farms, the long-term prospects also look good for Race Bank and Triton Knoll.
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FOCUS Seven offshore wind farms off the East Anglia coast, totalling 4.6GW, have secured Contracts for Difference under the government’s new wind subsidy regime, including Beatrice, two at Hornsea, Walney
and Burbo Bank, and most recently Neart Na Gaoithe and East Anglia One. There is also 1.7GW that could still be developed under the old Renewable Obligations model. The pipeline of development and
planning consents in the East of England is therefore very strong, attracting companies like Statoil, which has plumped for Great Yarmouth as its wind operations and maintenance hub. As work progresses
more companies are expected to follow suit, possibly creating an offshore wind hub to rival Aberdeen.
Gas from subsea coal deposits another possibility for North Sea
The large coal deposits under the North Sea could provide an alternative gas supply as conventional reservoirs decline, adding to the possible alternative sectors that could develop offshore. Data from seismic tests and boreholes shows that the North Sea seabed contains up to 20 layers of coal, most of which can be reached with the technology already in place to extract offshore oil and gas. Specialist driller, Five-Quarter, has recently obtained a licence for offshore gas work in the North Sea, which it will use to demonstrate technology designed to extract the gas from subsea coal seams. It is targeting an estimated two billion tonnes of coal just off the coast of Northeast England, while a further 3-23 trillion tonnes are thought to lie further out to sea. The exploration scheme is backed by the government, and also involves a new gas plant in Northumberland, to process the flow of hydrocarbons (see diagram). Further north, in Scotland Cluff Natural Resources announced last November that it was seeking permission to build the first
Underground Coal Gasification plant in the UK to process resources from its Kincardine licence in the Firth of Forth, estimated at 1.3 Tcf. Cluff’s CEO, Algy Cluff, said: “The development of UCG at the Kincardine Licence Area would result in the creation of new jobs, help protect existing industry as well as create significant supply chain benefits. The emerging UCG industry has a significant role to play in unlocking the UK’s most abundant indigenous energy resource which, with the imminent closure of the last deep coal mines, is now otherwise effectively beyond reach. The deep offshore UCG projects being undertaken by CNR have significant environmental, safety, and when combined with carbon capture and storage, climate change benefits compared with coal mining and coal-fired power generation. We believe that UCG will help provide a cleaner energy, diversity of supply and energy security for the UK, and we look forward to updating the market on our developments at our Kincardine Licence area with respect to this.” The Kincardine Licence is located in the heavily industrialised region of central Scotland, next to the major Grangemouth petrochemical complex, the Longannet coal-fired power station and a number of other energy-intensive industries which could benefit from a new low cost source of fuel gas and petrochemical feedstock.
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Strike threatens to further undermine UK North Sea’s competitive position Perhaps like the UK’s coal mines in the 1970s, Britain’s offshore oil and gas-fields are not as attractive an investment opportunity as they once were. After producing 42 billion barrels over fifty years, escalating costs and limited exploration opportunities now mean there are an increasing number of more geologically and fiscally attractive locations elsewhere. Any strike action would be likely to reinforce this situation, pushing up the costs and risks of doing business in the UK North Sea. Oil and gas is one of the most international of business sectors, with capital flowing freely across borders. Multinational oil companies assess and compare projects across the globe when they make investment decisions, and strike action would inevitably push UKCS projects further down the list. As well as persuading some companies to move their investment elsewhere, a strike – combined with the current low oil price - could push others into job-shedding mergers or even bankruptcy. So if the strike goes ahead it will inevitably mean lower UK oil and gas production and fewer jobs in the longer term. Bill Murray, chief executive of the Offshore Contractors Association, has already pointed this out: “The need to make efficiencies and increase productivity in order to prevent further redundancies and prolong the life of the North Sea is well understood by the industry following a period of unsustainable cost inflation. Strike action would only serve to make investment in the North Sea less attractive and jeopardise the long-term future of the industry.” On the other hand, if pay and conditions are cut, the labour force is mobile enough to move to where things are better. A survey by recruitment group Oil and Gas People of more than 1,000 North Sea workers showed that more than 70 per cent of UK-based respondents would consider moving overseas, where they believe they will find better job security, conditions and wages. Kevin Forbes, managing director of Oil and Gas People, said: “This is bad news for the UK industry. Only six months ago it was reporting a huge skills shortage.” The two unions involved in the threatened UK action are the GMB and Unite, both of which claim there is massive support among their members – who on average earn just under three times the average UK wage - for the action, despite the massive challenge the sector is facing from low oil prices. The GMB Union said there was “overwhelming support” for
an official strike ballot in a similar vote among its members at the end of March, although it didn’t give an exact figure. Unite said “knee jerk cuts to jobs and standards” would undermine “future prosperity and safety” in the industry. It said 93.5 percent of members covered by the Offshore Contractors Agreement (OCA) were in favour of proceeding to an industrial action ballot, “which could affect operations on nearly every installation across North Sea.” About 2,500 workers, including electricians, plumbers, mechanics and riggers, will be asked to consider a range of options, including strike action. The unions’ main objection is the change to shift patterns from two weeks on and two weeks off, to three weeks on and three weeks off, which they say could affect safety. The GMB claimed that “proper risk assessments and consultation have not taken place and the new rotas will have an adverse impact on member’s safety, health and quality time”. The unions are also objecting to job cuts, which they claim already amount to 10,000 in the offshore sector since the oil price slump. But it is difficult to see how strike action could possibly improve the outlook for employment – quite the reverse, unless public funds are brought in. The unions should perhaps be more honest with their members, and warn them that while action might safeguard current pay and conditions in the short term, it could also help ensure the jobs will not be there for the next generation. The GMB claimed the cuts were “blatant opportunism” on the part of some of the oil companies and contractors. But the challenge facing oil and gas companies is very real – for example, data from insolvency specialists Begbies Traynor, reported in The Telegraph, showed that the number of UK oil and gas businesses experiencing “significant” financial distress increased by 69 percent to 486 in the fourth quarter last year, compared with 288 companies a year earlier. Julie Palmer, partner at Begbies Traynor said: “In the absence of successful consolidation, we expect that as many as fifty companies in the sector face administration in the next eighteen months.” The unions are now putting together an electoral register that is robust enough to withstand any potential legal challenges, a process which could take some time, according to the GMB. In the meantime, the industry will be hoping the unions don’t take offshore oil and gas down the same route that put the final nails in the coffin of UK coal.
Price fall drives natural selection in offshore oil and gas sector
F
alling prices have sparked a round of cost cutting among oil and gas companies, with higher cost, highly leveraged or poorly backed operations increasingly vulnerable to takeover or forced asset sales, as has been seen in last month’s takeover of BG by Shell, and problems affecting the likes of Trapoil and PA Resources. While efficient operators will survive, those in poorer positions may become targets. Companies with uncommitted capital have an opportunity to expand market share and non-industry speculators have a strong entry opportunity, particularly financiers and those interested in distressed debt. Matthew Jurecky, GlobalData’s Head of Oil & Gas Research and Consulting, said: “Voluntary oil production cuts to support oil prices have been ruled out in favour of a brutal process of natural selection to correct the market. The most efficient producers will be left standing as growth slows and companies cut capital budgets and reduce headcounts. Producers are retrenching, focusing capital on maintaining production levels, repaying debt, and paying dividends.
Those with financial obligations greater than cash flows from operations, and especially those that have depended on debt for growth, will become increasingly distressed. These companies will ultimately be forced to either sell assets or seek an outright buyer to avoid bankruptcy.” This could also signal a more general move towards a greater efficiency-focused business approach to development and operation, especially in high cost regions such as the North Sea, possibly involving specialisation and use of new technology designed specifically to cut operating and development costs (see AziNor story on page xx). High prices meant that for many years, cost factors were often outweighed by timeliness, quality of delivery and other considerations. Xcel Sales Ltd, which has a base in Aberdeen, said that capitalising on the opportunities the tighter market presented was an important factor in determining which organisations would emerge in a stronger position when the upturn comes. It recorded a rise in the sector’s sales activity in the last quarter of the 2014/15
financial year as companies increased their efforts to secure new business. “This is a cyclical industry well used to peaks and troughs and for every downturn where large players feel the pinch and look to drive cost efficiencies through their business and the supply chain, it also offers opportunities for smaller, nimbler companies to break through,” said Xcel CEO, Nicola Hartland. “Building a well thought out strategy and plan of execution will result in the positive returns on investment that will allow many small firms to grow during the downturn.” Cost-focused businesses need to concentrate on those activities that add value, and “create the space and capacity to execute more activity for the same or less cost,” according to accountants, PriceWaterhouseCoopers (PwC). Opportunities for low cost operators are likely to pick up, with analysts expecting an increase in takeover and asset acquisition activity, and further consolidation among some companies in the market. Such consolidation would be good for the objectives of the 2014 Wood report, which
Accelerating evolution?
Nicku / Shutterstock.com
Opinion
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FOCUS called for more collaboration between companies in the North Sea in order to develop more marginal fields. One low cost specialist that sees the situation as an opportunity to spread its business model is Oranje-Nassau Energie (ONE). It focuses on developing mature, end of life assets, and recently picked up more equity from Shell and Exxon. Shell said it sold its 25 percent stake in the Sean field to ONE because the asset had entered a phase where it offered more value to other companies than it did for Shell. Similarly, in January Enegi Oil said the downturn in North Sea activity related to the fall in oil price, was an opportunity for it to expand its “marginal field initiative” in the region, using cost saving and mostly unmanned technology.
Budget cuts
Prompted by falling earnings and cash flow, Europe’s biggest oil producers are all cutting capex and attempting to boost output while cutting costs. The six biggest European oil companies – Total, BP, Shell, Eni, Statoil and BG - have trimmed 2015 capital expenditure by around 10 percent each on average this year, amounting to a $14 billion cut from capital spending of $129 billion in 2014, according to news and pricing company, Platts. The capex cuts varied depending on the company, with BG Group, prior to the
news of its takeover, outlining the biggest reduction of 30 percent. Shell said it would cut spending by $15 billion over the next three years, which chief executive Ben van Beurden said would equate to delaying or cancelling 40 projects, although capex in 2015 will be little changed from the previous year. Provided cash reserves are sufficient companies with a long term view of oil markets, like Shell, are continuing to maintain spending. One of the benefits of the falling oil price is that costs also come down. PwC called on the sector as a whole to make sustainable cost reductions in North Sea CAPEX projects, currently valued at over £39 billion. OPEX costs, improved cash management and redefining the way projects are delivered are also areas of potential savings, including improved decision making, reducing over-runs, streamlining the supply chain and improving collaboration. “Operators have the power to effect change and the low oil price could be the catalyst needed to change attitudes and approaches”, said PwC. After capex the big short-term opportunity now lies in increasing operational efficiency. This can be enhanced by revolutionary new technologies, new approaches to maximizing recovery, tactics to reduce downtime and a fresh look at ensuring the integrity of existing structures. Efforts will focus on several areas, according to consultants, Upstream
Intel. These include: • Developing structural integrity management (SIM) – incorporating an RP2SIM strategy to mitigate external events and integrate risk- orientated approach to age management • Ensuring well integrity – defining an integrated and data-driven approach for well integrity governance, enhanced production and continued compliance • Enhancing deepwater well recovery – developing integrated production optimization strategies to maximize output and increase recovery from existing wells • Utilizing data-driven production optimization strategies – implementing, managing and analysing data effectively to maximize recovery rate and increase operational efficiency • Revolutionizing flow assurance – enhancing flow assurance strategies and operating systems architecture to guarantee flow, reduce operational costs and maximize production economics • Cultivating subsea processing capabilities – ensuring the reliability of subsea production facilities to improve oil recovery across existing wells and head for deeper waters
Xcel Sales CEO, Nicola Hartland
Big Pumps
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Long Pumps
Short Pumps
Vertical Pumps
PD Pumps
Centrif Pumps
AOD Pumps
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29/01/2015 10:58:03
Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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INFORMED
Aberdeen SPE appoints new chairman The Society of Petroleum Engineers (SPE) Aberdeen Section has appointed Shankar Bhukya as its new chairman, taking over from Ross Lowdon who has stepped down due to re-location to Houston. Beginning his career as regional applications engineer at Smith Services in Aberdeen, Mr. Bhukya has more than eight years’ oil and gas industry experience and is currently technical marketing engineer at National Oilwell Varco (NOV) for Europe and Sub-Sahara African region. Mr Bhukya is mechanical engineer by qualification. Mr. Bhukya said: “SPE Aberdeen is a fantastic, thriving section which I am proud to be part of. After receiving the SPE International President’s Award for Section Excellence for the fifth consecutive year in 2014, I feel extremely privileged to have been selected as chair of the Aberdeen Section.” “SPE Aberdeen has made great strides in recent years towards supporting industry collaboration and I hope to continue this through the many exciting events and initiatives the SPE Aberdeen Section has
planned.” Mr. Bhukya continued: “One of SPE Aberdeen’s top priorities is supporting the future workforce by providing a link between university and industry. Through my role in SPE Aberdeen’s Student Development Committee, I have seen the importance of encouraging students to pursue a career in the oil and gas industry. Allowing young people the opportunity to develop their skills through our organised events and workshops will enable SPE Aberdeen to continue to do this. “Helping to shape students’ careers, coupled with the commitment of SPE’s volunteers, is what has attracted me to SPE Aberdeen. I look forward to working with the volunteers to build upon the Section’s success and continue its important role in the oil and gas industry.” SPE is an international organisation, with thousands of members in the UK, each of whom is affiliated to one of three UK sections in Aberdeen, London and Great Yarmouth. Aberdeen is the largest of these sections with over 2,500 members.
New SPE Aberdeen Chairman Shankar Bhukya
3sun Group acquires AID Industrial 3sun Group, a specialist provider of products and services to the global energy industry, has acquired AID Industrial; experts in Industrial Rope Access, Work at Height and Global Wind Organisation safety courses. Great Yarmouth-based AID Industrial has a strong track record in providing world-class training to clients throughout Europe, North America, Africa and Asia and is one of the largest independent equipment suppliers in the East of England.
Home Secretary, Theresa May, meets 3sun Group employees
It offers a complete range of equipment to suit industry needs including fall arrest, work restraint and work positioning. 3sun Group is headquartered in Great Yarmouth, and since 2013 has had a facility in Gourdon, Aberdeenshire, specialising in the construction and maintenance of subsea controls systems. This recently refurbished site hosts 20 employees and is comprised nearly 4,000 square feet of office space alongside 6,000 square feet of specialist workshop and storage space.
The acquisition reflects 3sun Group’s commitment to offer complementary capabilities to the renewable energy and oil and gas sectors, and follows its recent expansion into the European market through its Danish office opening. The amalgamation also expands 3sun Group’s expertise in the supply of PPE, encompassing a full range of equipment across multiple areas of the industry including Rope Access, Working at Height and Confined Space.
Commenting on the recent acquisition, 3sun Group CEO Graham Hacon said: “This is a significant acquisition for 3sun Group and is aligned to our ambitious growth strategy for the next five years. AID Industrial holds the same family values as 3sun Group, offering customers safe, reliable and cost effective delivery of its projects and services. “Rope access and working at height are key competencies required of our technicians. Bringing this training expertise in-house to our 3sun Academy
allows us tighter control over costs, which ultimately benefits our clients.” Since its inception in 2007, 3sun Group has grown rapidly to now employ over 300 people across five divisions, and has earned a global reputation for resolving some of the key energy engineering challenges facing the energy sector. Its acquisition of AID Industrial marks a successful first quarter of the year for the Group, following major contract wins and a £10million investment from the Business Growth Fund.
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INFORMED
Trio of appointments at Aberdeen’s Semco Maritime International contracting and engineering company Semco Maritime has strengthened its Aberdeen team with three new appointments. Brian Donaldson takes up the role of business development manager, with Colin Stewart and Gustav Ferrao appointed as assistant accountant and senior systems engineer respectively. The appointments come as Semco Maritime marks its third year in Aberdeen. The company handles major oil and gas, wind and rig projects in the UK as a turnkey contractor, providing a range of integrated services including the design, fabrication and maintenance of assets. Its Aberdeen facility offers particular expertise in the design, manufacture and installation of costeffective, technology-driven mechanical, electrical, instrumentation, control and automation, and telecommunications (MEICAT) solutions. An experienced business development manager, Brian has worked in the energy industry for 19 years. He is a qualified mechanical engineer and a member of the Institute of Measurement & Control. “It is exciting to join Semco Maritime’s team at this important phase in the company’s development,” said Brian. “Since establishing a presence in Aberdeen three years ago, Semco Maritime has enjoyed considerable success in the north-east.
It is my intention to develop this strong track record as there is undoubtedly scope for further market penetration, given the breadth and depth of our service offering.” Derek Cook, managing director of Semco Maritime Ltd, said: “While we retain our MEICAT expertise here in Aberdeen, our wider capabilities and resources as part of a global organisation are gaining increasing recognition. Our £5 million rig refurbishment base in Invergordon has enjoyed a successful initial year, with several important orders completed over the past 12 months. “Brian’s drive and experience will be invaluable to the business as we continue to bring Semco Maritime’s range of services to the attention of the UK marketplace. Our engineering and finance divisions will also benefit from the skills that Gustav and Colin bring to their new roles.” Semco Maritime established its first offshore business unit in Esbjerg, Denmark, in 1980 and now operates additional bases in Norway, the UK and Singapore. Semco Maritime’s Aberdeen facility employs 50 people and offers particular expertise in the design, manufacture and installation of MEICAT solutions. In January 2014 it signed a partnership agreement with Cromarty Firth Port Authority to establish a £5million rig refurbishment base at Invergordon.
Hydro Group and EnerMech join forces to develop new product innovation Subsea cable and connector specialist Hydro Group has teamed up with mechanical engineering group EnerMech to launch an innovative new product offering in Aberdeen. In response to significant customer demand, Hydro Group and EnerMech have combined expertise to deliver a new hydraulics hose product, offering lay-up and over-sheathing of hydraulic hoses for use in umbilical, topside and well intervention projects in the oil and gas industry. The partnership could generate in the region of £500,000 in the next 12 months. Graham Wilkie, Sales Director at Hydro Group said: “The new hose bundles offer significant benefits to installers and users for flying lead, workover umbilicals, well intervention, Topside and BOP control and injection systems. The bundles also allow greater versatility when faced with awkward routing or high dynamic usage, and may incorporate strength members such as aramid braiding, steel wire central ropes and aramid central ropes to the customer’s specification.” EnerMech supplies a broad range of mechanical services to the international energy industry and has a 40 year heritage in hydraulic services including engineering and design, hydraulic component supply
and hose integrity management. Gary McRobb, EnerMech Business Development Manager, said: “Innovation and offering integrated solutions for our global clients is a central tenet of everything we do at EnerMech. Together with Hydro Cables Systems we are able to provide full engineering support, sourcing and supplying hoses, including high specification hoses such as High Collapse Resistance (HCR), and can also supply fully fitted, flushed and pressure-tested umbilicals which can also be deployed onto a reeler at the customer’s request.” Further expanding the product offering and several recent increases to capabilities has meant the creation of new jobs for Hydro Group. Staff numbers at the firm’s Aberdeen base rose to over 100 for the first time this year and projected turnover for 2015 is predicted to rise by 12% from £9million thanks to increased development of new and existing markets. Hydro Group has seen a period of significant investment in new machinery, with this new capability allowing the company to extrude up to 120mm diameter over composite bundles or single hoses. Final produced lengths can be supplied from 50 to 2000 metres depending on the size of hose, number of components and the finished diameter of the umbilical.
Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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INFORMED
Rod Buchan appointed chairman at IMES Group. Rod Buchan has been appointed executive chairman at IMES Group, bringing with him more than 30 years’ experience in the oil and gas sector, including five years as managing director of Aker Offshore Partner in Aberdeen. In 2013, he established his own management company to advise oil and gas clients on their growth and other strategic issues. IMES, which has six operational locations in the UK and one in the United States, is a leading marine and subsea business, providing inspection, monitoring and engineering solutions to the global energy, defence and industrial markets. Rod Buchan said: “There is huge potential to grow the IMES business by bringing its in-house expertise and capabilities to the
wider market, not just in the UK but further afield, in particular the United States.” Rod is a Fellow of the ACCA and holds a Master’s Degree in Construction Law and Arbitration. He has a long association with the Leadership Team of Step Change in Safety, having co-chaired the Competence Steering Group. Previously he was a director of industry body LOGIC, vice-chair of the Offshore Contractors Association and an ambassador for OPITO. IMES, which has a team of 70 across its seven operations, is an independent specialist provider of lifting and inspection services, wire rope management, engineering and design consultancy and bespoke load measurement products, ensuring safe operation of cranes, lifting gear and other specialised structures.
Is it time for rotators to come out of the shadows? Working in the shadows, outside of the system and following the dollar from one location to another, rotators play a vital and yet almost hidden part in the oil and gas industry. But significant changes are on the horizon. Working on short assignments – perhaps two months on, two months off – many rotators currently live a nomadic lifestyle and despite being well paid have traditionally enjoyed few of the benefits other employees take for granted. Rotational workers, or rotators, is the name given to workers who regularly work in another country, typically on a fixed schedule such as 28 days on followed by 28 days off – so they ‘rotate’ between home and work. It is particularly prevalent in the oil and gas industry where rotators are used primarily offshore on exploration and extraction projects in a variety of roles. But the principle is replicated across many industries. The benefit for employers is that skilled rotators can be recruited quickly and for short periods of time to work on specific projects. Often in the past nobody took responsibility for where - or even if - they paid tax. There have been no pensions, no careers advice or help with acclimatisation. In fact the system seemed perfectly designed to keep them ‘off the books’. For some, of course, that system still works - and the money and freedom on offer is enough of an incentive to make an alternative way of working seem attractive. But in many multi-nationals across several industries, in pharmaceuticals and engineering as well as on oil rigs, there is a real sense that changes are in the air. Young people entering the workforce these days have a different attitude – they demand international travel as part of their development and are far more relaxed about working abroad. So suddenly multi-nationals are seeing rotator work very differently. Some of our clients in the United States, for instance, are using rotator opportunities as a way to uncover talent – sending high potential employees on a series of shortterm assignments to key locations as part of their development.
In future, opportunities on rigs and on engineering projects could be offered to those on the high potential track or as part of normal talent development for the graduate programme. And most importantly they will be treated as employees not as nomadic workers who are somehow out of the system. Crown World Mobility recently held a seminar on rotators in Aberdeen; and what was interesting was that the issues that drew the most debate were about what could be done to bring rotators into the system and how to aid retention. We discussed mentoring programmes, for instance, using older rotators to help younger recruits. There was a real change in focus. It’s a world that until now not many have talked about; and as a result rotators have traditionally had little incentive to show
loyalty. It wouldn’t be unusual for a rotator to arrive at the airport for a job, be offered more money to go elsewhere and simply disappear. In fact, a Deloitte survey in 2013 revealed that 44 per cent of respondents said the most common cause of failed rotational assignments was losing talent to competitors during a project. The challenge now may be how to keep those same people on board as the environment changes. Future rotators will want far more from their employer – more perks, more services, tax equalisation, help with travel and acclimatisation. They will want universal benefits. The rotator of 2017 may well be younger too, more educated, less willing to live in the shadows. It looks like things cannot stay the same…
OGA’s Andy Samuel to be keynote speaker at Oil & Gas UK Annual Conference in June Andy Samuel, Oil and Gas Authority (OGA) chief executive, will be speaking at Oil & Gas UK’s second Annual Conference in Aberdeen, which runs from 17 to 18 June 2015. The conference will take a unique look at the challenges and opportunities that face the industry, offering key insights into the solutions that will help the UK oil and gas industry maximise economic recovery over the coming decades. Oil & Gas UK’s chief executive, Malcolm Webb, said: “For many businesses in this industry times remain tough, our members are
telling us that there has never been a more important time to network and to share ideas through collaboration. It’s in that spirit I’m delighted to note that Oil & Gas UK plans to hold its second Annual Conference. “Just over a year ago Sir Ian Wood delivered game-changing proposals for radical reform of industry regulation. There is, I believe, cross party and industry alignment on the need for full implementation of the Wood Report, including the full establishment of the Oil and Gas Authority, which we are pleased to see, under Andy Samuel’s leadership,
is proceeding well. “The recent Budget laid strong foundations for the regeneration of the UK North Sea. It was the outcome of Government, regulator and industry collaboration for the benefit of all parties – a culture which I am sure Andy Samuel will strengthen further through his leadership of the OGA. Industry greatly looks forward to his speech in June.” The conference will take place at the Aberdeen Exhibition and Conference Centre from 17 to 18 June 2015. Under the theme of Maximising Economic Recovery from the UK Continental Shelf,
it is titled: ‘MER UK: The Next 40 Years’ and will aim to highlight, define and debate the critically important issues facing upstream petroleum exploration and development on the UK Continental Shelf. Malcolm Webb added: “The UK’s offshore
oil and gas industry is undoubtedly a major national asset. Our indigenous resources are a valuable prize offering energy security and we have unsurpassed technical capabilities in Aberdeenshire and throughout the country.”
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INFORMED Jee secures six-figure subsea integrity Acona UK completes twowell campaign for Perenco management contract with E.ON E&P Jee Ltd, a leading independent multidiscipline subsea engineering and training firm, has secured a six figure contract with E.ON Exploration and Production (E.ON E&P), to deliver subsea integrity management and engineering services for its North Sea assets. The three year contract, which was awarded in March 2015, involves Jee supporting E.ON E&P’s Subsea Technical Authority, by providing annual integrity management services for its subsea assets. The scope of work includes flowlines, risers, umbilicals and structures on EON E&P’s Huntington, Babbage, Hunter/Rita and Johnston assets. Vivek Chhabra, Senior Engineer at Jee Ltd, said: “This is a significant contract win for Jee, with the scope of work involved reinforcing our integrity management and engineering reputation and capabilities. “Effective integrity management can lead to significant cost saving potential for companies by minimising operational interruptions and reducing downtime. At a time when cost saving is so imperative to the industry, and as subsea assets are maturing and reaching the end of their design lives, good integrity management has never been more important. “We are delighted to be working with the E.ON E&P team, and believe our
experience positions us perfectly to support this project. We look forward to strengthening our relations with E.ON E&P now and into the future, by successfully delivering optimum engineering services for the company,” concluded Mr Chhabra. Jee is an independent subsea
engineering and training company with offices in Aberdeen, London and Tonbridge. Jee’s multi-disciplined capabilities and integrated services cover the spectrum of subsea engineering for the whole life-of-field for the global oil, gas and renewables industries.
Well drilling and management
specialists Acona UK have completed a two-well campaign for Perenco UK in the Southern North Sea. The sevenmonth campaign, using the Transocean GSF Monarch, drilled a subsea well on the Leman field (Quad 53) and a platform well on the Hoton field (Quad 48). Drilling started in July and came to an end in March. The campaign operations were managed by Acona UK Drilling Superintendents Donald MacArthur and Jonathan Speed Andrews, reporting to the Perenco UK Drilling Manager, and involved a total of 12 Acona UK staff. Acona UK has offices in Aberdeen and Great Yarmouth and employs about 50 staff in the UK with 400 in the Acona Group based in Stavanger, Norway. On this campaign, the integrated well delivery team contained both Perenco and Acona personnel and drilled 4000ft of reservoir, overcoming such challenges as salt sticking and fracture losses. Mr MacArthur said: “The integration of Perenco and Acona personnel created a high quality team, delivering two producing wells in challenging fields with excellent operational and safety performance.” This is the second
campaign Acona UK has managed for Perenco, the first delivered wells on the Tyne and Inde fields in 2012. Acona UK has drilled more than 50 complex wells on a full well management basis for international oil & gas companies and completed front-line engineering on 200, drilling or standalone abandonment of 50 offshore wells for a client list including Gaz de France Britain, Tullow Oil UK, RWE-Dea U, Centrica (HRL) Ltd, EOG Resources United Kingdom, Star Energy and Bridge Energy UK. The company has driven more than $1bn of business since 2005 in its portfolio of exploration, subsea and horizontal wells and complex well abandonments. Acona UK managing director Douglas Nunn said: “We deliver the best in drilling performance plus have a safety and environmental record that is second to none.” Acona UK’s expertise covers the complete lifecycle of oil and gas wells and operated as a drilling department for operators to hire. Mr Nunn has a “healthy aversion to gold plating” focusing on high quality cost effective projects that offer clients value for money.
Drilling superintendent Donald MacArthur (left), one of the managers of AconaUK’s Perenco campaign, with managing director Douglas Nunn, (centre), and commercial manager Paul Collins.
Olympic Bibby officially christened at ceremony in Norway
On Thursday 9 April, the official naming ceremony took place for IRM (Inspection Repair and Maintenance) light construction vessel the Olympic Bibby, at the Kleven Shipyard, Norway. The ceremony saw the vessel’s official Godmother Mrs Connie Brown, wife of recently appointed Chairman of Bibby Offshore Mike Brown, christening the NORSOK compliant, 4,500 tonne vessel in front of a crowd of 250. Bibby Offshore, leading provider of subsea installation services to the offshore oil and gas industry, signed a charter agreement with Olympic Shipping in March 2014 for the newly built Olympic Bibby. The agreement for the subsea
support vessel is for a three year period, with options to extend for an additional two years. Howard Woodcock, Chief Executive of Bibby Offshore, commented: “Norway is a very important marketplace for us, and we are dedicated to expanding our presence and existing services in line with regional industry demand. The Olympic Bibby is a cost efficient vessel with capabilities that will help us achieve these objectives by further aligning the business going forward during the current environment.” Arne Lier, Managing Director of Bibby Offshore AS, said: “We aim to further grow our capacity and presence in Norway by providing a superior service for our clients.
Offshore Aberdeen | May 2015 | offshoreaberdeen.com
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INFORMED
RMEC kits out charitable team ahead of Kenyan marathon A FORFAR-based oilfield services company has helped a team of marathon runners take part in a gruelling allterrain fundraising race to raise money for impoverished children in East Africa. The joint team, made up of runners from the north east of Scotland and Kenya, were kitted out with top quality athletic kits by RMEC Ltd ahead of the gruelling Rift Valley Marathon which pits competitors against rugged terrain and temperatures of up to 27°C. The 22-strong line-up called ‘The Kenya 22’ ran in aid of the Gathimba Edwards Foundation. The charity currently helps over 170 Kenyan children living in poverty across the Karatina, Iten, Chaka and Kitale regions of the country. The organisation was originally set up to support the Pavilion Village home for children abandoned or orphaned due to HIV and AIDS. After visiting some of the children they were raising funds for, the runners embarked on the race which took them through the rural villages near the town of Eldoret, climbing the tough territory used by some of the country’s best-known distance runners during training. “One of our employees made us aware of the work carried out by the Gathimba Edwards Foundation and we wanted to
provide practical support to the Kenya 22 ahead of their extraordinary marathon challenge,” said Bryan Fagan, managing director of RMEC. “It’s fantastic that as well as raising sponsorship and running the marathon, the group took the time to travel around the country to see first-hand how the work the charity does is making a difference to people in these communities. “We’re a small company headquartered
in a rural area and could see the synergies with our business. Giving back to our local community is very important to us and we are pleased to have been able to support this initiative and spread that goodwill further afield.” The charity was founded by Scottish athlete Myles Edwards and Kenyan Olympic runner Gideon Gathimba after the two met at the opening of the Aberdeen Sports Village in 2009.
Quartzelec looks to expand in Aberdeen While parts of the Aberdeen based oil and gas industry has experienced mixed fortunes over recent years, Quartzelec, a leading international and independent electrical engineering group, has gone from strength to strength and is now looking to continue its local expansion and recruit 10 more skilled electrical engineers and staff over the coming months to help meet its growing customer order book. “There is a vast array of project critical electrical machines used right across the sector and keeping everything operational is a massive, ongoing task. We’ve invested heavily in our local workforce over recent years, with the seven staff that joined us since the autumn taking the Aberdeen operation to 50; and we’re still actively recruiting,” stated Jamie Burns, the local General Manager who took on the role nine months ago. “Both our marine and rotating machines businesses have seen a strong and consistent 25 per cent growth in orders over the past five years and we are also looking to open additional offices on the west coast and elsewhere in Scotland to service demand.” As oil, gas and marine companies have endeavoured to minimise costs they have increasingly realised that the
time and cost to fabricate and install a replacement electrical machine is often far more expensive and time consuming than preventative maintenance or implementing an effective repair. This has led to a significant rise in the volume of service and repair contracts being awarded to Quartzelec. The cost of this work can be just the matter of a few hundred pounds while it’s possible for some to exceed a million – but in each case the customer ultimately has less down time and can be more competitive when delivering their products or services.
Aberdeen’s ROVOP announces new Houston regional HQ and three senior appointments Due to an increased demand for its services globally, independent subsea Remotely Operated Vehicle (ROV) services provider, ROVOP, has established a Western Hemisphere headquarters and support base in Houston, as well as appointing three highly-regarded ROV industry professionals to lead the business.
“The management team in Houston recogniSe ROVOP’s ability to set a new benchmark in the Gulf of Mexico. We are delighted to have them on board.”
Scott Wagner, Brett “Gonzo” Eychner and Wayne Betts bring a combined total of more than 100 years’ global experience in the ROV services sector to ROVOP. They join an established management team and
staff of 130 based in Aberdeen, Scotland, who have developed ROVOP into a leading player in the ROV field. The company’s client portfolio includes oil & gas, offshore wind and telecommunications companies, with an enviable track record of successfully delivering high-profile projects in more than a dozen countries. Mark Vorenkamp, chairman of ROVOP, said: “The management team in Houston recogniSe ROVOP’s ability to set a new benchmark in the Gulf of Mexico. We are delighted to have them on board.” Scott Wagner, ROVOP Houston managing director, said: “ROVOP has an impressive track record and has proven itself to be a dynamic and agile business, capable of setting new standards in safety, cost and reliability. “The recent mobilisation of two Schilling Ultra-Heavy Duty (UHD) Generation III ROVs, capable of closing a blow out preventer (BOP) within 45 seconds to meet American Petroleum Institute (API) requirements, illustrates ROVOP’s commitment to supporting clients with industry leading technology in the Gulf of Mexico.”
Brett “Gonzo” Eychner, Steven Gray (ROVOP managing director), Mark Vorenkamp and Scott Wagner
offshoreaberdeen.com | May 2015 | Offshore Aberdeen
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INFORMED
ADIL expands Accelerated North-east firm Conceptual Engineering services strengthens team with key appointment Independent energy consultancy ADIL has invested in growing its Accelerated Conceptual Engineering (ACE) capabilities to help the global oil and gas industry more quickly and efficiently evaluate options for field and area developments. The Aberdeen-headquartered company, which works with exploration and production companies around the world to progress projects to sanction and final delivery, has invested a five figure sum in the development. ACE combines ADIL’s broad experience and expertise with industry proven software to enable operators to make cost-effective evaluation of options during the appraisal and select phases of developments. The process creates optimum wells and facilities configurations and phasing for alternative development and export options, taking account of the forecast range of reserves outcomes. It integrates subsurface, drilling, process, commercial and operations requirements to define all aspects of a development option through field life, delivering capital, operational and abandonment expenditure costs for the options in line with the project maturity. This enables reliable comparative economic evaluation to be undertaken and informed, auditable decisions to be made. “There are significant opportunities out
there but now more than ever, operators need a reliable, efficient process and toolset to ensure their developments progress through stage gates and that the best solution is selected,” said managing director James Paton. An independent consultancy focused on providing state of the art development and operations management support to the
energy industry, ADIL has upwards of 190 staff at offices in Aberdeen and London. “We have steadily invested in expanding our company both in terms of our people and our capabilities in line with market needs in the last 12 months and have found demand for our services continues to rise among smaller, independent operators,” added Mr Paton. Scottish Enterprise chief executive, Lena Wilson, welcomes Raptor R&D
A leading North-east marine equipment specialist has lifted its team with a key appointment, as it continues to experience significant growth. Motive Offshore Group, which was established in 2010, has recently strengthened its management team, appointing Steven Simpson as sales manager who will be primarily based at the firm’s Aberdeen sales office. Mr Simpson brings more than 10 years of experience to the role, previously holding a number of business development positions within the oil and gas industry. He will be focused on developing key accounts
with existing and potential clients, and implementing strategic sales plans to drive and expand the business in the home market and internationally. Motive Offshore Group is one of the leading marine equipment specialists in the industry, specialising in high capacity winches, umbilical deployment equipment and specialised subsea equipment. The firm recently restructured and now has two key operating companies, Motive Engineering and Motive Rentals and more than 100 employees across its three bases in Aberdeenshire, Aberdeen and Norway.
iSURVEY Group celebrates growth with new office launch iSURVEY Group, a leading provider of survey and positioning services to the global oil and gas and telecommunications sectors, has marked a successful first year for its UK division with the launch of a new office in Aberdeenshire. Since an initial £500,000 investment in early 2014 to set up UK-based iSURVEY Offshore Limited, a number of new appointments have taken onshore staff numbers to six, in addition to a further 20 personnel who are mobilised to offshore projects for the UK entity. In line with the company’s growth strategy, it is expected that another three onshore staff, and as many as 10 offshore, will be recruited to the team during 2015. iSURVEY Offshore Ltd also announced a number of contract wins throughout the last year with major operators including Bibby Offshore and Jumbo Offshore. A profitable first year in 2014 accumulated revenue in excess of £2million, and external sales £300,000 ahead of budget. iSURVEY Offshore Ltd managing director, Andrew McMurtrie, said: “We continue to build on our reputation as a leading provider of high quality survey and positioning services, and our UK division has picked up real momentum since its launch in January 2014.
“Testament to this is that business has grown, and staff numbers have increased to such a level that new premises were required within one year. The additional capacity our new facility provides will be instrumental to our growth over the coming months. Building on this, we expect that another move to larger premises will be required within the next 12 months. This will allow us to capitalise on increasing business enquiries and add to our personnel as we embark on our growth plans for the future.” iSURVEY will be holding an open day on 11 May at its Banchory premises, where invited guests will hear about the company’s exciting future expansion plans and view the new facilities. This includes an onsite workshop, storage yard and offices. Mr McMurtrie continued: “The team is delighted to be welcoming guests to our new premises. Our successful first year would not have been achieved without the support of our clients and key suppliers, and we look forward to marking this milestone with them.” iSURVEY Offshore Ltd is part of the Norway-based iSURVEY Group, which also has a busy operational base established in Singapore.
iSURVEY Group’s new Aberdeenshire premises
| May 2015 | offshoreaberdeen.com
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INTERVIEW economy, creating an innovative methodology with a cross-disciplinary approach, and contributing to the environmental sustainability.
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Who makes up your team? It is a team with 36 academics from eight disciplines, overarching all aspects of CCS, from capture engineering and offshore storage to social perceptions, law and petroleum economics. The group joined as full partner status the Scottish Carbon Capture and Storage Centre SCCS, a worldwide leading CCS research community. Heriot-Watt, University of Edinburgh and British Geological Survey are founders and partners. Strathclyde has also joined SCCS.
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How are plans progressing for CCS in the UK? – Have there been any practical or technical problems of note? The plans are going well. There are no problems, but research is advancing towards optimised systems. The industry should be encouraged with real action, including better legal and regulatory definition from government at all levels.
Dr David Vega-Maza is currently the Carbon Capture and Storage (CCS) group champion at Aberdeen University, and a member of the Scottish Carbon Capture and Storage (SCCS) directorate. His research portfolio at the University of Aberdeen aims to develop new models and measuring technologies in order to gain fundamental knowledge, reduce uncertainties and engage in cross-cutting activities in CCS as a climate change mitigation technology.
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Beyond the first two projects, what comes next, and is there a master long term plan for the sector in the North Sea? Other pending projects include the Teesvalley Collective, which captures carbon dioxide from industry, and £4.2 million project known as Caledonian Clean Energy, which could also link in with an industrial cluster. The UK government is examining options for demonstration projects for phase two CCS projects. These are likely to require a greatly reduced or even zero capital subsidy, making CCS a very competitive option for reducing carbon emissions. Industrial capture is being looked at more now, rather than just carbon capture from power production - clusters are the way forward.
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Why is CCS research and development focused on Aberdeen? Aberdeen is a perfect environment for developing carbon capture, utilisation and storage (CCUS) in the UK. There is a cluster of high-technology offshore engineering companies, an experienced and qualified work force, and a very active research community engaging with all the stakeholders. What is the role of the university in the sector? The University of Aberdeen carries out novel research with an inter-disciplinary group focused on CCUS activities, aligned with the University strategic objective for having academic, economical and societal impact, enhancing the knowledge
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Will a higher ETS (Emissions Trading Scheme) carbon price help? Does the need for new pipelines or even platforms make some projects less viable (if so are there not cheaper options)? As already mentioned, costs are falling. However, a higher European ETS carbon price would clearly be a great help, but it is essential that both the CCS strike price and Contract for Difference are set to allow institutional funding of CCS to begin. This will drive costs down and as developers see the clear benefits the risk profile associated with investing in CCS will be reduced.
During his career, Dr Vega-Maza worked at the Shell and Qatar CCS research group at Imperial College London, where he carried out experimental work measuring thermo-physical properties of CO2-fluid mixtures under capture and storage conditions. He gained his research experience to date in the fields of experimental thermodynamics (including calorimetry and phase behaviour), fundamental measurement science (including acoustic techniques for gas properties and new standards in temperature and humidity), and in power plants analysis and simulation.
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How can the UK power/emissions market be redesigned to encourage CCS? This could be done by creating a CCS obligation similar to the exiting renewables obligation that has been in force for quite some time. This would then allow CCS to compete on an equal footing with other low carbon technologies.
What are the important stages to CCS (capture, transport and storage) and how are their relative costs developing? Primarily, it is the legal and regulatory liabilities that need to be defined around each stage of the process. Relative costs are not an issue – as we mentioned costs are coming down and capital subsidies may not be needed in phase two projects. Primarily, it is the legal and regulatory liabilities that need to be defined around each stage of the process. Relative costs are not an issue – as we mentioned costs are coming down and capital subsidies may not be needed in phase two projects.
QUICK CROSSWORD ACROSS DOWN 7 Textiles; materials (7) 1 Classic rice dish from Spain (6) 8 Energy-producing device with rotors 2 Thumb-tack for fastening papers (7, 3) driven by steam, gas, water, etc. (7) 3 Sailing ship with two or more masts (8) 10 Vent (eg. on whale’s head) for releasing air (4-4) 4 Oil-producing country in Gulf of Persia (6) 11 Street; road; thoroughfare (6) 5 Capable; competent (4) 12 Artillery piece used to fire projectiles (6) 6 Offended (8) 13 Removes; withdraws; takes out; mines (8) 9 Get worse; go downhill (11) 15 Large North Sea reservoir of natural resources (5, 8) 14 Alterations; changes; clauses (10) 17 Someone who sets a trap or ambush (8) 15 Peak; summit; highest point (8) 19 Item with rungs for climbing or descending (6) 16 Glowing fibre in light-bulb (8) 21 Crazed hound; nickname of ex-dictator Gaddafi (3, 3) 18 Oil-platform worker, or specialist in moving heavy materials (6) 23 Heat-treated to maximize toughness (of iron, etc.) (8) 20 City in Devon (6) 24 Truck or lorry with low base and no sides or roof (7) 22 Information; figures; statistics (4) 25 Tied (of string, cord, rope, shoelace, etc.) (7)
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Across: 7 fabrics 8 turbine 10 blow-hole 11 avenue 12 cannon 13 extracts 15 Piper Oilfield 17 ensnarer 19 ladder 21 mad dog 23 tempered 24 flatbed 25 knotted Down: 1 paella 2 drawing pin 3 schooner 4 Kuwait 5 able 6 insulted 9 deteriorate 14 amendments 15 pinnacle 16 filament 18 rigger 20 Exeter 22 data
Interview with Dr David Vega-Maza CCS champion at Aberdeen University.
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Is offshore CCS under pressure from the rising risk of accelerated decommissioning of offshore infrastructure? – How reliant is CCS on re-using existing infrastructure? The finite life of assets is a problem for CCS, as the window for using existing infrastructure to help mitigate CCS costs is closing. Not all existing infrastructure is usable/viable, but where possible CO2-enhanced oil recovery (EOR) with CCS should be pursued as it effectively provides a CCS revenue stream. The owners of the infrastructure - mainly the oil and gas community - would be much keener to carry out CCS if tax regimes were adjusted slightly and decommissioning could be deferred. We are not reliant on re-use but it enables cost-cutting and faster development of the CCS industry.
I can point to Scottish Enterprise SE, such as CNS Hub, getting involved. Other opportunities would no doubt be available to companies currently involved in the offshore oil and gas sector. Many of the areas of engineering are similar, including pipeline and reservoir management, and so on. If you are involved in oil and gas extraction then the chances are the skills and products offered could be applied to CCS.