Energy Focus - Spring 2020

energyfocus

ISSUE 39 SPRING 2020

F ROM T H E E N E RGY I N DUST R I E S COU NC I L VIEW FROM THE TOP Campbell Keir, EIC’s new President, on supporting businesses through crisis

EXPORTING Tailoring post-Brexit trade deals to UK strengths will be key to growth

OIL AND GAS COVID-19: Disruption, demand and resilience planning

RENEWABLES What is stopping the UK from making the most of tidal energy?

Navigating another perfect storm EIC Chief Executive Stuart Broadley: Weathering winds and safe haven markets

Cover_Spring 2020_Energy Focus 1

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Contents ISSUE 39 SPRING 2020

06

Campbell Keir

FROM THE EIC 5 Foreword From the Chief Executive

6 View from the top Campbell Keir, EIC President

10 News and events Updates from the EIC

14 Special Report: Exporting beyond Brexit Jeremy Bowden on global Britain’s energy future

18 Accelerating the offshore energy transition Lucy Woods on turning challenges into opportunities

OIL AND GAS

POWER

22 Futureproofing the offshore industry

35 Utilities must act now on energy transition

Mark Dickson, VP Energy Transition, io consulting

Dana Hanson, Principal, Ernst & Young LLP and EY Americas Power and Utilities Leader

26 New wave of opportunities?

Diveena Danabalan, Sector Analyst – Upstream, EIC

14

36 Powering tomorrow’s aerial vehicles

Global Britain

Sofiane Boukhalfa, Technical Director, Aerospace and Defence, and High-Tech Practice, and Jorge Hurtado, Technology Consultant, PreScouter

29 Coronavirus and the oil market Boris Ivanov, Founder and Managing Director, GPB Global Resources

26

30 A Caribbean success story Pietro Ferreira, Regional Analyst, EIC

NUCLEAR 40 Europe’s big plans for small modular reactors

Decommissioning hot spots

32 Tapping into America’s energy potential

Tim Yeo, Chairman, The New Nuclear Watch Institute

Energy Focus puts the spotlight on the Gulf of Mexico

43 Finding a solution for the legacies of UK nuclear power Karen Wheeler, Chief Executive, Radioactive Waste Management

44

Canary Islands renewable plans

RENEWABLES 44 Small islands, big opportunities

40

José Antonio Valbuena Alonso, Regional Minister, Government of the Canary Islands

SMRs in Europe

46 The challenges facing tidal energy David Casale, Director, Turquoise International

The Energy Industries Council 89 Albert Embankment, London SE1 7TP Tel +44 (0)20 7091 8600 Email info@the-eic.com Chief executive: Stuart Broadley Should you wish to send your views, please email: info@redactive.co.uk

Editors Sairah Fawcitt +44(0)20 7880 6200 sairah.fawcitt@redactive.co.uk Lucy Chakaodza +44(0)20 7091 8638 lucy.chakaodza@the-eic.com Account director Will Hurrell Production director Jane Easterman Senior designer Seija Tikkis Picture editor Akin Falope Content sub-editor Kate Bennett

For sales and advertising please contact Tim Cariss +44(0)7759 463456 tim.cariss@redactive.co.uk Energy Focus is online at energyfocus.the-eic.com ISSN 0957 4883 © 2020 The Energy Industries Council

Energy Focus is the official magazine of the Energy Industries Council (EIC). Views expressed by contributors or advertisers are not necessarily those of the EIC or the editorial team. The EIC will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.

Publisher Redactive Media Group, Level 5, 78 Chamber Street, London E1 8BL Tel: +44(0)20 7880 6200 www.redactive.co.uk

Recycle your magazine’s plastic wrap – check your local LDPE facilities to find out how.

www.the-eic.com | energyfocus

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Foreword Stuart Broadley CEO

From the Chief Executive: In this issue of Energy Focus we highlight how the supply chain can turn challenges into opportunities. The articles in this edition were produced prior to the COVID-19 pandemic currently taking place

Throughout the world, the oil price wars, 2020 oil crash, Brexit, COVID-19 pandemic and push for decarbonisation are causing huge disruption to the industry’s supply chain as the perfect storm hits the energy sector.

Companies such as BP are stating they will decarbonise completely and globally by 2050, and an increasing number of firms are announcing similar intentions – both for environmental, social and governance (ESG) reasons, and to de-risk their businesses.

Several oil and gas corporations in Western Europe are witnessing share price dilution, as not enough people are buying oil and gas shares in a bid to put pressure on the sector to diversify away from oil and gas.CEOs are under increasing pressure to deal with the cause of this decrease in demand by responding with ESG, leading to radical, fast-reacting strategy statements from oil majors and contractors that can lack detailed implementation plans.

The UK government is reacting to decarbonisation pressure, placing net-zero carbon at the heart of its future policies and looking at decarbonisation acceleration opportunities. These include increased funding for the development of new technologies such as hydrogen, carbon capture, utilisation and storage (CCUS), floating offshore wind and nuclear small modular reactors (SMRs).

COP26 in Glasgow is a coup for the UK and Scottish governments, but is now, understandably, postponed. It is not yet clear whether these new technologies can kick-start a new UK industrial revolution. The supply

chain is facing additional challenges, such as the recent price war triggered by a breakdown in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over proposed oil production cuts.

Oil prices had already fallen 30% since the start of the year due to a drop in demand and the ‘price inflation/deflation valve’ that is US shale. The price war is one of the major causes of the ongoing global stock market crash.

Massive over-supply of oil and gas, and bloated storage reserves, mean there will be a long lag to any price recovery – undoubtedly further hampered by a global demand reduction due to COVID-19, estimated to be 20% or more.

Many oil companies are reconsidering projects and looking at 30% cuts to CAPEX and OPEX budgets – putting the squeeze directly onto the supply chain at the worst of times.

Governments and lobbyists are pleading with oil companies to take a more collaborative approach when it comes to the supply chain.

However, Saudi Arabia and Russia ended their oil price war on Sunday by finalising a deal to make the biggest oil production cuts in history, following pressure from US President Donald Trump to support an energy sector ravaged by coronavirus. OPEC said it would cut 9.7m barrels a day in oil production in May and June, equivalent to almost 10% of global supply in an effort to stabilise global crude markets.

COVID-19 is impacting on supply chains and day-to-day business operations internationally and across the sector, and the long-term impacts remain unclear. However, there is some good news: the disease has inadvertently had a rapid and profound effect in supporting the activism view on

decarbonisation. Measures put in place to slow the spread of the virus have caused a slowdown in economic activity, meaning there are fewer vehicles on the road. Earth-orbiting satellites have observed a decrease in pollutants such as nitrogen dioxide, emitted by motor vehicles, power plants, and industrial facilities. We all hope this is visible proof that decarbonisation works and will drive clean tech and one-planet policies for recovery and investment.

EIC has worked closely with supply chain companies to study how firms recovered from the 2014 oil price crash. It is optimistic that many businesses, having learnt lessons from the 2014 crisis, will get through the current market crises after an initial and inevitable resizing and a mitigation of risk.

There are many key lessons to be taken from 2014: companies will retrench and focus on core clients to protect relationships and revenues, innovating wildly to meet new client needs; companies have already learnt to be more diversified; and there are signs that renewables and the energy transition may be safe haven markets in the coming years.

Companies have also learnt to be open to collaboration with partners and clients, combining forces to survive and thrive.

Stuart Broadley Chief Executive Officer, Energy Industries Council stuart.broadley @the-eic.com

www.the-eic.com | energyfocus

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From the EIC Q&A Campbell Keir

View from the top Q&A: Campbell Keir EIC President

We need to prepare for returning to business as usual‌ it’s essential that the EIC continues to help our members identify where the opportunities are and how to access them

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Q&A Campbell Keir: From the EIC

Energy Focus talks with Campbell Keir, new President of the Energy Industries Council about COVID-19’s impact on the industry, and supporting UK supply chain companies

What impact will the current market crises such as the oil price crash and COVID-19 have on the UK supply chain?

We are entering into new territories with the COVID-19 pandemic. Who would have predicted the impact on people’s health, and that large parts of the global economy would shut down? While the priority is to save lives, we should try to protect the core competencies and capabilities of our key industries as we did when the last oil crisis occurred. At that time, government intervention helped protect core capabilities, including initiatives such as the Aberdeen City Deal and formation of the Oil and Gas Technology Centre. We need to help the government identify what is required to preserve core capabilities and competencies ahead of a return to growth.

What measures can government departments such as DIT and trade associations like EIC take to assist businesses at this time?

EIC, like all trade associations, can play a vital role.

Firstly, we have got to make sure our members know what’s on offer from the government – not just the new measures taken in light of COVID-19, but also what exists already. It’s surprising how few companies are aware of how UKEF (UK Export Finance) can assist companies export, e.g. payment guarantees. It’s the role of EIC to make members aware of these different types of assistance schemes.

In the current crisis, it’s vital that EIC has an open dialogue with government on how the industry is responding to the measures that have already been introduced and whether they are enough, or more is needed. For example, in my capacity working for British Expertise, we have been giving feedback and asking industry what rules and regulations can be relaxed to allow business and industry to continue to operate.

We need to prepare for returning to business as usual.

Perhaps it may proceed at a different pace around the world depending on the situation in a particular region or country. Maybe parts of Southeast Asia will rebound

ahead of the rest of the world, with Europe following – we have to wait and see. Let’s hope it’s as quick as possible.

In the meantime, it’s essential that the EIC continues to help its members identify where the opportunities are and how to access them.

Part of your role at DIT was leading on infrastructure. How are the UK’s leading firms helping companies win major international contracts in this current climate?

With regards to energy and infrastructure, there are huge opportunities globally. For example, if I focus on infrastructure, the DIT has done a lot of work in Latin America, in countries such as Peru, Brazil and Colombia.

To meet the demands of their rising population and growing prosperity, developing and emerging economies like those in Latin America will need assistance to upgrade their infrastructure, whether it be roads, ports, airports or railways. The UK has a lot to offer, especially in integrated infrastructure planning, front-end engineering, and so on. What is important is that these markets understand the holistic UK offer. If we look at the oil and gas sector, decommissioning is a huge opportunity worldwide. The UK has significant experience in decommissioning (oil and gas, civil nuclear). Rather than having individual companies bidding around the world, we need to take a more joined-up approach, bringing the industry commercial/ technical offer together with the City of London package alongside government-to-government support to win against the competition.

COP26 has now been postponed to 2021 due to COVID-19; how can the government keep up the momentum on its climate change commitments?

I am in two minds over whether the coronavirus pandemic will help us focus on the climate change agenda. Governments around the world are quite rightly currently focusing on managing the crisis, saving lives and protecting the economy. At some stage, we will return to the climate change debate. The global economic

About Campbell Keir Campbell Keir has more than 30 years of professional experience in the oil and gas industry. After graduating with a master’s degree, he joined Shell International as a Petroleum Engineer. Mr Keir has worked in operations and technical positions in the Netherlands, Malaysia and Abu Dhabi, followed by a series of senior roles throughout the Middle and Far East.

He spent seven years as Country Chair and VP for Shell in Kazakhstan.

In 2015 he was seconded for two years into Department for International Trade (DIT) as Deputy Director for Energy, then joined DIT as Deputy Director of Energy and Infrastructure.

www.the-eic.com | energyfocus

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From the EIC: Q&A Campbell Keir

If you can bring the global market to the UK through events such as EEC, the opportunities are endless shutdown has resulted in emissions in the UK dropping dramatically. People talk about being able to hear the birds singing in London. Fish have returned to the waters of Venice, and the haze has cleared from cities around the world.

Perhaps the impact human activity is having on our climate and wellbeing is becoming much clearer to the general public, and this may put additional focus on the climate change debate and pressure on leaders to keep up the momentum on commitments in this area. Or perhaps we will return to our old ways – who knows?

The UK has made tremendous progress; we increased our electricity supply through renewables and are now less reliant on fossil fuels. Still, we need to go further in addressing heat and transport issues.

I don’t believe the climate agenda is going to disappear. I think it will be a firm priority once we are out of the woods with COVID-19.

Looking ahead to future investments, what lessons can we learn from offshore wind development in the UK during the past 10 years?

The implementation of offshore wind was heavily backed by strong, clear governmental policy. Also, the industry knew what it was going to get in terms of commercial rewards and then applied technology to bring the costs down. The winning formula was clear government policy, commercial robust investments and application of technology.

Congratulations on being appointed EIC’s new President.

What role do you see yourself and EIC playing, going forward, in a rapidly changing landscape?

I see my role as helping CEO Stuart Broadley and his team achieve their objectives, especially in the longer term as we transition to Net-Zero 2050. I want to act as an advocate for the energy sector on behalf of EIC and its members at a time when the sector and supply chain is undergoing transition. While net-zero 2050 is a clear target, we can’t abandon the hydrocarbon industry. We will still need this industry to provide energy, which will support not only developing and emerging nations, but also emerging markets as their economies grow.

However, we must do that in a socially responsible way. We need to be very clear with EIC’s Stakeholders about what EIC stands for. Going forward 10–20 years, I expect EIC will look very different. It isn’t going to be easy, and public perception will put a lot of pressure on extractive industries.

Managing expectations will be essential. I believe EIC has a strong role to play in the UK, and see the organisation strengthening its position overseas.

EIC will be holding its second Energy Exports Conference (EEC) later this year. How important is such an event in facilitating the supply chain and international trade?

As the last EEC was an inaugural event focusing on exports, we were quite surprised at how successful it turned out to be. This year’s event will be important in bringing even more global opportunities to UK supply chain companies.

Traditionally, a lot of trade is carried out by taking a delegation of representatives, from around 15–30 companies, overseas.

This is a relatively small percentage of the SME population in the UK. If you can bring the global market to the UK through events such as EEC, the opportunities are endless.

It’s easy for SMEs to travel to Aberdeen and other parts of the UK to attend a conference, and if you can set them up right and whet their appetite, you can get them on that export path.

I am still very much in favour of doing overseas missions, but I think there is a strong role to play in bringing global companies to the UK. Events such as EEC are key in bringing opportunities to the UK supply chain.

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U P DAT E S F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L

news&events introduce members to regional energy markets and their major players.

Worldwide business support

About the EIC Established in 1943, the EIC is the leading trade association for companies working in the global energy industries.

Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require.

As a not-for-profit organisation with offices in key international locations, the EIC’s role is to help members maximise commercial opportunities worldwide.

We do this in a variety of ways:

Enabling members to expand into markets across the globe

Market insight Helping members to track global energy projects and assets Our projects database, EICDataStream, provides extensive information on more than 8,800 active and future projects in all energy sectors. By tracking full project lifecycles from feasibility to construction and then completion, it helps members to identify opportunities and plan their business development strategies. Our operations and maintenance database, EICAssetMap, puts the details of more than 4,000 energy facilities across The Americas, Asia Pacific, Europe and the Middle East at your fingertips.

High-profile international events Connecting members with buyers and partners The EIC hosts flagship industry events that bring together supply chain companies with global energy contractors and operators, and bespoke events that keep members informed about projects, sector developments and markets. Our overseas trade delegations and EIC-run pavilions at international exhibitions

Member companies who want to do business outside the UK can rely on our global network of offices to provide regional market knowledge, one-to-one advice and practical support. We also provide virtual and rental offices, and facilities for hotdesking, meetings, conferences and corporate events.

Business intelligence Keeping members informed and raising their profile We help our members to stay connected with the world of energy through informative online news, e-bulletins, market reports and industry publications. Our comprehensive directory of member supplier services is also a useful resource for operators and contractors.

Industry courses Enhancing members’ skills and knowledge Our quality courses, which can be delivered off-site or in-house, are led by highly experienced trainers with industry backgrounds.

We tailor our training to suit a variety of levels and also work with member companies to run programmes, some of which include tours to manufacturing companies.

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From the EIC

IMAGES: GETTY/ISTOCK

News and events

EIC Insight Report: UK Operational Renewables report: AssetMap

EIC Insight Report: Global Offshore Wind

EIC’s new report shines a light on projects which will generate 5MW or more of renewable energy, drawing on data from EIC DataStream and AssetMap databases.

During the past three years, the UK has commissioned more than 10GW of renewable energy in biomass, energy from waste, solar and wind (onshore and offshore) collectively. This injection of capacity commissioned to the grid, 4.5GW of which specifically came from offshore wind, has taken the overall capacity generated in the UK to 43GW. The UK is top of the leader board for offshore wind globally, currently producing 8.4GW. The report highlights that during the past 10 years, 29 offshore wind farms have been commissioned, producing 7.8GW. As the UK works to boost offshore wind capacity to 30GW by 2030, EIC data shows that 21 offshore wind farms are expected to be constructed during the next five years, producing 14GW in total.

The offshore wind sector’s global expansion trend continued throughout 2019, bringing overall operational capacity to more than 28GW. Key markets such as the UK, China, Germany, the Netherlands and Taiwan further strengthened their positions as project pipelines were expanded and ongoing developments progressed with construction.

The report finds the sector is expected to see strong growth throughout the next decades, not only in existing ‘mature’ markets, but equally in emerging ones.

Examples of countries that have gained significant interest from developers and the supply chain alike in 2019 are Poland, Japan, Vietnam and Ireland.

REPNEW O OUTRTS NOW

During the past 10 years, 29 offshore wind farms have been commissioned, producing 7.8GW

To buy or download your copy of the Global Offshore Wind insight report please visit: www.the-eic.com/ Publications/MarketIntelligenceReports

For members and non-members wishing to utilise our in-house experience to help track key renewable opportunities, please buy or download your copy of the insight report at: www.the-eic. com/Publications/MarketIntelligenceReports

www.the-eic.com | energyfocus

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EVENTS COMING UP

Energy Exports Conference

EIC launches new series of live e-vents COVID-19 is having unprecedented shifts in the way that we will work and travel. Several of our planned events and overseas trade delegations have now been postponed in line with government regulation.

The EIC is still committed to providing its members and wider companies with the very latest energy sector market intelligence and updates. We have transitioned to a virtual platform allowing EIC events to be broadcasted to individual homes, and have launched a series a series of information webinars.

Our first EIC LIVE e-vent, ‘Focusing on Oil and Gas during COVID-19’ on 2 April, was a success.

More than 124 attendees logged in to hear EIC’s market intelligence team give an overview of the current state of play in the global oil and gas sector in the wake of the coronavirus pandemic.

On 22 April we hosted an EIC LIVE e-vent, which looked at the latest sector news directly from key players in the Norwegian energy market.

EIC has planned further e-vents, with the full listing available on the EIC website.

Upcoming e-vents include:

When? 20–21 October 2020 Where? Aberdeen Why attend? It is estimated only 40% of the energy supply chain and companies in the UK are actually exporters. At a time when the government is looking to maximise export opportunities, EIC is excited to announce the return of The Energy Exports Conference (EEC) in Aberdeen in June.

Organised by EIC and partners, EEC helps exporters identify and pursue opportunities on energy projects globally. The event will host representatives from global companies including ADNOC, Aramco, Total, BP, Equinor, Shell, Bechtel and Wood, convening more than 1,000 attendees and 100 speakers.

After the success of the inaugural EEC in 2019, 20 delegations from around the world at are expected at this year’s event. Highlevel speakers will discuss issues impacting the sector, including the energy transition, access to funding, decommissioning, export starter markets and offshore wind.

More than 50 companies within the UK supply chain will exhibit during the two-day course. If you are looking to enter or expand into global markets, EEC 2020 is the perfect place to raise brand awareness, showcase new products or services and meet buyers.

EEC will kick off with a networking dinner and drinks hosted by the Lord Provost of Aberdeen Council. Last year more than US$150bn of global projects requiring UK products and services were discussed in Aberdeen by over 20 major operators, including Aramco, Ørsted, BP and Shell.

For more information, visit: exportsconference.energy

1 May EIC Live: Open Forum – Operations & Maintenance 5 May EIC Live: Opportunities in the Nuclear Industry 19 May EIC Live: Focusing on Global Offshore Wind 26 May EIC Live: Focusing on Decommissioning 9 June EIC Live: Opportunities to Export 16 June EIC Live: Focusing on Hydrogen 30 June EIC Live: Focusing on the Latest Technologies

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LEADING COMPRESSOR TECHNOLOGY AND SERVICES www.burckhardtcompression.com

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Special Report Exporting beyond Brexit

A

ccording to the UK government, post-Brexit Britain will be a global ‘force for good and an energetic champion of free trade’. There is also talk of ‘strengthening historic ties’ and embracing opportunities ‘in the rising economies of the future’. However, the optimism and positive statements hide considerable uncertainty, both over trade terms with the EU from 2021 onwards and with the 50 or so countries where trade had previously been covered by EU deals (most recently Japan and Canada) – and a new deal has yet to be put in place.

The most important trade deal is with the EU, which accounts for 44% of the UK’s international trade. The tight deadline (progress by June and finalisation by December) may limit its scope, which could potentially spell a painful adjustment in 2021 – especially if there is no deal, which would mean a switch to World Trade Organization (WTO) rules. This is by far the least attractive outcome, according to EIC CEO Stuart Broadley.

‘It’s clear that a deal is much better than no deal,’ he said. ‘The WTO terms sound

GLOBAL BRITAIN The coronavirus has affected post-Brexit talks, but it has not killed them. If trade deals can be closely tailored to UK strengths, the future could see growth for UK energy supply chain exporters, writes Jeremy Bowden

The biggest opportunity around Brexit is to work the energy transition into trade deals around COP26 and a net-zero target

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Exporting beyond Brexit: Special Report

simple, but there’s greater uncertainty.

No one’s ready for no deal with WTO, especially between the UK and EU. In the energy sector, most companies are exhausted by Brexit, Covid-19 and the recent oil price crash, and unsure of what to do in such a difficult market condition.

Some have set up offices in Europe.’

It is highly probable that, having taken such a decisive step, these companies will look to exploit their new locations and grow if there is a no deal Brexit – which could mean an acceleration of outward investment, Mr Broadley added.

Most contracts have no contingency for ‘no deal’, so exporters are advised to identify key supply chain relationships and work through the risks if they have not done so already.

Away from the UK/EU talks, progress on other deals has been slow – although some has been made, including on a UK/US trade deal. However, with the government’s negotiating objectives identifying only a 0.16% improvement in potential UK growth from a good US deal, there do not appear to be substantial new opportunities for exporters here.

Fine-tune around strengths Previously, trade negotiations would have occurred at the EU level. Now, UK negotiators can pay closer attention to the strengths and weaknesses of the UK’s industry and services, which may mean better-tailored trade deals in future – providing more opportunities for UK industry and services. Now that the UK can set its own internal regulations, it may also

UK’S low-carbon advantages Greatest penetration of low-carbon technologies and green energy (centred around cheap and plentiful wind) Existing infrastructure, including depleted gas-fields for carbon storage Tough low-carbon rules and a higher carbon tax than elsewhere Grants and guaranteed payments for new generation renewable technologies High levels of expertise and innovative companies High profile of issue among UK population

be able to amend certain working directives to provide a competitive advantage.

‘The UK may be able to negotiate better trade deals with third parties, because they can be structured more around UK strengths than EU strengths. That’s the number one opportunity,’ said Mr Broadley. This can cover not just basic industry capabilities, but also standards, processes and UK law, which can also favour UK companies.

Mr Broadley identified UK services in which the UK has established strengths as particularly important, along with specialist skills. This may mean that trade deals include skills agreements in which UK talent can be deployed overseas. He said deals should be built just as much around such services as on exportable goods. ‘From there, [the UK] can rebuild manufacturing as well, if agreements can focus on what we’re good at making – selected elements and clusters of our economy.’

While the UK may be able to be more agile in doing trade deals than the EU, the EU is a bigger economy, and can thus bring more weight to negotiations.

Import taxes on embedded carbon?

Mr Broadley pointed out that, given the UK’s target to reach net-zero carbon by 2050 (the first major economy to commit to zero carbon), and as the largest wind market in Europe (in terms of coastline, wind capacity, established offshore wind production and a huge and experienced supply chain capability), the UK government should also be thinking about including embedded carbon import tariffs on all goods and services. ‘If we are to reach

www.the-eic.com | energyfocus

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Special Report: Exporting beyond Brexit

90% of world growth will be outside the EU during the next 10 years In search of trade deals UK ministers are travelling around the world working on the UK’s other trade possibilities.

Foreign Secretary Dominic Raab has been active in Asia-Pacific, with an eye on areas such as Japan’s recent move into offshore wind, where the UK is a world leader, and the nascent offshore oil and gas decommissioning in Southeast Asia and Australia, where the UK also has considerable experience.

Similarly, International Trade Secretary Liz Truss led a recent summit in Africa on demand for clean energy. She says the UK wants to reinforce its economic partnerships with African nations ‘as part of a government drive to ensure the continent’s growing demand for investment is met by the UK’s expertise and innovation.’

net-zero by 2050, this is essential, and Brexit gives us an opportunity to include this in new trade deals.’

He noted that lower-carbon energy was already an area where British industry was strong, given the UK’s lead in the energy transition: ‘[UK companies] are further ahead on producing low-carbon products, as UK regulations and legislation have pushed them faster than other countries.’

With import tariffs, UK energy supply chain companies would have to expand to meet demand, and this scaling would also cut costs and make UK low-carbon exports more attractive – especially as other countries adopt zero-carbon goals. ‘This is a strategic opportunity. Other countries, including the EU, may follow suit, but the UK has a lead, which can provide real competitive advantage. I hope the government will build this in, and with full confidence that it’s the right thing to do.’

Neil Golding, the EIC’s Head of Oil and Gas, cautioned that current low oil and gas prices will make it more difficult to back low-carbon options. ‘From operators and EPCs, the future is about reducing emissions, beginning with the supply chain, and that may indeed hold opportunities for UK companies. But [low-carbon] costs remain high and lower oil prices mean lower margins for EPCs, which still depend mostly on oil and gas, as well as more competitive hydrocarbons,’ he

Industrial policy tie-in Any trade policy along the above lines would need to tie in with domestic industrial policy, according to Mr Broadley. This can help ‘make sure that investment inside the UK goes to the right places’. It could be directed to products or technologies, or geographically towards cities or clusters that can get to net-zero quicker. ‘This helps tackle UK emissions and creates technology hubs that can quickly switch to export hubs – which can be linked to the developing free trade zones strategy as well,’ he said.

Second-generation low-carbon technologies already receiving government funding include green and blue hydrogen, floating offshore wind, nuclear small modular reactors, energy storage and carbon capture utilisation and storage – all of which could lead to export opportunities in future. Mr Golding noted that by helping government build regulations around the zero-carbon goal, the UK energy supply chain could benefit from export opportunities, as these regulations could be replicated abroad.

He also promoted collaboration such as that seen at Hinkley C, which enabled local companies to win more contracts.

Low-carbon moves in domestic industrial strategy and in trade deals could be linked into the UK’s COP26 hosting in Glasgow, when more stringent action on climate change may be forthcoming. ‘The biggest opportunity around Brexit is to work the energy transition into trade deals around COP26 and a net-zero target.

The planets are aligning for us, and we could be five years ahead of the rest of the world,’ said Mr Broadley.

Whatever the UK government agrees in its trade negotiations, UK companies need clarity, consistency (across departments, as well as through time) and certainty, so they can plan and invest for a cleaner and more profitable future.

IMAGES: ALAMY

The EU accounts for 44% of UK international trade

said. ‘It’s about finding the right balance – too many restrictions will push up costs. If we move too quickly to net-zero, we’ll price ourselves out of the market.’

The Department for International Trade declined to comment on either the potential for new overseas opportunities for UK businesses post-Brexit, or the possibility of an embedded carbon tax on imported goods.

16 energyfocus | www.the-eic.com

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Feature Offshore energy

Accelerating the

offshore energy transition The UK is in pole position to help accelerate offshore low-carbon energy innovation, both at home and overseas – but collaboration is key, writes Lucy Woods

18 energyfocus | www.the-eic.com

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Offshore energy: Feature

T

he energy sector is in the middle of a mass transition.

The race to decarbonise and switch to renewable energy will present many challenges and opportunities throughout the global industry – including opportunities for international collaboration. In the offshore energy sector, the UK is building on its globally recognised expertise to lead the energy transition and meet its net-zero carbon target for 2050. In the US, lessons from Europe’s veteran offshore workforce are being adopted by its nascent offshore wind industry.

UK offshore transition Last December, to help the UK industry reach the 2050 deadline, the UK Oil and Gas Authority (OGA) published a first phase report for the UK Continental Shelf Energy Integration project. The project aims to unlock integration opportunities, including how oil and gas infrastructure can be used for carbon capture and storage (CCS), wind and hydrogen facilities, and how oil and gas operators and the supply chain can partner up with renewables.

‘The UK’s infrastructure, subsurface reservoirs and expertise, along with a world-class supply chain, which is already diversifying into renewables, make it well-placed to be a global leader in the energy transition,’ states Andy Samuel, OGA Chief Executive, in the report’s foreword.

Teaming up for opportunities OGA spokesperson Simon Belgard told Energy Focus that existing oil and gas infrastructure is contributing to the transition with offshore terminals and pipeline networks, which are ‘prized assets for CCS as well as hydrogen and for transporting carbon dioxide offshore.’

The report recommends closer partnerships between offshore oil and gas and renewables for platform electrification and reducing oil and gas offshore installation emissions by using renewable electricity from wind turbines instead of diesel. ‘Old oil platforms can host electric transformers and substations to allow more rapid expansion of wind power,’ says Belgard.

Another offshore transition technology suggested by the report is ‘gas-to-wire’, whereby gas can be converted offshore to

electricity, then transported using existing wind energy distribution cables. Also using offshore infrastructure, natural gas can be produced offshore and converted to hydrogen using methane reforming with carbon dioxide, then stored in offshore reservoirs. These ideas present many opportunities for UK oil and gas and renewables entities to team up.

The conversion of distribution infrastructure to bring new energy forms, such as electric cars and hydrogen, to consumers is a significant challenge in the energy transition, says Belgard. To achieve full commerciality, the technology still has to evolve to reduce costs. However, as the UK’s energy supply chain has many highly relevant areas of expertise, including a world-class subsea capability, the UK ‘is well placed to support and benefit from the energy transition – both in the UK and overseas,’ according to Belgard.

Helping power US wind This international collaboration in offshore energy transition is most apparent in the nascent US offshore wind energy industry.

According to the American Wind Energy Association, wind energy generated 6.5% of the US’s electricity in 2018. However, only one offshore wind farm contributed to this: the 30MW Block Island Wind Farm.

In the the same year, 24.3% of the UK’s electricity came from offshore wind alone.

The US industry ‘looks to Europe for experience as the leaders of offshore wind’ says Bruce Carlisle, Director for Offshore Wind at the Massachusetts Clean Energy Centre. ‘We have a lot of trade missions to the UK, Netherlands and Denmark.

This leads to conversations, business to business connections, and learning a lot from these industries.’

Although the US may be decades behind many European countries when it comes to offshore wind deployment, the last couple of years has seen an explosion of investment, procurement and construction. New York, New Jersey and Massachusetts states have co-invested together ‘on a large scale to help reduce the cost and improve efficiency,’ says Carlisle. The US offshore wind industry, ‘fully acknowledges that we are going zero to 60, from first to fifth gear,’ he adds.

With a 26GW aggregate pipeline in US for offshore wind, it is hoped that recent high

The US has a total offshore wind pipeline of more than 26GW with 14 offshore wind projects totalling 9.1GW expected to be operational by 2026

The UK is well placed to support and benefit from the energy transition – both in the UK and overseas

www.the-eic.com | energyfocus

Feat Offshore Energy_Spring 2020_Energy Focus 19

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Feature: Offshore energy

Offshore energy integration concepts Gas-to-Wire

Hydrogen UK expertise in demand The US offshore wind industry is hoping to shave 10 years off its development by learning from the European experience, says Carlisle. One of its most notable benefits is access to the UK supply chain – especially large-scale established wind turbine manufacturers. US entities ‘are building connections between European manufacturers and suppliers, so that it is easy to get companies onboard and for project agreements to be seamless,’ he adds.

For the UK to benefit, Carlisle advises the offshore supply chain to find local US businesses ‘that can be upscaled and retooled and developed to meet the specifications to grow business in the US’.

H2

Electrification

Moving the US market forward As well as supply chain needs, ‘some offshore wind job occupations do need additional bodies,’ admits Carlisle. The MassCEC 2018 Offshore Wind Workforce Assessment, using examples from Europe, found a skills

CCS

CO2

Energy Hubs

Old oil platforms can host electric transformers and substations to allow more rapid expansion of wind power

SOURCE: OGA

gap: water transporters, maritime workers, marine equipment engineers, skilled trade workers and operation and maintenance technicians are needed to meet the demands of the growing US offshore wind industry.

‘The European experience makes it clear that integrated partnerships between industry organisations, trade unions, and community college and vocational school systems will be needed for the creation of an adequate pipeline of workers with the skills, experience, and credentials needed to work in the offshore wind industry,’ the report states.

To fill this offshore skills gap, MassCEC is going above and beyond to develop a competitive workforce, including introducing new training schemes at local education institutions such as Bristol Community College and the Massachusetts Maritime Academy, working with European partners to deliver expert training.

Carlisle revealed to Energy Focus that there is an initiative in the works to take US workers to Europe and Asia to work on offshore wind projects. ‘It is still in development, so I can’t name it, but it is apprenticeship work that will be continued when the workers are back in the US. It will take time, but once those apprentices are back, they can train others, gain more skills and abilities, and the US offshore wind workforce will grow.’

IMAGES: ISTOCK

investor interest, especially in the northeast of the US, will lower the levelised cost of energy (LCOE) during the next few years.

The states of Maryland and North Carolina are specifically named as the next big markets to invest in.

‘We are paying close attention to European knowledge and how to reduce the LCOE, and there has been a consistent drop in prices, just like there was in Europe,’ says Carlisle. ‘We expect we will continue to see reductions in LCOE cost, especially over the next 20 years as various large and important sectors, such as transport and heat, look to decarbonise and electrify, requiring GWs of renewable electricity sources such as offshore wind.’

20 energyfocus | www.the-eic.com

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Oil and Gas Energy transition

Future-proofing the offshore industry The energy transition and the UK’s drive to net-zero requires the oil and gas industry to embrace energy efficient operations, while supporting the growth of CCS, offshore renewables, and hydrogen, writes Mark Dickson at io consulting

O

il and gas as a source of energy is a significant fraction of the 2050 energy mix, despite many opinions in the popular press to the contrary.

Limiting global warming to 1.5°C will require ambitious, internationally cooperative policy environments that transform both supply and demand, and in turn, this will put pressure on oil and gas.

By 2050, in the latest International Renewable Energy Agency Renewable Energy Roadmap reference case, fossil fuel use for energy would fall to one-third of today’s levels. Oil and coal would decline most, by 70% and 85% respectively. Natural gas use would peak around 2027 and would be the largest source of fossil fuel by 2050, however with production declining by 30% from the present level. Undoubtedly, oil and gas will be around for a while.

investor appetite for a quicker payback Carbon lobby groups applying pressure to avoid the development of higher carbonintensive resources – such as heavy oil, tar sands, and so on.

The volatility of oil and gas prices – for example the recent oil price crash stimulated

by COVID-19 and the unpredictable nature of geopolitics related to energy Government pressure for the oil and gas

Is future-proofing possible?

It seems, in current months, oil and gas assets and developments face a continuous stream of emerging risks – some old and some new. Facing a full range of emerging risks and the pressures from climate change, how can the industry design future oil and gas developments, and is future-proofing realistically possible? We see the major risks facing the industry as follows: The pressure to reduce methane emissions – according to researchers from the US University of Rochester, methane’s effect on global warming has been underestimated by 40% The availability of, and competition for, capital – with the emergence of shale gas, where investment tranches are smaller in size and shorter in tenor, with increased

22 energyfocus | www.the-eic.com

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Energy transition: Oil & Gas

industry to pioneer new decarbonisation technology, such as carbon capture and storage (CCS) and hydrogen production.

Mitigating risks These present an almost existential threat to the industry; how can current assets and future oil and gas developments reduce these risks in field development design? io tracks the value drivers that companies set for developments, and we have observed the following additional requirements emerging: Flare reduction – Many countries now insist on significantly reduced flare gas tolerances, and public-private partnerships such as The Global Gas Flaring Reduction partnership are committed to zero routine flaring. However, from the fossil-fuel

company participation perspective, only a few of the majors and national oil companies have signed up. io believes that zero routine flaring will emerge as a mandatory requirement for oil developments. The technology is available to capture small scale gas streams such as flaring, and while not as costeffective as main oil production, this should now be a mandatory design consideration. A range of technologies – including compressed natural gas, micro liquefied natural gas and mini gas-toliquids – can be applied in a modular configuration to address the flaring issue.

Continuous improvement in GHG emissions reduction – We live in an age

when industry’s greenhouse gas (GHG) emissions are a subject of public concern and significant scrutiny, with national, legally binding targets and commitments.

Guidelines on financial disclosure, such as the Task Force on Climate-related Financial Disclosure’s recommendations, have been formulated to advise oil and gas companies on how to measure and report GHG emissions. However, io sees a need for: • Changes to operational management systems and plant operating philosophies. These should embrace continuous improvement in GHG emissions reduction – treating GHG emissions as production loss management – where teams record GHG emissions and the root causes of them, and thus focus on managing the plant and engineering modifications to continuously and progressively reduce emissions.

• Active GHG monitoring and measurement. Future assets will need to include more instrumentation to detect actual GHG emissions. The Oil and Gas Climate Initiative appears to have invested heavily in methane and GHG detection. Future oil and gas assets will need to include more sensors, and potentially drones, to commit to methane detection.

• Global benchmarking of GHG emissions by asset and collaboration in continuous improvement. Operators need to see the benefits in comparing GHG emissions from assets, and in collaborating to achieve best practice. Cooperation is in everyone’s mutual interest. Best practice can extend not only to day-to-day operational management, but also to the engineering for the production plant. For example, a reduction in the number of flanged connections and potential leak paths for methane, and less complex

The old ways of designing and operating oil and gas assets need to change www.the-eic.com | energyfocus

OG Future Proofing_Spring 2020_Energy Focus 23

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Oil & Gas: Energy transition

The above should lead to insights into oil and gas development design principles, and an evidence-based approach to adjusting facilities and modular designs.

Descoping and electrification – We believed the digital revolution would help to remove personnel from platforms. However, we still see a lack of consideration given to de-manning platforms, and what the minimum required facilities are.

In a recent study, we looked critically at the facilities that would be necessary on a gas production platform if it was converted to a normally unmanned installation. We were able to reduce weight by 60%, CAPEX by 50% and OPEX by 30% while maintaining the required production output. Reducing the offshore facilities requirements reduces power consumption and enables integration with renewables or electrification from shore. It also reduces overall capital requirements and delivers improved investment returns. In the current climate, focus on the minimum viable product for offshore development concept is a necessity.

Integration with other systems – In the future-proofing of offshore oil and gas developments, one emerging trend is to be mindful of additional opportunities in geographic proximity to the development: • Renewables. In recent years, certain offshore oil and gas developments have

gained a new neighbour – offshore wind.

This provides an opportunity to remove the gas turbine used for power production from the platform. If the platform is descoped sufficiently, could it be powered from the nearby wind array? If this is viewed unfavourably by the array’s owners, can the oil and gas operator build an array to power the platform?

• Gas-to-Wire. This involves converting

Platform de-manning could reduce: Weight by

60% 50% 30% CAPEX by

OPEX by

while maintaining the required production output

A new age for oil and gas Pressure on the oil and gas industry in the era of decarbonisation can only increase.

Consequently, the old ways of designing and operating oil and gas assets need to change. This must be addressed at an operational and fundamental design level for oil and gas companies to join the 2050 net-zero global commitment. Start with the end in mind, but consider the new endings that are possible!

By Mark Dickson, VP Energy Transition, io consulting

IMAGES: EQUINOR/ERLEND HATTEBERG

processing facilities, may combine in the future to achieve a technical limit for fugitive emissions.

gas to electricity and exporting through a neighbouring offshore wind array. This may prove economically advantageous to the oil and gas developer if agreed by the owners of the array, and may be a source of revenue if the platform has excess power generating capacity.

• CCS. Designing for the future may require consideration of the offshore platform’s tail-end-life. Should oil and gas companies design future platforms for conversion to CCS service? Companies could consider gaining experience by using CO2 enhanced oil recovery to gain expertise in CO2 service and the first step in CO2 sequestration.

Increase technology development and de-risking – It seems that only major oil and gas companies are investing in de-risking technologies, and the age of independents developing new technologies appears to be over. However, several new technologies will soon have a significant effect on the success of future oil and gas developments, and collaborative models should be explored: • Carbon capture technology – amines and others • Hydrogen generation – hydrolysis, membranes • Energy storage and electrification – we have noticed in recent years the vertical integration strategies of major oil companies not only generating electrical power, but also involved in energy storage and energy trading • Hydrogen-burning gas turbines – a range of turbines that burn up to 100% hydrogen, which could be used to develop the uptake of hydrogen as a carrier fluid by providing off-takers with the means to consume hydrogen for power generation.

24 energyfocus | www.the-eic.com

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Oil and Gas Decommissioning

A

s decommissioning strategies in the North Sea and the Gulf of Mexico are tweaked for increased efficiency and cost reduction to maximise economic recovery, some regions are only just putting together their decommissioning frameworks. However, one advantage these new markets have is that with careful planning, they can avoid making the same mistakes that more mature markets have made.

New hot spots Despite limited experience and knowledge in new key markets such as Southeast Asia (expected decommissioning spend of more than US$77bn), Brazil (US$6bn expected to be spent on 18 Petrobras projects by 2024), and the Arabian Gulf (usually carried out within redevelopment projects and therefore difficult to track), the industry is particularly adept at applying global lessons on a situational basis.

Countries such as Australia, Brazil, Brunei, India and Malaysia have been vocal about wanting to engage with the decommissioning expertise of the UK. Petronas, Malaysia’s national oil company, estimates that its spend

on decommissioning alone during the next five to 10 years will be around US$2bn.

What does good practice look like?

When planning for the decommissioning of assets, lessons learnt from both the North Sea and Gulf of Mexico apply, with in-region experts able to offer comprehensive insights on planning for the later life of assets into decommissioning.

Key points that underpin a successful decommissioning strategy include the need for planning ahead, understanding and controlling the costs associated with the decommissioning of an asset, and engaging clearly and transparently with key stakeholders and the supply chain. Ensuring regulatory compliance, and balancing costs and risks well in advance of cessation of production (CoP), are also crucial.

Collaboration cuts costs While the life extension of an asset may buy an operator anywhere between one and 10 years of extra production, the extra time can be used for planning and preparation that could save large amounts of money in the future. Unlike other parts of the industry, decommissioning is not a competition, and

Expected decom spend Southeast Asia more than

US$77bn US$2bn

Petronas expects to spend around

during next 5–10 years

Brazil

US$6bn on 18 Petrobras projects by 2024

it pays to co-operate with other operators to reduce costs for all involved.

The cost of well plug and abandonment is estimated to be around 49% of global decommissioning spend. Operators have

New wave of

opportunities?

With US$200bn expected to be spent on decommissioning globally during the next 20 years, EIC’s Diveena Danabalan tracks international developments

26 energyfocus | www.the-eic.com

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Decommissioning: Oil and Gas

devised ways to keep the cost of well plug and abandonment down, including abandonment in batch campaigns, vessel sharing between operators, optimising activity schedules, using alternatives to the existing drilling derrick method, and assessing wells using light well intervention vessels before carrying out campaigns.

IMAGES: ALAMY

Lessons learnt from the North Sea In the North Sea in particular, costs have been driven down not only by the above co-operation strategies, but also by investment in new technologies. Recently, ConocoPhillips cited that it would see significant cost savings by using a throughtree (rigless) process for well plug and abandonment by SPEX, which removes casing and any associated cement back to the formation, allowing the installation of a permanent barrier.

Over time these technologies will become commercial and widely used. Figures put forward by the Oil and Gas Authority (OGA) show that, compared to 2018, there was a more than £6bn reduction in the like-for-like cost estimate for decommissioning in 2019; the largest fall in costs has been for well plug and abandonment.

Fairfield Energy recently announced that costs for the decommissioning of the Dunlin Cluster in the Northern North Sea had been reduced by £31m thanks to a decrease in well plug and abandonment costs. According to the OGA, running costs for platforms in the North Sea have also been reduced by around 40% during the past two years, due to early well abandonment strategies and prompt de-manning post-CoP.

decommissioning. In fact, due to our expertise in subsea, supply chain capacity was deemed surplus to requirements in this area, hence the need for exporting our capabilities. Well plug and abandonment, regardless of well type – i.e. platform or subsea – was also determined to be catered for. In the foreseeable future, the UK supply chain will have to either export or diversify its expertise, or risk losing out on valuable business opportunities.

Looking ahead

By Diveena Danabalan, Senior Analyst – Upstream, EIC

Decommissioning is an inevitable part of a field’s life cycle, and should be looked at as an opportunity, not a necessary evil. Experts have speculated that, in the future, the decommissioning market will look very different from today. It will continue to be a niche market, as having too many contractors that specialise in decommissioning would eventually stop adding value and turn the sector competitive, with operators that specialise in decommissioning as opposed to operators falling into it on a project-by-project basis.

The UK government is also looking into the use of ready-to-be-decommissioned assets as part of future carbon capture and storage projects, such as the in-development Acorn project, and potentially hydrogen storage.

Globally,

US$200bn will be spent on decommissioning during next 20 years UK services needed:

Project management

Conductor removal

Engineering and planning

Mobilisation and demobilisation of derrick barges

Exporting UK expertise

The North Sea is a valuable training ground for the fledgling decommissioning industry

The North Sea, despite being a valuable training ground for the decommissioning industry, will soon become an overcrowded market. In a report conducted by Accenture in 2018, an assessment of the UK’s supply chain capabilities concluded there were satisfactory capabilities in the UK to meet the sporadic demand generated from North Sea

Permitting and regulatory compliance Platform removal

Platform preparation Pipeline and power cable decommissioning Well plugging and abandonment Materials disposal and site clearance

www.the-eic.com | energyfocus

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Oil and Gas COVID-19

Coronavirus and the oil market As lockdowns spread around the world, the oil industry faces more disruption to demand and supply chains, writes Boris Ivanov at GPB Global Resources

W

ith travel and economic activity across the world restricted, demand for transport fossil fuels has dropped.

This reduction in demand is particularly notable in China, the world’s largest energy consumer, which last year accounted for more than 80% of global oil demand.

Electricity demand and industrial output in the country has been functioning far below their usual levels, with coal consumption at powerplants down 36% and the countries’ oil refining capacity reduced by 34%.

For the oil market, the consequence of this reduced demand has been particularly marked, resulting in a twofold challenge: a drop in oil value and a consequent price war.

Black swans and barrels The oil industry has survived hardship, including the 2008 financial crash, and will survive this latest ‘black swan’ event. Many in the industry are confident in their ability to weather market volatility as they did during low-price storms in 2008 and 2016.

However, producers and supply chains have had to adapt. Some oil-producing countries, such as Saudi Arabia, Iraq and Nigeria, have opted to sell crude oil at discounted rates, and several oil companies are scaling down on their exploration, production and new projects budget. Oil majors such as Royal Dutch Shell and Chevron are taking immediate steps to ensure they are well-positioned for the economic recovery. They are significantly reducing their capital spending plan and suspending share repurchases to prioritise long-term value and protect dividends.

market solutions. We hope OPEC and the US can contribute to the stability of oil prices and return to the negotiating table. Energy cooperation has been a solid pillar of the transatlantic cooperation in the toughest of times, so the importance of maintaining this cannot be over-stated.

Looking to 2021 In the longer term, many are looking towards the likely resurgence of oil demand in 2021.

Once the outbreak is controlled, the global economy, particularly China and India, is expected to rebound at a notable rate. As a result, global oil demand could double or triple to make up for the lost demand.

The oil industry is resilient and wellpositioned to withstand this challenging environment and weather market volatility.

For oil companies, the priority is to put the health and safety of staff and customers first, and ensure the safety of business operations.

While it is too early to predict the energy outlook for the future as a result of COVID-19, the world will move beyond this, and the business case for streamlining operations and investing in resilience planning will be reinforced and widely accepted.

By Boris Ivanov, Founder and Managing Director, GPB Global Resources

IMAGES: GETTY

OPEC+ cut deal The biggest issue came in March when the Organization of the Petroleum Exporting Countries and 10 other oil producing countries (OPEC+) failed to agree on stable production levels. With Russia unwilling to accept a production cut of more than 1m barrels per day (bbl/d) to offset falling demand, oil prices fell to a multiyear low. By mid-March, crude prices were down to 30%, sparking a selloff in crude oil.

With the short-term situation proving fluid as governments around the world initiate several control measures, there is still a great amount of uncertainty over what the full impact of the virus might be for the oil industry, and how things will develop – even with the recent OPEC+ agreement to hold back about 10% of the world’s supplies in May and June, and continue with lower reductions until April 2022.

Cooperation is crucial The crisis has revealed certain truths about international cooperation, governance, and the energy system. Companies and oil industry bodies are calling for governments to put measures in place to support oil industries. In the US, there has been a focus on mobilising stimulus funding to purchase crude oil for the Strategic Petroleum Reserve to help prop up gas and oil producers. Likewise, industry trade unions in the UK met with Scotland’s energy minister to discuss futureproof plans for the industry’s skilled workers operating in the North Sea. Such initiatives should help protect the industry and safeguard its workers.

With Saudi Arabia now offering buyers discounted oil prices, which could lead to further price falls for global oil markets as demand for energy continues to fall, countries must work together on proposed

Many are looking towards the likely resurgence of oil demand in 2021

www.the-eic.com | energyfocus

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17/04/2020 10:32

Oil and Gas Guyana

Major oil discoveries offshore Guyana have propelled the former British sugar-growing colony from a frontier province to an oil and gas hot spot, writes EIC’s Pietro Ferreira

G

uyana is the world’s newest oil and gas player. As multinationals firmly establish themselves in the capital, Georgetown, barges that once transported the country’s famed sugar on the Demerara River have been replaced by platform supply vessels carrying state-of-the-art oil and gas equipment. And a floating production storage and offloading (FPSO) unit, sporting the colours of the Guyanese flag, is producing oil some 160km off the coast.

A Caribbean

success story

The Stabroek block In December 2019, Guyana joined the ranks of world oil producers after ExxonMobil started operations at the 120,000bbl/d Liza Destiny FPSO. First oil came less than five years after the oil major announced the Liza-1 discovery on the Stabroek block.

Located in the deep waters of the GuyanaSuriname basin in northern South America, Stabroek is home to 16 discoveries to date – the most recent announced in January 2020.

According to latest estimates, all discoveries combined contain recoverable reserves of 8Bbbl of oil equivalent – a number that is likely to increase as drilling work leads to new hydrocarbon discoveries.

At a conservative barrel price of US$50,that could mean revenues of close to

Development phases Liza Destiny was the first of at least five FPSOs to be installed on the Stabroek block.

A second development phase will also feature an FPSO at the Liza field, but with a 220,000bbl/d oil processing capacity. The vessel – Liza Unity – is under construction in Singapore, and the unit will be the first to be provided by SBM Offshore under the contractor’s Fast4Ward standardisation programme. Similar to Phase 1, TechnipFMC

A country of only

780,000 people, Guyana is set to jump into the world’s top 10 oil producers, on a per-capita basis

US$15bn per year

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Guyana: Oil and Gas

Guyana’s massive reserves will offer opportunities in the mid and downstream segments has heavier oil than previous discoveries. A 150,000–190,000bbl/d unit could potentially be installed in the area, contributing to ExxonMobil’s target to achieve an output of 750,000bbl/d by 2025.

Other players

IMAGES: LIM-WEIXIANG COPYRIGHT SBM OFFSHORE

ExxonMobil’s discoveries offshore Guyana have motivated players hoping to achieve similar success. Tullow Oil conducted a drilling campaign on the Orinduik block, located next to Stabroek, in 2019, leading to the Jethro and Joe discoveries. The company later confirmed that the two discoveries contain 10–15º API heavy crudes, with high sulphur content. Orinduik is estimated to contain 5.1Bbbl of oil equivalent.

Repsol, on the other hand, was not as successful. The company is the operator of the Kanuku block, where the company announced the Carapa-1 discovery in January 2020. Although Repsol initially announced the discovery of 27º API oil, the well was plugged and abandoned after the reservoir proved to be smaller than expected. and Saipem will be responsible for subsea trees and SURF equipment, respectively, and start-up is scheduled for 2022.

A third development phase targeting the Payara prospect is already in the works and SBM Offshore has secured the front-end engineering design contract for the 220,000bbl/d unit. An engineering, procurement and construction contract is expected to be confirmed once the project is sanctioned by ExxonMobil. In November 2019, Saipem was selected for the engineering, procurement, construction and installation of SURF equipment. Start-up is expected in 2023.

An additional field development project is expected at the Hammerhead oil field, which

questioned the transparency of the results, leading to a full recount (ongoing at the time of writing). Both parties support the development of oil and gas reserves, but the opposition has pledged to seek better contract terms with oil companies.

Looking ahead It is just the beginning for Guyana’s fledgling oil and gas sector. As the discoveries by ExxonMobil and other players increase, new field development projects are likely to be announced. According to an estimate by the financial services company Credit Suisse, there are 25 additional prospects to be explored on the Stabroek block alone, while discoveries already announced merit at least nine development phases.

Looking further ahead, it is possible Guyana’s massive reserves may offer opportunities in the mid and downstream segments as well. There have been discussions on how to monetise natural gas produced offshore, as well as the feasibility of a refinery (GuyEnergy, a local company, has pledged to complete a small-scale modular refinery this year). Current and future projects in Guyana are proof that the country has secured its place among oil and gas players, offering a wealth of opportunities for the supply chain.

By Pietro Ferreira, Regional Analyst, EIC

Political challenges The development of Guyana’s oil reserves and the question of who will manage the windfall is at the centre of the country’s political debate. Guyana’s demographics are roughly split between Afro-Guyanese and Indo-Guyanese ethnic groups, a division reflected in local politics.

In December 2018, incumbent President David Granger – whose party is supported by the Afro-Guyanese community – lost a vote of no-confidence in Parliament, triggering elections on 2 March 2020. Although Guyana’s election commission announced a victory for Granger’s ruling party, the opposition – supported by Indo-Guyanese groups – and international observers

Looking to expand into Guyana?

Prospects exist both for sales of services and equipment to existing concession holders and for the awarding of additional offshore concessions. To discover more about current projects and opportunities for the supply chain, please email EIC South America at: pietro.ferreira@the-eic.com

www.the-eic.com | energyfocus

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Oil and Gas North America

Tapping into America’s energy potential Energy Focus puts the spotlight on the Gulf of Mexico – not only one of the most important areas in the region for energy resources, but also one of the most productive basins in the world

T

he Gulf of Mexico (GoM) is expected to set another oil production record in 2020 with most of the growth coming from deepwater projects, reaching an anticipated 1.9Mbbl/d. At the same time, investments in these projects are half the amount they were in 2019, as project costs have decreased by 60% and OPEX is down by 7% since 2015.

The outlook for the GoM is optimistic; despite the significant decrease in investment, the Energy Information Administration expects the region will continue to break records as a result of infill drilling, increased production from existing fields, and new discoveries.

Between 2015 and 2019, the collective resource totalled more than 5Bbbl of oil valued at US$1.9bn (November 2019). For the US, approximately 17% of oil and 5% of natural gas production are sourced from federal GoM waters. The gulf’s share of Mexico’s oil and gas production, however, soars to 75% of its total output.

Untapped resources The US Bureau of Ocean Energy Management (BOEM) estimates that there are still 30Bbbl of oil and nearly 80Tcf of natural gas yet to be discovered. There are currently 2,579 leases spanning 13.7bn nautical acres in the US GoM. The region is poised for plenty of investment and business opportunity as BOEM is launching two lease sales each year through to 2022 – which will include all available

unleased areas in federal waters, covering 78m acres. In Mexico, regulators estimate a total investment of US$96bn would be required if all 58 blocks awarded to private companies were fully developed.

There have been many significant discoveries in deepwater GoM in recent years. Development options vary and are dependent on the condition and location of the field.

Clusters of discoveries are often tied back to centralised production hosts.

Some of the most notable deepwater discoveries in 2019 include Shell’s 1Bbbl-discovery at its Blacktip Prospect, BP’s 122m of net oil pay discovery at its existing Thunder Horse field, a 28m net oil pay encounter at Hess’ Esox-1 well, and Talos Energy’s 77m total net pay find at its adjacent Bulleit and Orlov Prospects.

There is also opportunity in exploration activities in the GoM. Shell is proceeding with a deepwater drilling campaign on assets it won during Round 2.4, including the drilling of 10–13 wells for an estimated CAPEX of US$800m–2.4bn. Four of the wells will be drilled in 2020, and a similar amount in 2021. Repsol is investing US$98m for the drilling of two wells on acreage it won during the same round.

Across the gulf waters to Mexico, the Andrés Manuel López Obrador administration has set significant targets while attempting to roll back the energy reforms of 2015 and bring the national oil company Petróleos Mexicanos (Pemex) back to the fore, promising an oil and gas market increase in net oil production to 2.697MMbbl/d by the end of 2024.

Decommissioning picks up Although decommissioning in the GoM has slowed since the downturn, it is now picking up again as installations completed in the 1970s are reaching the end of their useful lifespans. Structures are being removed at a rate of 150–200 per year. The US Government Accountability office and US Bureau of Safety and Environmental Enforcement estimate that more than 2,000 structures must be removed in addition to 9,000 wells that will need to be plugged and abandoned during the next few years.

Helping members do business There are still many challenges in the offshore oil and gas market, but EIC’s DataStream database provides a positive outlook, showing approximately 95 active and future offshore upstream projects with an anticipated CAPEX of US$131.3bn.

This is significant, with many opportunities across the supply chain between now and 2026. Doing business across the Gulf is something EIC is well positioned to assist with. Our North America Office is in the heart of the Houstons Energy Corridor, connecting us to top tier contractors, major operators and governmental bodies.

We also have office facilities available to rent.

We recently held our second EIC Connect event in Mexico City, bringing together companies working in the energy sector within the UK and globally, as well as buyers and procurement professionals that are active in the Gulf.

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North America: Oil and Gas

CANADA Canadian firm TC Energy has approved the proposed 2023 NGTL Intra-Basin System Expansion through firm delivery contracts of approximately 309MMcf/d. The natural gas pipeline network includes 92,600km of gas pipeline, which transports more than 25% of North American natural gas demand. The liquids pipelines division includes 4,900km of oil pipeline, which ships 590,000bbl/d – about 20% of Western Canadian exports. Details of the NGTL Intra-Basin System Expansion include connecting the Western Canadian sedimentary basin to markets in Alberta on the NOVA gas transmission line. It is expected the project will help meet market demand in the power generation, oil sands, petrochemical and utility sectors.

ACTIVITY TO WATCH ACROSS THE REGION

Looking to expand into North America?The EIC can help If you are thinking about doing business in North America, our team in Houston is on hand to help. For more information on our EICLaunchPad service, which provides a low cost, low risk entry into this market, contact houston@the-eic.com. As part of the Launchpad service we can offer you serviced office facilities, including hot desks, meetings spaces and virtual office provision, enabling you to kick start your business within the region.

MEXICO Pemex is looking to increase oil production at the Abkatun, Pol and Chuc reservoir complex – made up of 18 fields, of which 10 are currently productive. Part of the development plan is to bring the remaining eight fields into commercial production.

Much of the future development will focus on advanced recovery techniques, including natural gas injection in wells at the Chuc and Abkatun fields.

Pemex’s exploration and production unit PEP plans to drill a total of 54 new development wells (some vertical and some sidetrack), reopen four exploration wells and perform 38 major well repairs at the Chuc project. New infrastructure needed in the area will include 11 offshore drilling structures and 21 subsea pipelines stretching to a combined 136km.

TRINIDAD AND TOBAGO THE US The US Department of Energy (DOE) recently approved four liquefied natural gas (LNG) export projects for construction on the Texas Gulf Coast in February 2020. The DOE’s permits will allow the four terminals combined to ship 47m metric tons per year of LNG to countries currently without free-trade agreements with the US, when the facilities become fully operational. The DOE authorised Exelon’s proposed Annova LNG export terminal, NextDecade’s Rio Grande LNG and Texas LNG export terminals, to be located at the Port of Brownsville, in addition to expansion of Cheniere Energy’s existing Corpus Christi LNG export terminal.

Trinidad and Tobago has been involved in the petroleum sector for more than 100 years. There has been considerable oil and gas production on land and in shallow water, with cumulative production totalling more than 3Bbbl of oil.

Recently Shell Trinidad and Tobago took a final investment decision for the development of Block 22 and NCMA-4 in the North Coast Marine Area (NCMA). This development, Colibri, is expected to add a total of 43,100bbl of oil equivalent per day (250MMcf/d of gas production) through a series of four subsea natural gas wells. Drilling of these wells is expected to commence in the second half of 2020, with first gas anticipated in 2022.

www.the-eic.com | energyfocus

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PW US Utilities_Spring 2020_Energy Focus 34

17/04/2020 10:33

Power US

I

n an increasingly decarbonised, digitalised and decentralised energy world, the ageing US power system needs to evolve.

A grid fit for the future During the next decade, the traditional US electricity distribution system is poised to experience significant change as zero-carbon commitments accelerate the need to integrate more intermittent renewable energy. Grid modernisation and an expanding digital ecosystem have elevated the importance of securing physical and cyber assets. Resilience is a priority, given the increasing frequency and intensity of extreme weather events.

Against this backdrop, the reduced cost of distributed energy resources (DERs) has led utility customers to become more active participants in their energy consumption.

Although distributed solar makes up around 1% of total US electricity generation today, this is expected to quadruple during the next decade. In certain regions, such as California and the US Northeast, penetration will be much higher and have a negative impact on traditional sales of grid-supplied electricity.

Electrification throughout the economy, especially in transportation, promises new sources of load and revenue. By 2030, nearly 19m electric vehicles (EVs) are expected on US roads, compared to less than 2m today.

Reinvention will be key Distribution utilities are facing pressure to reinvent themselves amid the rise of renewables, DERs and EVs. They will need to remain relevant by seizing the opportunity to shape the electric grid’s evolution and capture the right roles in the future energy ecosystem.

A recent EY and GridWise Alliance report that includes insights from C-suite leaders of some of the largest US utilities recommends utilities embark on a three-phase investment journey to develop new, enhanced capabilities across every aspect of their business.

IMAGES: ISTOCK

Phase 1: Connect and protect As DER deployment accelerates, utilities need to continue investing in grid modernisation programmes and resilience. Granular modelling, forecasting methodologies and greater visibility over connections will be critical to understand the scale and scope of DER deployment. DERs leave the grid edge exposed to physical and cyber threats at

Utilities must act now on energy transition Dana Hanson at EY Americas urges US utilities to reinvent themselves multiple entry points. Utilities can improve security by using risk-informed approaches to manage their assets and operations.

Phase 2: Sense and enable Advanced sensor deployment will create situational awareness at the grid edge and enable improved real-time monitoring and control. DER management systems (DERMS) and broader advanced distribution management system (ADMS) strategies will

become increasingly important with greater DER deployments. With real-time visibility over power flows, distribution utilities can position themselves as neutral market facilitators and platform providers. Customer inquiries, connections and installations can become more streamlined. Non-wire alternatives can be deployed across the network for managing energy consumption more sustainably. Many of these capabilities will require new strategic partnerships, with the exact role of the utility still to be determined and likely differing according to state regulation and legislation (for example EV opportunities and value pools, such as public charging infrastructure).

Phase 3: Optimise and control The final investment phase prepares distribution utilities for additional higherlevel responsibilities and enhanced customer engagement. By investing in full DERMS/ ADMS capabilities, advanced analytics and dynamic pricing mechanisms, the distribution utility will be better placed to balance local supply and demand in a more integrated way.

DER optimisation and a more streamlined coordination of wholesale energy market transactions will ensure power reliability at the local level. At the same time, utilities, their partners and third parties will be able to provide customers with enhanced experiences and additional services, as innovation platforms evolve and mature.

Equipped with new capabilities, distribution utilities can embrace a future enriched by DERs – and become crucial players in the clean energy ecosystem.

By Dana Hanson, Principal, Ernst & Young LLP and EY Americas Power and Utilities Leader.

The views expressed are those of the author and are not necessarily those of Ernst & Young LLP/EY

UK supply chain opportunities There is a need for UK services and products to help US utilities with the following distribution challenges: Fortify defences against cyber attacks Battery-storage at grid scale and behind-themeter; battery storage-safety and incident response Integrating DERs into utility’s distribution grid in cost-effective manner – significantly, solar in states of California, Arizona, Hawaii

Investigate impacts of 5G cellular equipment on distribution practices For underground distribution systems: emerging inspection methods, new maintenance approaches, asset life extension, and work practices Asset management programme to monitor and maintain ageing infrastructure with minimal tools Developing adaptive and scalable protection solutions for active distribution systems SOURCE: UK DEPARTMENT FOR INTERNATIONAL TRADE

www.the-eic.com | energyfocus

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Power Energy storage

Powering tomorrow’s

aerial vehicles

New advances in energy storage technology are enabling new designs in aerial vehicles. SoďŹ ane Boukhalfa and Jorge Hurtado at PreScouter look at the emerging technologies and their applications in the energy industry

(Above) Artistic representation of Stratobus

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Energy storage: Power

IMAGES: THALES ALENIA SPACE; E. BRIOT / INTELLIGENT ENERGY

T

he latest surge in the innovation of aerial vehicles brings with it a pair of ‘green’ lenses that will support the energy industry in its transformation to a low-carbon economy. Many of the vehicles currently being designed for future applications are relying heavily on the use of renewable energy sources such as solar and wind.

For the oil and gas industry, zero-net emission, highly efficient and driverless aerospace vehicles can fulfil the roles of exploration, mapping and surveillance of remote areas, as well as the transportation of goods and inspection of oil and gas company assets. Various improvements in renewable energy storage are allowing these vehicles to stay in the air longer and to carry higher payloads, with simplified maintenance schedules.

These developments are occurring as the oil and gas industry focuses on reducing its operational environmental footprint. While about 15% of indirect greenhouse gas emissions are produced as a result of the extraction of oil and gas, and its transport to end-users, the demand for fossil fuels is forecast to increase 25% by 2040, even as calls to reduce emissions gather pace.

Technology will be key in enabling the oil and gas industry to meet this increasing demand. Technology’s contributions could include extending operations to remote places, making the industry more operationally efficient during resource extraction, and the adoption of artificial intelligence and wearable technologies, among other things.

A recent report released by PreScouter investigated this area and found that the aerospace vehicles of tomorrow will target three main applications: transportation, telecommunication nodes, and surveillance and monitoring. What are the potential applications for the oil and gas industry specifically? How can oil and gas companies benefit from these aerospace technologies, beyond the traditional drones we already know about? Below, we profile several innovative aerospace vehicles and highlight their potential applications in the oil and gas industry.

The Stratobus™ offers continuous regional coverage that can carry payloads for oil and gas operation sites either on the ground or at sea.

For observation missions, it can provide video surveillance of activities of offshore platforms, and for security, it can anticipate potential terrorist attacks on infrastructure. In addition, this airship can provide real-time weather and environmental monitoring that would otherwise be impossible to measure in extremely harsh environments.

It can increase network capabilities within and between areas of operation using 4G or 5G telecommunications, and allows for hyperspectral imaging (for example, for finding spectral signatures for new oil and gas fields, or to monitor assets and emissions).

Exploration, mapping, surveillance and connectivity platforms

Monitoring and inspection of pipelines in well and offshore oil rigs

The Stratobus™ (Thales Alenia Space) is an autonomous stratospheric airship that operates from an altitude of ~11.81 miles (20km). The airship is capable of monitoring extensive areas by eliminating terrain masking, and due to its ability to withstand winds of up to 56 miles/hour (90 km/h), the Stratobus™ can linger over any particular area. This high altitude platform system could be an ideal aid for the oil and gas industry because it can run continuous operations for up to five years. The airship is equipped with 10,764 square feet (1,000m2) of photovoltaic cells, with a 24% efficiency rate.

The Hydrogen Drone, currently being developed

by Project Rachel led by the Productiv company, is the first hydrogen fuel cell-powered multi-rotor unmanned aerial vehicle. The drone has been reported to remain in the air for up to 70 minutes with a 5kg payload, making it twice as efficient as current battery-powered drones. The prototype is testing fuel cell power modules (650W and 800W) that facilitate higher power outputs. The drone can refuel faster and has a longer flying time than those operated with batteries. The operation is quiet, and does not vibrate. The drone is equipped with a

The UAV Hydrogen Drone is powered by fuel cells from Intelligent Energy

Aerial vehicles currently being designed for future applications are relying heavily on the use of renewable energy sources such as solar and wind

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Power: Energy storage

Transportation of heavy loads to inaccessible places Solar Ship is a Canadian company that has developed the prototypes of semi-buoyant aircraft designed for transporting heavy loads of up to 35 tons. Nanuq, the largest aircraft, is 100% powered by solar energy and exhibits an excellent short takeoff and landing performance. Nanuq can meet the most critical demand for transportation of cargo needed in the most isolated regions with no other access routes. Some examples of heavy loads include materials for the construction and/or decommissioning of wells, as well as large freights containing outsized loads, dangerous goods and hazardous materials. The company has also developed prototypes of two other smaller aircraft with payloads of 200kg and 2,000kg respectively. Both smaller units can be outfitted with floats that require takeoff and landing from aquatic bodies.

Improvements in energy storage are enabling vehicles to stay in the air longer and to carry higher payloads, with simplified maintenance schedules

multi-rotor engine powered exclusively by hydrogen (~300 bar; at 1 bar hydrogen has approximately 7% of the density of the air) contained in a 6-litre cylinder. The payload capacity is 5kg and the drone is capable of remaining below 20 kg of maximum takeoff mass.

Productiv’s Hydrogen Drone offers a highly efficient performance due to its long travel distance, which translates to broader coverage and superior performance under harsh conditions, compared to current drones in the market. In addition, payloads can be used to equip drones with technology that can improve predictive maintenance, monitor wells and pipes, provide real-time location and asset data, support communication from remote areas, and improve automation of workflows.

SolarShip is a solar-powered, helium-filled cargo plane that floats

Exploration, communication, gathering of real-time data, and observation The h-aero® is a solar-powered helium unmanned aerial vehicle that offers versatile monitoring capabilities with interesting applications that can be extended to oil and gas activities. It can be used, for instance, in resource exploration surveys, for close-up inspections of wells and pipes, for internet and communication relay purposes, and to provide real-time monitoring of assets. This UAV is made of fibre composites, canvas and high-density foils. Solar cells allow the flight system to complete an entire day mission with a payload of 3kg.

The h-aero® is able to switch between a rotationally symmetric (helicopter) and a mirror-symmetric (airplane) configuration, allowing for a variety of missions. The company is currently in an initial market commercialisation stage which can help to customise the requirements needed for particular industrial activities.

Staying ahead of the curve As seen so far, the evolution of aerospace vehicles for tomorrow provides a myriad of applications for the oil and gas industry. The proliferation of these vehicles is enabled by developments in fuel cells, batteries, and solar panels, among others. Most oil and gas companies are still using traditional unmanned aerial vehicles and aircraft for monitoring or transporting applications.

For increased safety, environmental performance, productivity, efficiency, and reliability, and to stay relevant in a changing energy landscape, firms need to start considering the benefits and new applications being enabled by these new designs and energy storage solutions.

By Sofiane Boukhalfa, Technical Director, Aerospace and Defence, and High Tech Practice, and Jorge Hurtado, Technology Consultant, PreScouter

IMAGES: HYBRID-AIRPLANE TECHNOLOGIES / THE SOLIDWORKS BLOG

(Above) h-aero solar-powered helium UAV

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BO

EIC

O NO K IN W G

NATIONAL

DINNER 2020

22 OCTOBER

New venue Join us at the iconic De Vere Grand Connaught Rooms for a glamorous night of networking, entertainment, awards and great food in a truly palatial setting.

Just five minutes from Covent Garden and Holborn tube stations this venue offers excellent transport links and accommodation options for you and your guests.

THE UK’S PREMIER ENERGY INDUSTRY EVENT Join us at the most prestigious event in the UK energy industry’s supply chain calendar as we celebrate the achievements and successes achieved by YOU, our members.

Your guest speaker The no-nonsense, legendary comedian that is Jimmy Carr is set to return to the EIC National Awards Dinner after first appearing on our stage in 2017.

He’s back to deliver an afterdinner speech that’s guaranteed to entertain and is not for the faint-hearted.

Take advantage of this unbeatable early bird offer to host and entertain your own VIP guests at an unforgettable evening.

Cost Table of ten: £1,990+VAT Individual place: £199+VAT

Awards ceremony

Corporate hospitality is a great way to help improve relationships within your network. Contact Charmaine Thompson, EIC Sales Executive, to find out how to exceed your client’s expectations and differentiate yourself from the competition.

The EIC awards ceremony will recognise companies which offer a product or service with a positive and significant effect on the UK energy supply chain. Details of award categories and how to enter can be found on the website here:

+44 (0)7710 996 915 charmaine.thompson@the-eic.com

PW Battery Tech_Spring 2020_Energy Focus 39

BOOK TODAY

T: +44 (0)1429 874 450 E: nationalevents@the-eic.com www.the-eic.com/nationaldinner

© EDF Energy 2017

Sponsorship opportunities

www.the-eic.com/Events/ EICNationalAwardsDinner/Awards

16/04/2020 14:18

Nuclear SMRs

(Right) The world's first simulator control room at NuScale Power's SMR design facility in Oregon

Europe’s big plans for

small modular reactors

W

hen the new President of the European Commission invites a teenage climate activist to the launch of a proposed new law to cut carbon emissions, the debate about climate change is getting broader.

When that activist dismisses the law that Ursula von der Leyen called the ‘heart of the European Green Deal’ as ‘empty words.... surrender’ and accuses the EU of only ‘pretending’ to be a leader on climate change, the debate is getting franker, too.

Filling the green power gap Until two years ago, these events would have been unthinkable – but global concern about climate change is rising fast. The need for a much more rapid switch to low-carbon technology is now extremely urgent.

The significant and welcome growth of renewable energy, aided by the falling cost of solar and wind power, is set to continue.

However, it is clear that for the world to have

any chance of reaching net-zero emissions by 2050, significant additional nuclear capacity is also needed.

This presents a huge opportunity for the nuclear industry. In much of Asia, the Middle East and countries around the borders of the EU such as Belarus, Russia, Ukraine, Turkey and the UK, large nuclear plants are already under construction or in development.

Within the EU, however, investment in new nuclear plants is mostly confined to east and central European member states.

Smaller is better A game-changer in this scenario may soon appear in the form of small modular reactors (SMRs). SMRs can be sited in more varied locations, away from large grid systems, and can bring power to remote or less developed areas, or those where demand is too low to justify bigger plants. They can also fit easily on redundant brownfield sites where coal-fired power stations may have previously operated and which are not large enough to host a 1GW nuclear reactor.

The lower initial capital investment requirement and shorter build time makes financing easier and opens up the chance of greater reliance on private funding.

Construction cost savings may result from modular designs that enable manufacture to take place in controlled conditions on a factory assembly line – potentially also improving build quality and efficiency.

A high level of passive and inherent safety features can be integral to the designs. The possibility of siting SMRs below ground level can reduce vulnerability to terrorist threats.

Advanced reactors can not only generate electricity but also supply heat to homes, businesses and industrial processes. They can produce hydrogen – whose important future role in cutting emissions is becoming more widely recognised – as well as synthetic fuels to help the transport sector transition away from oil.

Floating innovation Rosatom’s pioneering work on floating reactors opens the possibility of SMR technology being deployed in a

IMAGES: ROLLS-ROYCE / NUSCALE POWER LLC / ROSATOM

Tim Yeo at the New Nuclear Watch Institute on putting SMRs on the map

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SMRs: Nuclear

(Left) Rosatom’s first-of-a-kind floating nuclear power plant, Akademik Lomonosov, is based on SMR technology

For the world to have any chance at all of reaching net-zero emissions by 2050, significant additional nuclear capacity is also needed wider range of locations, including some too hostile for other types of nuclear plant.

Floating reactors can also provide fresh water, an essential consideration in some places. The first floating reactor, the Akademik Lomonosov, has just started operating in Chukotka, Russia.

Closer to SMR reality With all these potential benefits, it is not surprising that Europe is taking a growing interest in SMRs. Memorandums of Understanding (MoUs) have already been signed in several European countries.

Last year, NuScale Power signed two MoUs – one with Romania’s current nuclear operator Societatea Nationala Nuclearelectrica SA, which provides 20% of the country’s electricity; the other with CEZ Group, which produces almost 75% of the Czech Republic’s electricity from fossil fuels, renewables and four Russian-designed nuclear reactors. More recently, NuScale has also finalised an agreement with Ukraine’s State Scientific and Technical Centre for Nuclear and Radiation Safety. These MoUs all provide a basis for exploring the potential for deployment of NuScale’s innovative technology in the three countries.

Another leader in the SMR race is GE Hitachi Nuclear Energy, which signed an MoU with Polish chemical company Synthos last October to collaborate on the deployment of its BWRX-300 SMR in Poland. GE Hitachi also has an agreement with Fermi Energia OU to look at the feasibility of building the same design in Estonia.

The great SMR race Many other SMR designs are at different stages of preparation in North America, China

may move quickly to nth-of-a-kind reactors with its RITM-200.

Whether that or any other design ends up being built in Europe may depend on a common-sense licensing regime emerging, and SMRs achieving cost reductions. The jury is still out on this, but the potential for cost-competitive products clearly exists.

The decade of SMR action?

One UK SMR power station can produce 440MWe of electricity – enough power to: • Supply a city the size of Leeds • Charge 88,000,000 smartphones • Light 40,000,000 bulbs • Charge 62,857 electric cars and elsewhere. Some of these may end up being developed in Europe.

The leading British player is Rolls-Royce, which is working with the Nuclear Advanced Manufacturing Research Centre and 10 UK companies. The availability of sites that are licensed for nuclear installations should facilitate the rollout of SMRs in the UK. The current government appears supportive, following a period during which the signals from Whitehall have sometimes been mixed.

Michael Liebreich suggested last year in Bloomberg New Energy Finance that Russia ‘appears to be well in the lead in the SMR race’. Drawing on its experience with nuclear-powered icebreakers, the country

Even outside the EU, the UK can be a player in the SMR marketplace. A strong and consistent government commitment to nuclear energy is needed to boost investor confidence and to encourage and nurture a trained and skilled workforce. Business and trade unions alike will respond to the right political signals.

At a recent meeting of Canadian and British energy and climate experts organised by Kirsty Gogan of Energy for Humanity, the attitude towards SMRs was positive, without being dismissive of the challenges that remain. These include the hostility of some environmentalists to all things nuclear.

Encouragement was drawn from two campaigners who identified as ‘evidencebased greens’ – former opponents of nuclear who are now supporters.

In Europe, the immediate task is to secure the European Commission’s recognition of the essential role of nuclear energy, and to maintain the right of individual EU member states to decide their own energy mix. With those pre-conditions in place, SMRs could be on the way, with Europe in the vanguard.

By Tim Yeo, Chairman, The New Nuclear Watch Institute

(Above) Rolls-Royce sees SMRs on the UK grid by 2029

www.the-eic.com | energyfocus

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20 D NE -2 A W 1 O TE CT S O BE R NC Waste Management_Spring 2020_Energy Focus 42

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16/04/2020 14:20

Nuclear Waste management

Finding a solution for the legacies of UK nuclear power Managing radioactive waste needs an integrated approach, says Karen Wheeler at Radioactive Waste Management

R

adioactive waste must be managed safely and responsibly to protect people and our environment. Around 90% of the UK’s radioactive waste generated during the past 70 years is classified as low-level and is already being safely disposed of at the Low-level Waste Repository in Cumbria or other existing and specially designated, licensed surface facilities.

The remaining 10% is classed as higher activity waste, which will continue to be radioactive for thousands of years. This is currently being stored safely and securely in interim facilities at more than 20 locations around the country. Still, these facilities require constant monitoring, ongoing maintenance and the costly re-packaging of waste over the long-term. They will also remain vulnerable to the environmental and social risks and changes, such as glaciation, sea-level changes and extreme weather, that will occur over many thousands of years.

IMAGES: GETTY

GDF – the best option for hazardous waste We need to safely and permanently dispose of this waste in a geological disposal facility (GDF) – a highly engineered network of vaults and tunnels built into the rock many hundreds of metres underground to ensure no harmful levels of radiation ever reach the surface environment.

Geological disposal is internationally recognised as the best long-term solution for higher activity radioactive waste. The UK government adopted geological disposal as its policy for managing this type of waste following recommendations from the Independent Committee on Radioactive Waste Management. The Committee has carefully considered many alternatives to geological disposal, but they are not

technically achievable, not environmentally safe, or too dangerous to implement.

I am proud to be leading RWM’s work to deliver a GDF. A subsidiary of the Nuclear Decommissioning Authority group, we are working together with those who produce and store nuclear waste to adopt an integrated approach, ensuring it is carefully managed to protect people and the environment, now and in the future.

We are also working in close collaboration with international partners who are ahead of the game. Countries including Sweden, Finland, France and Canada are already working on their plans to construct and operate their GDFs.

A suitable site and a willing community In the UK, our approach is to find a suitable site and a community willing to host a GDF. Hosting a GDF will bring many benefits for the host community – its construction and operation will create substantial numbers of skilled jobs and training opportunities for decades, as well as other significant investment opportunities aligned to the community’s own long-term growth vision.

Evaluating whether a site is suitable and selecting a location will be done based on the following factors: Safety and security – must be assured and endorsed by independent regulators. A GDF will not be built unless we, and they, are satisfied it is safe Community – RWM will consider social and economic opportunities, community wellbeing, and how a GDF can align with the host community’s vision Environment – a GDF is a major environmental protection endeavour and construction of a GDF will need to meet independent regulatory requirements

Engineering feasibility – RWM will need to ensure there is scope for sustainable and safe design and the ability to construct and operate a GDF in the location Transport – RWM will need to ensure the safe and secure transportation of waste, people and other materials Value for money – RWM has a duty to ensure that the costs of each potential location represent value for money At RWM, we are at the start of the process to find a site for a GDF in the UK. We are actively engaging with people and communities across the country to help them find out more about the opportunities this long-term programme could have for them, so they can decide whether their community might be interested.

We feel it is really important that people understand our approach to siting a GDF, so I would encourage readers to visit the dedicated GDF website: www. geologicaldisposal.campaign.gov.uk.

By Karen Wheeler, Chief Executive, RWM www.the-eic.com | energyfocus

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Renewables Canary Islands

T

o reduce the current dependence on foreign energy and cut CO2 emissions, maximising renewable generation in the Canary Islands’ power systems is one of the regional government’s main energy policy goals.

The islands have a high potential for the development of renewables, with good wind, solar,water and geothermal resources and flexible demand potential.

These conditions, combined with the significant reduction in renewable technology costs that makes it competitive, represent an opportunity for UK firms looking to do business in the islands.

Buoyed by the success of the smallest island, El Hierro – which is close to becoming the first island in the world to become fully self-sufficient for renewable electrical energy – and attracting interest from multinationals, the Canaries look set to be a proving ground for developing renewables.

New energy model The Canary Islands’ electric power system is evolving towards a new energy model, based on renewable energies, that is more efficient and sustainable. In 2019, the Canary Islands recorded a 56.2% increase from 2018 in renewable energy production, according to statistics published by Spanish grid operator RED Eléctrica de España (REE) – and this trend is expected to continue.

Demand for electricity at the end of last year climbed by 0.4% from 2018 to 8,875GWh – 16.4% of which was covered by local renewables. The islands’ total installed power capacity amounted to 3,012MW.

A carbon-free future As the islands plan to reduce reliance on imported fossil fuels, the regional government is preparing a new ecological transition plan, which aims to reach 45% penetration in renewables by 2025.

Plan 2025 is a national initiative and involves investments in efficiency gains,

Canary Islands Energy Strategy Plan 2025 targets Conventional thermal power 2,600 MW Wind 1,025 MW Offshore wind 310 MW PV 300 MW Solar thermal 300,000m2 Hydro 2 MW Biomass 25.5 MW Geothermal energy 30 MW Pumped hydro 331.3 MW Number of electric vehicles 107,000 Electric vehicle electricity demand 297,593 MWh Total electricity demand 10,856 GWh Renewable energy penetration (electricity) 45% Renewable energy sources vs. primary energy 12%

Small islands,

big opportunities With its natural and financial advantages for the renewable energy sector, companies wanting to get a toehold in the EU post-Brexit should turn to the Canary Islands, writes government minister José Antonio Valbuena Alonso

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Canary Islands: Renewables

improvements in the transport network, energy storage systems and interconnections between islands to strengthen existing networks.

The islands continue to make progress towards energy self-sufficiency in renewables, and several projects are in the pipeline. These include: Offshore wind energy – subject to a public tender and with an investment of €900m, one of the world’s first floating offshore wind farms is planned off the south east coast of Gran Canaria,comprising 40 wind turbines.

Each of these will generate at least 8MW, obtaining power of 320MW. Onshore wind energy – following the auction of almost 184MW of wind power in December 2018, the winning projects (including Naturgy Energy's 29.2MW

IMAGES: GETTY

Business opportunities for UK companies The complexity of all projects planned provides business opportunities for companies that offer innovative solutions or carry out R&D activities related to: Testing of renewable energies-related technologies Development of electronic components for the optimisation of renewable energies systems Development and implementation of distributed generation systems (selfconsumption, micro-networks) Implementation of demand management solutions associated with manageable loads and automation of these processes Carrying out studies on the integration of renewable energies in distribution networks and assessment of additional equipment providing network services Deployment of solutions related to smart grids and communication networks for coordinated management in real-time Implementation of demand management solutions associated with manageable loads and automation of these processes Testing of renewable energies’ system components Sustainable mobility (electric cars, hydrogen, etc.)

Platform to entry in the West Africa market from a secure and European place

Installed power capacity (2019)

Electricity demand (2019)

Wind 14.2%

Biomass 0.1%

Wind 1,138.3 GWh

Biomass 9.8 GWh

Solar Photovoltaic 5.5%

Conventional thermal 79.7%

Solar Photovoltaic 277.9 GWh

Conventional thermal 7,422.3 GWh

Hydro 0.5%

Total 3,012 MW

Hydro 26.7 GWh

Total 8,875 GWh

Puerto del Rosario and Disa Eólica’s 19.2MW Hoya de Lucas wind farms) must be online by the end of 2022. The Spanish central government intends to hold a second tender, which is expected to promote the installation of at least 180MW in 2020 with a budget of €80m Solar energy – a major 350MW solar photovoltaic energy project is planned with a 1GW storage system based on lithium technology. The Institute of Technology and Renewable Energies and the Institute for the Diversification and Energy Saving are involved in this €300m+ project Hydroelectric energy – REE has been commissioned to build and operate the €390m Chira-Soria reversible hydro pumping project in Gran Canaria. This will be the largest civil engineering work planned in Spain. The 200MW power plant is expected to be commissioned in 2025. This project could be reproduced in five other areas in the islands.

Key players The Canary Islands government has favoured the creation of public and private companies in the renewables sector. Key players in the public sector include the Technological Institute of the Canary Islands, The Institute of Technology and Renewable Energies and PLOCAN – The Oceanic Platform of the Canary Islands. All collaborate with private companies to carry out research studies or projects.

In the private sector, REEhas the responsibility of planning, developing and maintaining the transmission grid in the insular and extra-peninsular systems. This is also true of UNELCO – Union Electric Company, founded in Gran Canaria in 1930, dedicated to power generation – which had control of most of the production of electricity in the Canary Islands. In 1988 it was acquired by the multinational Endesa/Enel.

Gorona del Viento El Hierro, S.A., is in charge of the management, operation and maintenance of the ‘Hydro-wind of El Hierro’. This hydroelectric plant produced 56% of all the energy needed by its inhabitants. In 2019, the island operated on clean energy from the Hydro-wind plant for 18 days in a row.

Benefits of doing business The Canary Islands enjoy a unique corporate tax rate of 4% for renewables, R&D and technology innovation in a programme approved by the European Union. There is also a cashback scheme on investments of 35%–55%, and up to 90% in some cases. This is the most generous incentive scheme in Spain, and possibly in Europe.

By José Antonio Valbuena Alonso, Regional Minister for Ecological Transition, Combat against Climate Change and Territorial Planning, Government of the Canary Islands www.the-eic.com | energyfocus

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Renewables Tidal energy

The challenges facing

tidal energy While the popularity of tidal power is low, the attractiveness of this form of energy is high. David Casale at Turquoise International looks at taking tidal to the next level

U

K tidal energy has seen little progress in the 20 years since the idea for the European Marine Energy Centre was conceived. A new challenge may be for it to rebrand as the UK Marine Energy Centre, as more companies move out to Canada and France.

In finance, five principles are often used to help form an investment case: How big is the market?

How much of the market can the company/ technology serve?

What will be the profits when the company reaches this goal?

How much will it cost to go on this journey?

How will the investor be repaid for sharing these risks?

So, how might tidal energy address these challenges?

How big is the market?

Perhaps the biggest challenge is to determine the size of the market opportunity. In the past, commentators talked about 20GW of power from UK waters – about half the capacity needed by the National Grid on a peak day. Even adjusted for the tide going in and out, this would only be around a quarter of UK peak demand. However, this is not the market for tidal, and to gain access to this market, tidal energy would need to compete

on cost. Currently, it does not seem likely that tidal will ever match the newly empowered onshore wind – and, of course, the technology still needs to work.

The recent UK Energy Systems Catapult ‘Innovating to Net-Zero’ report mentions tidal twice in its footnotes, demonstrating that this is simply not a technology featuring in its plans at scale much before 2050.

Surely, then, the market for tidal energy is different: smaller and more local, in places where the grid is weak or non-existent. This could include islands, as well as locations where local preferences demand extra effort to meet net-zero – those near global tech giants and their net-zero promises, for example. This market is significant and

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Tidal energy: Renewables

piles of rocks), as well as tethered buoys below the surface and snakes. All of these have failed – often due to a complete lack of understanding of harsh sea environments.

Instead, a fleet of small, surface floating, low-cost, low-tech devices is emerging. This might sound negative, but at least these new surface devices are working!

No other technologies are currently available to match the development made by Sustainable Marine Energy, Orbital and others, so the 200MW market is all for them.

What will be the profits when the company/technology reaches this goal?

growing, but it is not 20GW. Let us accept that perhaps 200MW is as much as even the most patient investors are concerned would need to be reached within 10 years.

IMAGES: ALAMY

How much of the market can the company/technology serve?

I have disallowed large-scale tidal players.

MeyGen, for example, has been in the big tidal game for 12 years and now produces 6MW at a load factor of 32% for around £50m. However, following a loss posted last year, the investor community will be more cautious. What is more, the Swansea Bay tidal lagoon has hit a cost-of-power stop.

We have seen attempts to mount tidal turbines on the sea bed (on frames above

Tidal is not going to be a power margin that drives the profitability of this industry. We have seen enough of the approach and relative cost (compared to other forms of generation) to know that the niche in which it is to develop will not pay a high price for power. This niche will hopefully pay a high price for capacity, though – not only to install the turbines in the first place, but also, just as importantly, to maintain them. Tidal energy is a lifestyle choice, not a commodity product. Again, this is not so bad – lifestyle products can be very profitable! Both Canada and France are probably going after tidal for lifestyle rather than economic reasons, as they want to be leaders in the fight to reach net-zero. This way, they can be doing something about it – a sensible approach.

It would be hard to come up with a simple gross profit margin in this article, but suffice to say it would need to be enough to pay for the equipment, maintenance, overheads and some small return to investors. It seems unlikely that a premium margin will emerge for this product.

How much will it cost to go on this journey?

Timing is everything and, in that regard, investors today are benefitting from a considerable sum of money that has been invested and lost in poorly-conceived projects. The benefit, however, is that the people working in the industry are wiser, the supply chains are established at realistic price points, and the number of operating hours from early prototypes is growing.

The cost of getting from our current position to a fully established, highly available 200MW operating fleet of floating

The market for tidal energy is smaller and more local, in places where the grid is weak or non-existent devices worldwide is manageable. Still, given the small market size and low margins, it would perhaps be unwise for there to be more than a couple of players in this market – this certainly seems to be the case now.

How will the investor be repaid for sharing these risks?

This is a challenge; the risks in tidal energy are significant and could be summarised as: Market risk – will the lifestyle buyers put the money behind a fleet of tidal energy projects? Yes, for as long as subsidies are on offer, but given the wide gap in economic value between other renewables and tidal, this remains a risk Construction risk – significant risk reduction can be achieved with standardisation, supply chain co-operation and design. The worst here is probably over (and it was bad) Operational risk – operations at sea can be challenging due to changing weather conditions. While this is very site-specific, many have met this challenge with simple surface and easily towed designs Durability – we will have to wait and see if these devices can survive significant periods of remote operation.

Despite a niche future for tidal in the transition to net-zero, a significant improvement in fortunes for current players and the future industry could be established with a small operating fleet of flexible and cheap mounted surface devices. I wish them well as they move towards 5MW arrays, en route to a 200MW industry.

By David Casale, Director, Turquoise International www.the-eic.com | energyfocus

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News Products and services

Company news UnitBirwelco achieves first class certifications One of the UK’s only full-service suppliers, UnitBirwelco has achieved accreditation to BS EN 1090-2 :2018 EXC 4, the highest achievable execution class. This shows the company has the capability and skill to work on the most demanding and difficult projects in areas such as construction, rail, nuclear, and oil and gas, and can provide the highest level of compliance to the CE marking that is needed in structural steel regulation. UnitBirwelco also achieved The American Society of Mechanical Engineers’s U & S and National Board NB & R stamps in 2019. UnitBirwelco’s transformation strategy also includes implementing ISO 14001 and achieving Cyber Essentials certification across all divisions.

With more than 100 years of experience, covering three strategically located sites across the UK, this push for accreditations is helping to transform the UnitBirwelco group and expand its capabilities. www.unitbirwelco.com

Ducab: Powering the energy sector through custom cables With four decades of expertise behind it, Ducab plays an integral role in powering the evolution of the energy sector. From developing customised cables to providing installation supervision, storage, training, certifications and more, Ducab will continue to contribute to the growth of the energy sector in the UAE and beyond, for many years to come.

As the energy sector in the UAE – and the wider world – evolves from being 100% hydrocarbon-based to adopting alternatives going forward, Ducab has taken on an innovation mindset and created cables specifically suited to the need of the UAE’s developing industry. The UL approved SolarBICC line of cables and wires was introduced, followed by NuBICC, catering to the burgeoning solar and nuclear power projects respectively in the UAE and beyond.

Ducab also meets the challenging demands of the wind energy sector, and has supplied a wind scheme in the Dhofar region of Oman and cables for a number of wind projects in North Africa. www.ducab.com

CompEx certificate extension process As the COVID-19 outbreak evolves, global governments, healthcare providers, employers and communities are responding to specific local conditions in order to contain the outbreak. CompEx has been working with employers and independent training providers to monitor the evolving situation and put appropriate measures in place to support key stakeholders.

Our key decision has been to establish a certificate extension process, meaning CompEx practitioners can apply for a three-month extension if their certification is due to expire. More details can be found at www.compex.org.uk/about/ coronavirus-covid-19-update. Our advice remains that employers and individuals should contact their preferred training centre to rebook courses.

We are working to support our people and have a business continuity team in place. We have also enabled our administrative team to work from home so key services can be maintained. This is an unprecedented time of uncertainty and we will continue to provide updates via our website and training partners. www.compex.org.uk

Demand for green technologies fuels Schneider Electric’s UK expansion Schneider Electric is pleased to announce the expansion of its UK manufacturing facilities in Scarborough and Leeds, driven by rising demand in renewable and green technologies.

The business is set to invest in a multi-million pound upgrade and expansion of its Leeds and Scarborough manufacturing facilities.

The Leeds plant will expand production by 10%, creating new jobs and adding a new test cell and assembly line to cater to rising demand from the renewables industry. Scarborough adds a 1,000 square metre factory extension and a new painting line to focus on outdoor low-voltage solutions.

Mike Hughes, Zone President, Schneider Electric UK and Ireland, said: “We believe there is huge potential to enhance the skills, capabilities and production facilities in our Leeds and Scarborough sites to support the UK’s transition to renewable energy with high quality products and technology manufactured here in the UK.” www.se.com/uk/en

www.the-eic.com | energyfocus

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