Renewables and Offshore in North East England and Scotland

SPECIAL REPORT: RENEWABLES & OFFSHORE IN NORTH EAST ENGLAND & SCOTLAND

2 SPECIAL REPORT: RENEWABLES & OFFSHORE IN NORTH EAST ENGLAND & SCOTLAND

dim or switch

back to high skill

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deep sea diversity

Will we still be able to turn on the lights?

Academy promotes theory with practice

There’s a future for coal-powered energy

Umbilicals are the ultimate lifeline

TRAINING FOR THE

ENERGY INDUSTRY BENEFIT FROM A RANGE OF EMPLOYER TRAINING COURSES AND APPRENTICESHIPS AT OUR BRAND NEW PURPOSE BUILT ENERGY ACADEMY BASED IN NEWCASTLE. The Energy Academy, initially specialising in offshore wind engineering and technologies, will work closely with employers in the sector, with facilities to develop and grow business ideas including workshops, laboratory and incubation facilities.

We will also be offering a wide range of training courses available from November, these include: • Training of offshore manufacturing apprentices and higher apprentices • Welding and fabrication • Instrumentation and SCADA • CNC - full five axis training • Introduction to renewables • Sustainability courses

FIND OUT MORE For more information on the opening of the academy or if you are interested in opportunities for partnership working on this exciting development speak to our business contact team today on 0845 600 4140 or email employers@ncl-coll.ac.uk.

SPECIAL REPORT:

RENEWABLES & OFFSHORE

WELCOME Energy policy is attracting immense media attention and is the focus for an increasingly intense national debate and this is a debate with particularly strong significance for the North East of England and Scotland.

The North Sea, with its oil and gas fields, has dominated our economies since the 1970s and, despite the vast amounts of resource already extracted, it is likely to continue to do so for decades to come. There are four reasons for this: One, there is still plenty of oil and gas left in the North Sea fields, which, thanks to rising prices and improved technology and techniques, can and will be economically brought ashore.

Two, Dogger Bank will be the site of one of the UK’s biggest wind farms and commissioning it and maintaining it will sustain intense activity in Scotland and the North East.

Three, offshore skills honed and experience gained in the North East and Scotland will be readily transferable to other renewable sources all over the UK and Europe – technologies which include wind, tidal and even nuclear.

Finally, other energy options, such as Underground Coal Gasification have the potential to generate much activity in the old offshore centres. In this issue of BQ2 we look at investments being made, the research under way, the training being provided and many of the businesses engaged in the thriving and optimistic offshore and renewable sector.

CONTENTS

room501 ltd

04 NEWS Significant renewables activity in North East England and Scotland

12 dim or switch Peter Jackson asks when – and if – the lights will continue to come on

16 wind in its sales Narec must now start to pay its way

22 solid ground Call for academics to become savvy towards commercial opportunities

26 back to high skill The Energy Academy’s newly-qualified workforce is tops in theory and practice

30 return of a north sea bonanza?

BP’s £4.5bn investment is a massive boost to prospective energy supplies

34 seams natural Looking afresh at coal power

39 the race is on

RENEWABLES & OFFSHORE

Christopher March Managing Director e: chris@room501.co.uk George Cheung Director e: george@room501.co.uk Euan Underwood Director e: euan@room501.co.uk Bryan Hoare Director e: bryan@room501.co.uk Mark Anderson Director e: emark@room501.co.uk EditorIAL Peter Jackson e: p.jackson77@btinternet.com Kenny Kemp e: editor@bq-scotland.co.uk Design & production room501 e: studio@room501.co.uk Photography Chris Auld Photography e: chris@chrisauldphotography.com advertising If you wish to advertise with us please contact our sales team on 0191 537 5720, or email sales@room501.co.uk

High profile backing for Scotland’s renewables industry

42 deep sea diversity Umbilicals; the ultimate offshore lifeline

46 quay investment Right place, right time for Teesside firm

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CONTACTS

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room501 Publishing Ltd, 16 Pickersgill Court, Quay West Business Park, Sunderland SR5 2AQ www.room501.co.uk room501 was formed from a partnership of directors who, combined, have many years of experience in contract publishing, print, marketing, sales and advertising and distribution. We are a passionate, dedicated company that strives to help you to meet your overall business needs and requirements.

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While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All information is correct at time of going to print, November 2011.

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SPECIAL REPORT | AUTUMN 11

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AUTUMN 11

First minister praises tidal power programme, landowners warned over wind farms, Scotland rides the waves, diesel engines tick over nicely and a university campus builds an eco house safety and specialist training for the emerging renewable energy sector.

Advanced Industrial Solutions received support from North Tyneside Council for the centre – which will be part of North Tyneside’s Learning Village scheme.

As well as providing skills training for the offshore industry, the centre will also offer school visits and work experience opportunities for young people.

Paul Stonebanks, managing director of AIS, said: “The North East is already well recognised as a service provider for the offshore sector and we are keen to enhance that reputation. People travel from across the globe to our existing centre and hopefully this new enhanced facility will bring even more international delegates, who in turn will be spending money in the local area.

“The offshore sector, particularly renewable energy, offers enormous opportunities as it becomes increasingly important to the UK and we’ve got ambitious plans to capitalise on every opportunity available to us to establish AIS and North Shields as a leading player.”

North East Chamber of Commerce member Paul Stonebanks, managing director of Advanced Industrial Solutions

>> Ambitious plans A new purpose-built offshore training centre which will create up to 80 new jobs over the next three years is to be built on North Tyneside.

The Offshore Skills Centre is being developed

by Advanced Industrial Solutions (AIS) to cope with the growing demand for training courses from the offshore sector.

The new centre will more than double the size of AIS’s existing 10,000 square foot facility to provide industrial training for an additional 2,000 delegates per year in qualifications such as rope access, insulation, working at height, confined space, rigging and lifting, health and

SPECIAL REPORT | AUTUMN 11

>> Fife investment Shepherd Offshore has submitted its masterplan to revitalise the former Hyundai/Motorola plant in Fife into a renewables hub and bring jobs to the site which has lain empty since being built in the 1990s. The Newcastle-based firm, owned by the Shepherd brothers, is “delighted to be bringing forward proposals to deliver the largest new investment in Fife for more than a decade”.

The centrepiece will be a renewables centre of excellence creating a hub of activity and expertise in the emerging green energy sector which can attract major investment.

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First minister: Alex Salmond

>> Tidal power vision Scotland’s first minister Alex Salmond welcomed an announcement by Kawasaki Heavy Industries (KHI) that it intends to test its new tidal energy system in Scottish waters.

Japan’s KHI will test its new technology at the world-leading European Marine Energy Centre (EMEC) in Orkney, using its expertise in engines, marine propulsion and gas turbines systems to develop a tidal power generation system.

KHI plans to take part in future large UK, Japanese and global projects to harness renewable energy, creating more possibilities for future collaborations in Scotland.

The company’s announcement was also welcomed by Scottish Development International (SDI), which made the connections between KHI, EMEC and the Scottish Government to enable KHI to test its technology in Scotland.

Alex Salmond said: “I am delighted that KHI has decided to trial its new tidal power generation system in Scottish waters at the world-leading European Marine Energy Centre in Orkney.

“It is a very welcome recognition of Scotland’s vast marine renewables potential.

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“Japan is one of the great industrial nations of the world and I am encouraged that it shares Scotland’s vision of building on a strong engineering heritage to harness our natural resources and generate clean, renewable power that can reduce harmful emissions and tackle global climate change.”

>> Employment energy US industrial energy giant Air Products is a step nearer to building a waste-toenergy plant capable of powering 50,000 homes from the site beside North Tees Chemical Complex at Billingham. The 49MW facility now has planning approval from Stockton Council. Up to 50 permanent jobs would be created, along with construction work for up to 700 over three years.

>> Third party warning Landowners must think hard before allowing developers access to build wind farms on their land, says a Scottish legal expert.

“If developers are intending to use the existing roadway (public and roads specific to wind farms), does it need to be upgraded to be of sufficient width to transport the turbines?” asks Kirsty Macpherson, of the Energy, Climate Change & Natural Resources Group at Gillespie Macandrew in Edinburgh. “If yes, do the landowners own the land required to carry out such works?”

She says solicitors are often faced with trying to ascertain the owner of a ransom strip as the land required to upgrade a road that often belongs to a third party. Landowners must also consider whether there is enough capacity in the grid to allow the connection and the additional costs of connection if it is not

NEWS

located on the landowners’ land. Landowners have to be able to offer the land to the developers free of any third party rights such as agricultural tenancies and crofters (Scotland only) and ensure consent and/or resumption of any third party rights is obtained. This often involves the third parties receiving a share of any rent paid to the landowners.

>> Carrier bags bonus A&P Tyne’s workforce at Hebburn on Tyneside could get 5% of their pay in an additional bonus this year as the company works through offshore contracts and sections for the Royal Navy’s two new battleships. They have already received a half-year share of it.

The company has recently completed two orders for Subsea 7 – a world-leading >>

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SPECIAL REPORT | AUTUMN 11

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subsea engineering and construction company. It is also working on a £55m order to build part of Britain’s two new aircraft carriers. Early next year it will build part of the hull for the second carrier.

>> Workforce hots up A subsidised training scheme to advance the microrenewables market in the North East of England is proving a success, with 250 engineers having benefited.

The scheme, set up by Boldon-based community interest company Community Energy Solutions, which specialises in providing affordable energy, aims to make a skilled workforce able to meet demands.

Run in partnership with heat industry supplier Myson at Team Valley, Gateshead, the scheme incorporates a series of one-day courses.

Bluemull Sound (Nova Innovation Ltd); Sanda Sound (Oceanflow Development Ltd); Skerries in Wales (Marine Current Turbines Ltd) and Strangford Lough in Northern Ireland (Minesto UK Ltd). This now takes the number of UK projects to more than 30. The sites range from small technology test schemes for short-term installation to commercial projects with up to 30MW potential generating capacity.

Johanna Yates, offshore policy manager for Scottish Renewables, said: “The announcement confirms the appetite for developers to make use of the wealth of opportunities on offer around Scotland’s coastlines.

“With seven of the eight new sites based in Scotland it reflects the huge resource we have on offer. It is this vast resource that has led to a variety of leases being granted, proving that Scotland is the home of wave and tidal.”

>> Wind firm harvesting A Darlington firm is recruiting more staff in anticipation of further orders for the offshore wind sector. VSMC (Visser & Smit Marine Contracting Ltd), a leading European installer of highvoltage electrical cables, already employs 210 workers on- and offshore from the North East of England, although it only opened a facility in Morton Palms, Darlington, early last year.

VSMC, part of the Dutch group Royal Volker Wessels, is involved in more than a dozen projects in the UK’s wind farm sector, including London Array, the world’s largest offshore wind farm. Much of the work will be done at Darlington, says company director Paul Gilhooley.

>> Ayr’s wind uplift A total of 20 jobs have been safeguarded at an Ayrshire small wind turbine manufacturer after a buyer was found for the troubled firm. Receivers KPMG were called in to Stewarton-based Proven Energy after a fault was found in one of its turbines and the firm did not have the finance to keep trading.

KPMG sold the business and its assets to Kingspan Renewables, part of Kingspan Group, a specialist in sustainable products.

>> Scotland the wave Edinburgh-based Pelamis Wave Power has secured a lease from The Crown Estate to develop a wave farm off the island of Bernera on the Western Isles. The project is expected to generate enough electricity for about 7,000 homes.

The site is one of eight areas of sea bed the Crown Estate has leased out for wave and tidal projects. The sites include a wave project for AWS Ocean Energy Ltd in the Moray Firth, while tidal stream projects were also announced for West Islay (DP Marine Energy Ltd); the Mull of Kintyre (Nautricity Ltd);

SPECIAL REPORT | AUTUMN 11

Powering ahead: Jane Siddle of NEL with Graham Denholm, finance director of Royston

>> Diesel engines quicken turnover Royston Power Generation, bidding to send its £9m turnover upwards over the next four years, is getting six-figure backing from NEL Fund Managers and the Finance For Business North East Growth Fund.

The Newcastle firm sells, installs, maintains, services and repairs diesel engines for customers at home and overseas, and particularly in the marine, offshore, utility and defence sectors. Since it began working with NEL, the firm that employs more than 80 has raised its turnover by more than 50%.

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RENEWABLES & OFFSHORE

AUTUMN 11

>> Awards for green-ness The Scottish Green Energy Awards 2011 celebrates its tenth anniversary on December 1 in a gala awards event sponsored

by Scottish Renewables at the refurbished National Museum of Scotland. The ten awards will be presented for the best politician; contribution to skills and training; community initiative; best innovation; business growth; contribution to sustainable development; best project contribution to supply chain development; public sector initiative and outstanding contribution.

completion by July 2012. Located at the Aberdeen Energy Park, the Hub will offer 15,000sq ft of flexible office accommodation as well as meeting and networking space that includes a café for Park tenants and visitors. The Hub is a key feature of the enhanced tenant services programme at the Aberdeen Energy and Innovation Parks which will encourage knowledge transfer and collaboration between tenants and academia. The project is being delivered by a joint venture between Scottish Enterprise and Buccleuch Property.

>> Take tea in the Park A new £2.4m Hub development to support Aberdeen and Scotland’s leading position in developing global energy technology is on schedule for

>> Greenhouse planted Redcar & Cleveland College has launched a fully-operational eco house to enable businesses to train their staff in emerging renewable technologies. The eco house,

NEWS

named The Greenhouse, showcases the design, installation and maintenance of the most commonly-used equipment in the sustainable technologies market – solar panels, ground and air source heat pump installers, rainwater harvesting and greywater recycling systems. The property, based on the college campus, will enable those on eco skills courses to see how the latest equipment can be used and benefit domestic situations.

>> Profits at the double NOV Mission Products UK, formerly Anson in Gateshead until sold to American interests, has reported pre-tax profits up from £13.5m to £26m as it enjoys a boom on the offshore energy market. It employs nearly 400 people and plans further investment.

Specialists in the supply and hire of linear cable engines, tracked tensioners, carousels and cable handling and laying equipment for the offshore renewable energy market.

Providing expertise, products and services for the subsea telecoms and power cable industries for 25 years.

FHP Ltd, Unit BT 96/4, Fisher Industrial Estate, Fisher Street, Walker, Newcastle upon Tyne, NE6 4LT Tel: 0191 2637272 E-mail: reception@fhpltd.co.uk

www.fhpltd.co.uk Design • Manufacture • Hire • Service • Repair

RENEWABLES & OFFSHORE

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SPECIAL REPORT | AUTUMN 11

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AUTUMN 11

the Norwegian North Sea and the Draugen oil field off Kristiansund – which is operated by Norske Shell – and includes operations by a number of other companies.

Managing director Steve Guest said: “Norway is a growing market and one that values British experience and expertise. The companies with whom we are working have all said that they appreciate the skills that British workers bring to challenging situations.

“Moving into European markets is very important for us and we are working with a growing number of Scandinavian companies on a series of major projects.”

TechConsult UK is part of the Norwegianbased TechConsult Group, whose offices are in Bergen, Oslo and Stavanger in Norway.

>> Ships take shape

Growing market: Steve Guest

A deep-sea fishing company and an industrial boat charter company from the Shetland islands are investing more than £10m to build two vessels to take advantage of the renewable energy sector. Research Fishing Company and Delta Marine, an operator of tugs and workboats traditionally for the dredging industry, have both identified increased demand in the renewable sector.

>> Skills recognised

>> Growth follows buyout

Teesside recruitment company TechConsult UK, which has just marked its fifth birthday, is recruiting a growing number of engineers for the Norwegian market.

TechConsult UK, which is based at The Wilton Centre, near Redcar, recruits personnel for the offshore, fabrication and maintenance, process, shipbuilding, and civil engineering industries and is working with a number of big-name, blue-chip companies in Scandinavia.

The company is supplying personnel for companies working on a number of projects, including the Ormen Lange 2 development.

Discovered in 1997, Ormen Lange is Europe’s third-largest gas field and is located on the Norwegian Continental Shelf, 75 miles north west of Kristiansund in Norway.

TechConsult UK is also working with companies involved in the Ekofisk oil field in

Subsea specialist Tekmar Energy has concluded a management buyout involving a private equity group in a deal worth between £20m and £30m.

The firm recently announced a doubling of revenues in 12 months. It now expects a similar lift in the current financial year as it works with Elysian Capital, investors experienced in the sector. A spokesman at the Newton Aycliffe firm said the additional funds now available will enable Tekmar Energy to grow sufficiently to double the workforce to 300.

Results in its second full trading year showed £7.7m turnover against £3.3m before. Pre-tax earnings of £1.4m compared with £445,000 previously. The firm’s product Teklink is a protection for underwater power cables.

Established in Norway in 1985, the original

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Tekmar relocated to Newton Aycliffe in 1992.

It has been fully owned by Darlington-born engineer Gary Ritchie-Bland since 2000 and opened a factory in Darlington recently to complement its Newton Aycliffe operation.

Tekmar Energy went through the MBO after Bland decided to step back from its day-to-day running.

The energy activity, which doubled its workforce to 60 in 18 months, makes around 1,000 cable protection units a year.

Chief financial officer Phil Heathcock, one of the three members of the management team involved in the buyout alongside chief executive James Ritchie and chairman Colin Turner, said: “Offshore wind in Europe is going to grow by a factor of 50 and our protection system is compatible throughout.

“We have three big projects to complete by the turn of the year and we are looking at three contract awards before that.”

The energy division in its first year secured a £4.5m contract from German energy company Bard and it has continued to prosper since.

Earlier this year it completed its first UK wind farm project, supplying 103 systems to the Walney One wind farm in the Irish Sea.

>> Specialists merge Two specialists in mechanical and electrical engineering for the power, oil and gas, refining, chemical and renewable energy sectors have merged to form ENEX Group. Mechanical Engineers Flow Matters and Electrical contractors Technical Ex Services (UK) have now relocated to larger premises at Port Clarence. The merger was brokered

by Nigel Williams of Dickinson Dees on Teesside and Angus Allan of Clive Owen Corporate Finance.

>> Playing for Brazil PD&MS Energy, a Wilton Group company, has launched two new operations in Brazil to expand its oil and gas design, fabrication, installation and maintenance activities. The firm has already secured rig upgrade contracts with a global drilling specialist and has bases in Rio de Janeiro and Macao.

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NEWS

>> Tubular facility opened – and praised

Left to right Alex Dawson, CEO, TAG Energy Solutions; Chris Huhne MP, and Dave Eason, chairman, TAG Energy Solutions, in the new facility

TAG Energy Solutions recently welcomed the secretary of state for energy and climate change who officially opened its new £20m offshore wind turbine tubular production facility. Chris Huhne MP took a tour of the 6,920 metre square facility before launching a roll of steel onto TAG Energy Solutions’ automated production process for the creation of large diameter cans for offshore windmill foundations.

Constructed in readiness for the Round 3

offshore wind developments and current European opportunities, the new facility in Haverton Hill on the banks of the River Tees is the first of its kind in the UK and has the capacity to produce 100,000 tonnes of tubulars per annum.

TAG Energy’s manufacturing system rolls and welds large diameter tubulars used in the construction of offshore wind turbine jacket and monopile foundations.

The riverside facility also manufactures jackets, transition pieces and topside

structures which can be transported around the world from its wet dock and 6,000 totally enclosed load-out quay.

Chris Huhne said: “The creation of this facility demonstrates TAG Energy Solutions’ foresight in planning an effective UK supply chain for offshore renewables. Offshore wind will play a key role in the delivery of a balanced energy mix that will meet future UK requirements and it is essential the sector is supported by innovative and forwardthinking companies.”

There’s a new force making waves in the offshore renewable industry. +44 (0) 1325 390 500 commercial@ctcmarine.com www.ctcmarine.com

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SPECIAL REPORT | AUTUMN 11

NEWS

AUTUMN 11

>> Supply chain merger creates stronger links Nineteen of North East England’s leading energy sector companies have come together to help realise the region’s ambition to become a global hub for offshore renewable energy solutions.

The companies have formed Energi Coast, North East England’s Renewables Group, to promote the expertise of the region’s offshore renewables sector and secure a proportion of the £1bn global market.

Energi Coast companies have a combined turnover related to renewable of more than £200m, a figure forecast to double as the offshore renewables market expands. The group’s members employ around 6,000 people – forecast to grow by 30% as Round 3 offshore wind activities gather pace.

It is estimated that Energi Coast’s 19 members have invested about £400m over the past 18 months in offshore wind development.

In addition to promoting the region’s integrated supply chain in servicing the offshore renewables market in the UK and internationally, Energi Coast will also highlight the benefits of investing in North East England to aid the growth of the offshore renewables supply chain.

Alex Dawson, chairman of Energi Coast and chief executive of TAG Energy Solutions, said: “North East England has the potential to become a global hub for the offshore renewables industry.

“It is a unique region in terms of geography, experience, infrastructure and technical capabilities.

“North East England’s innovative and successful integrated supply chain is technologically-driven and has excellent credentials for delivering large-scale projects across the energy sectors.

“Having already substantially invested in offshore renewables, the region’s supply chain has signalled it intentions to be a serious player in the global market.”

George Rafferty, chief executive of NOF Energy, said: “The region is home to a collection of extremely innovative and successful companies that have blazed a trail for the North East supply chain in the oil and

SPECIAL REPORT | AUTUMN 11

Group together: Alex Dawson, left, and George Rafferty launch Energi Coast gas sector and are already expanding their expertise into offshore renewables.

“As green energy resources become an established part of the required balanced energy mix, North East England companies have the capabilities to secure a significant proportion of the market, both domestically and globally.

“Energi Coast will play a serious role in the debate of the cost of renewable energy. A cohesive and collaborative supply chain operating from one geographic location can have an impact on reducing the cost of producing renewable energy for the long-term.”

One of Energi Coast’s members is CTC Marine Projects, based in Darlington, a subsea installation, cable-lay and trenching

company with a fleet of marine trenching and burial equipment.

Stephen Wilson, business development manager – renewables, CTC, said: “CTC is pleased to be a part of the Energi Coast group, which will recognise and promote the significant capabilities that exist in the North East of England for serving the offshore renewables market.”

“Uniquely this region has the whole of the offshore cable supply chain from design, survey, manufacture, installation and trenching, which CTC is an important part of.

The region also has all of the balance of plant capabilities, excluding the wind turbine, which will make it attractive to both EPC contractors and developers as a single supply chain source location.”

North East England’s innovative and successful integrated supply chain is technologically-driven and has excellent credentials for large-scale projects

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RENEWABLES & OFFSHORE

AUTUMN 11

COMPANY PROFILE

Blazing the wind energy trail

W

ind-energy-Hartlepool looks set to become a major training base for the wind energy workers of the future.

That was the key message to emerge from a conference in which more than 200 top business bosses were planning in Hartlepool last week for a groundbreaking meeting on wind development.

That was followed up by a breakfast seminar the following morning with over 100 more delegates there. The double event was the first-ever North-East meeting of Renewable UK, which is the trade and professional body for the UK wind and marine renewables industries. It was held at the new £53m Hartlepool College of Further Education, in Stockton Street, and was sponsored

by PD Ports, which owns dockland in Hartlepool.

PD Ports chiefs are trying to persuade big international companies to invest in the town which is being seen as a potential UK hub of wind energy development. PD Ports development director Paul Barker said: “This is an example of us getting the name of Hartlepool out there and getting the word out about the strength of Hartlepool as a credible option.

“We can show people around the town and show them real sites, not just artists impressions. We are trying to tick off all the questions that investors would have. If they ask us have you got the land, we can show them that. If a business comes along and says we need hundreds of workers for a new plant in Hartlepool, where will they be training, we can say there is a

RENEWABLES & OFFSHORE

£53m College here. We can start training people there now.”

The conference included talks from representatives of the National Renewable Energy Centre and College Principal Michael Bretherick.

Mr Barker added: “The College is a showcase for Hartlepool and this was an event to showcase what is going on in the industrial world and what sort of training is needed.

“There is an opportunity in Hartlepool to be creating welders of the future, fabricators of the future as well as hi-tech positions such as turbines technicians.

“People are saying that wind farm development will be a 20-year process. If anyone is leaving school in the next two to three years in Hartlepool, this could put them in line for training and a career spanning for most of their life.”

Steve Wallis, Assistant Principal went on to explain, “Hartlepool College is the lead hub for the National Skills Academy for Environmental Technologies in the North East. We have a comprehensive training team of highly skilled lecturers and world class industry facilities. Our resources include an outdoor learning terrace, a skills academy equipped with ground source, air source, solar thermal and photovoltaic equipment.

We even have an industrial 500KW Vesta Wind Turbine for our students to learn on!”

As well the engineering courses at Hartlepool College they offer many other courses including University Level ones covering Health and Care, Teaching, Management and Leadership, Building Services, Sport and Public Services to name but a few.

For more information contact Customer Services on 01429 295111 or email enquiries@hartlepoolfe.ac.uk

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Lord Mandelson had a spring in his step and a smile on his face as he toured the new £53 million Hartlepool College of Further Education.

He spoke of his pride in the building as he covered every inch of the flagship College with Principal and Chief Executive Michael Bretherick and Professor Aidan Mullan, chairman of the College’s governing board.

Lord Mandelson, MP for Hartlepool from 1992 to 2004 and Government minister, spoke of the College being the perfect tool to raise the aspirations of countless Hartlepool youngsters and the pivotal role it has to play in the community. He beamed as he said “It is a dream come true. People who study here are going to be very, very lucky. It is the heart of this town and is a brilliant building with brilliant facilities.”

Lord Mandelson likened the College to a crossroads for the town and for individual students at a time when traditional heavy industries had moved into the newtechnology era. He added: “This College is so important and so exciting and stands as the crossroads of so much. It embodies ambition and inspiration.”

Lord Mandelson had been invited to launch the National Skills Academy for Environmental Technologies North East Hub. For more information on Hartlepool College, contact Customer Services on 01429 295111, email enquiries@hartlepoolfe.ac.uk or call in to reception and ask for a look around.

SPECIAL REPORT | AUTUMN 11

OVERVIEW

AUTUMN 11

dim or switch

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AUTUMN 11

OVERVIEW

Will our future be green or fossil fuelled or a mixture of both? Peter Jackson takes an overview of some of the issues that will determine the future of the offshore industry

It was almost a century ago that the foreign secretary Sir Edward Grey remarked: “The lamps are going our all over Europe’’.

He was speaking figuratively – and as the continent was about to embark on the First World War. It’s too early to predict that we might soon be saying the same thing in a more literal sense, but a pessimist could point out that there have been increasing reports over the past year of local authorities in the UK switching off street lights to save money.

Certainly there is a sense of a crisis coming to

a head. The latest furore was prompted by Ofgem’s announcement that the Big Six energy companies are now making as much as £125 from each household, up from £15 in July. The annual average energy bill is now £1,345 – double what it was just five years ago.

A quarter of households is now judged to be fuel poor, in other words, more than 10% of its net income goes on fuel bills. This has not escaped the notice of Government which is becoming very energetic in trying to find ways for households to lower those fuel bills.

The coalfield licensed off the North East’s coast alone could produce gas equivalent to about 75% of all the North sea gas ever brought ashore

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None of this was entirely unforeseen. The narrative has been that the world is exhausting its fossil fuels and that this is happening at an accelerating rate because of rapidly growing demand from the burgeoing economies of China and India. Furthermore, those same fossil fuels create greenhouse gases and alternative technologies must be found and these technologies have to be paid for. All of this puts an irresistible upward pressure on prices.

However, the whole issue – which was a pretty big one anyway – has acquired an even greater significance with the current global economic crisis. Now that money is tight for households, businesses and governments, high energy prices become even more painful and renewable alternatives, and the associated penalties on fossil fuels look even more expensive. Indeed, some would say: unaffordable.

George Osborne, the chancellor of the >>

SPECIAL REPORT | AUTUMN 11

OVERVIEW

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exchequer, gave some voice to this hitherto unspoken thought at last month’s Conservative Party conference. In a passage which would have sent a shiver of fear up and down the spines of environmentalists, he said: “We’re not going to save the planet by putting our country out of business… so let’s at the very least resolve that we’re going to cut our carbon emissions no slower but also no faster than our fellow countries in Europe.’’

On the one side, there are those who will take encouragement from this, who will say that the drive for renewable energy and cutting carbon emissions is a luxury that industry can no longer afford. They can also argue that

there is plenty of life left yet in fossil fuels.

As Kenny Kemp reports in these pages, BP says oil reserves will last until 2050 and it is putting its money where its mouth is with a £4.5bn investment to develop the North Sea’s Clair field to reach an estimated 640 million barrels of oil equivalent. Estimates for the total Clair Field complex run to more than seven billion barrels. Encouragingly, BP believes there is the potential of maintaining its current levels of North Sea production until 2050.

We also report that there is still enough coal in the UK to last us for another 100 years and that one company, Five-Quarter Energy, has a licence to exploit 2bn tonnes of it that are

A whole sector is rapidly growing to harness alternative forms of energy, particularly offshore wind. It has the potential to be as big as North Sea oil

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lying under the North Sea. However, despite the strength of fossil fuel reserves, a whole sector is rapidly growing and is straining at the leash to harness alternative forms of energy, particularly offshore wind. Its champions argue that it has the potential to be as big as North Sea oil and gas.

For example, a manufacturing facility with the capacity to make enough turbine blades to generate just 1,000 megawatts a year would employ about 1,000 people with hundreds more in the supply chain.

It has been estimated that the manufacturing activity required to meet the projected demand for offshore wind turbines – and we are talking about 2,660 turbines for the Dogger Bank field alone – would be the equivalent to building around 50 warships a year, a prospect to make many in Scotland and the North East misty-eyed with nostalgia.

The previous government’s low-carbon industrial strategy included an expectation that about 400,000 jobs would be created over the next eight years.

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It is said that as much as a third of Europe’s potential offshore wind energy resource is in UK waters and that could generate the equivalent of the country’s annual electricity consumption. It is also estimated that the total market potential of the offshore wind industry is £48bn. A consortium of four major European energy companies, named Fourwind, has been appointed by Crown Estates to take forward development of the Dogger Bank offshore wind project, 60 miles off the North East coast.

Fourwind hopes to submit its first development consent application by the end of

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2012 and it is currently conducting environmental assessment work. A Zone Development Agreement was signed this summer, which, says Fourwind, marks the halfway point in its progress towards the first development consent application.

To muddy the North Sea waters further, there is the possibility of another fuel source which straddles the divide between green and fossil, which, as we also report in these pages, is underground coal gasification, carbon capture and storage. This, as the name implies, involves converting the coal to gas while it is still underground and then returning the resultant carbon dioxide back to the voids it has created.

This also has massive potential, with its proponents claiming that the coalfield licensed off the North

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East’s coast alone could produce gas equivalent to about 75% of all the North Sea gas ever brought ashore.

It is perhaps not a good omen for carbon capture that the Energy Secretary Chris Huhne has just announced the scrapping of plans for the first carbon capture project at Longannet power station in Fife. He blamed problems with the length of pipeline needed and expressed interest in another carbon capture and storage scheme proposed for Peterhead.

This seems to be worryingly indicative of a lack of decision in forecasting future energy needs.

There is no indication that the UK is going to make a strategic decision on its future energy needs, but will rather shuffle aimlessly into the future patching together parts of various different solutions and giving them the grand title of an “energy mix”.

As far as energy policy goes, the future remains dark; let us hope it does not remain dark, simply because we can no longer afford to switch the lights on. n

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INTERVIEW

wind in its sales Narec has done pioneering work of international significance on renewable energy, but must now pay its way in the world, as commercial director Steven Caseley explains to Peter Jackson >>

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Blow by blow: Steven Caseley, Narec’s commercial director, monitors the wind speed blowing through the North East energy testing sector There are few more unforgiving environments than the middle of the North Sea. Any offshore wind turbines located out there, will, therefore, have to be capable of taking a lot of punishment.

In the words of Steven Caseley, Narec commercial director: “It’s not like a land base where you can just take a van and go and repair it. You can’t get offshore so easily and what if the weather won’t allow you to go? So testing is absolutely critical. The whole emphasis of what we are doing is that we are derisking the market.’’

He cites one pioneering turbine manufacturer which had such a high failure rate in its early offshore turbines that it invested millions on in-house testing of every component.

Narec, the National Renewable Energy Centre, was set up partly to provide manufacturers with the facilities to prove their equipment before it is installed offshore.

“This facility has been funded because there is a market failure,” says Caseley. “Because these things are so big and so expensive, no one company can afford to build a test facility to test each component part of its system.’’

Narec was set up by regional development

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agency One North East to drive the development of renewable energy and went on to to become a national hub for the development of offshore wind technologies.

Located on an eight-to-10 hectare site in Blyth, Northumberland, it has had about £150m of investment from government, One North East, European Regional Development Fund, and The Energy Technologies Institute since it was set up in 2003 and it now has more than 100 staff.

For five years, it has had a test facility which can test turbine blades up to a length of 45 metres. The testing is done by finding the blade’s natural frequency of vibrations and then oscillating it to see whether the design can withstand extreme offshore conditions.

There are recognised standards against which the blades are measured. There are, as yet no agreed standards for other components, although Narec is working with certification bodies to define these.

Narec is also building a £16m, 100-metre blade testing facility, to be operational in the first quarter of 2012, to cater for the turbines which are being designed for Round 3, which will operate far out to sea.

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“You are talking about a huge step change in scale which requires larger scale testing,’’ says Caseley.

The testing is to prove design, but a number of production blades will also be tested.

“We do have cases where we have broken a blade, where the blade has broken below its expected design strength, which is good, because we would rather it happens here than it happens offshore,’’ he says.

“Obviously, we have to have a very confidential relationship with our customers with a high level of security because none of these large organisations wants a competitor to see their design. Confidentiality is absolutely critical to this business.’’

The site is also building two drive train test facilities – a £15m, 3MW rig; and a £25m, 15MW rig, which will be the largest in the world. The 3MW facility will be used to test the drive trains of smaller wind turbines and also for tidal turbines.

Probably most striking out of Narec’s total offer will be its planned offshore £350m, 99MW capacity demonstration site.

Caseley explains: “We have a lease from the Crown Estate for a part of the seabed of Blyth

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There is nobody else who can offer a package like this. This is world-beating; there are other places, but this is the first site where everything will be a prototype

to allow the turbine manufacturers to come to test their new large-scale offshore turbines. So it’s a shop window for the OEMs to demonstrate their products to their customers who will be the utilities and the developers.

This is an opportunity to test and develop new offshore turbines.’’

This demonstration site will have the capacity for three arrays, each of five turbines, in water depths of 35, 45 and 55 metres, between 7km and 15km offshore. Narec will have a £20m floating platform in the demonstration site to act as a wind and environmental monitoring station. The platform, which will be more than 100m high, will validate the conditions for the testing of the wind turbines and will be used for Narec’s own research and development.

Narec is currently doing an environmental impact assessment and hopes to receive consent within 12 months and to see turbines in the site in 2014 or 2015.

Caseley says: “There is nobody else who can offer a package like this. This is world-leading; there are other places which have dry test facilities which are smaller, and there are other demonstration sites where there are one or two turbines, but this is the first site where everything on there will be a prototype.’’

Narec has been set up with public money and grants, but now the challenge is to commercialise it and make it pay its way, so that it is making a profit within the next two years.

“We have to build a sustainable business, so we are not reliant on the public purse,’’ says Caseley. “We are building these assets which are rapidly going up and the key issue now is; how do we commercialise the business? Effectively the Government has given us this cash and what we now need to do is make sure that we generate revenue

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from it and makes sure it becomes a self-sufficient business.’’

He explains that a commercial function has been set up within the business to understand the needs of the customers. He himself was only appointed at the end of the summer to develop strategic commercial relationships.

“The key issue is understanding the needs of the customers,’’ says Caseley. “The prime objective is to try to get close to some of these large organisations because there are not many companies with deep enough pockets to come and invest in the launch of the offshore wind industry. There are maybe 10 or 15 huge organisations who will come and test their equipment here.’’

INTERVIEW

This testing of the various components of a turbine to derisk the investment enables the operators to get insurance cover.

“In order for them to be able to get insurance on their products they will have to prove some kind of de-risking exercise which we can provide them with in terms of testing,” says Caseley.

“The beauty of it is that we are an independent test house when it comes to insurance and certification. That gives comfort to the insurance companies and developers and utilities. Even with the large organisations which have spent a fortune on in-house testing, there are opportunities for us to do tests.’’

With new technology operating in untried conditions, the insurers are operating in the dark with no history on which to form an actuarial judgement. Narec is working with various partner bodies to create and define the standards that the equipment can be tested to, which will give the insurers the necessary benchmarks.

Apart from wind, Narec also works on other renewables and its 3MW drive test rig is primarily intended for tidal equipment. >>

Research and deployment Narec’s subsea marine testing facilities were used to perform submerged testing of SMD’s (Soil Machine Dynamics) scale model prototype of RT-1 – a powerful subsea rock trenching vehicle for the burial of pipelines.

The RT-1 prototype was tested at Narec’s facilities in using a simulated seabed to recreate seabed conditions off the coast of Western Australia ahead of deployment. This enabled subsea engineering specialist company SMD to prove to their client, CTC Marine, the concept of the three-cutter arrangement to excavate a two-metre trench through up to 40MPa compressive strength rock beneath the pipe cutters. Narec’s facilities were also used to test SMD’s first ever Fall-Pipe ROV for Belgian dredging company Jan De Nul. SMD’s Fall-Pipe ROV is designed to carry out a number of offshore rock dumping operations and is equipped with state-of the-art survey equipment such as subsurface positioning, sonar sensors, cameras and monitoring equipment. The device underwent extensive subsea trials in one of Narec’s large marine wet docks to prove the performance of all critical systems.

Following the successful marine trials, the RT-1 prototype was shipped to Singapore, prior to deployment off the western coast of Australia, while the Fall-Pipe ROV was shipped to Spain for vessel instalment.

Paul Arthur, project manager at SMD, says: “Narec played a fundamental role in allowing us to carry out R&D prototype and acceptance testing on these systems. They provide a comprehensive testing environment which is cost effective and delivered within a specialist, secure and controlled setting.”

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“We are starting to see lots of interest for tidal devices at the moment, especially from Scotland where a lot of tidal projects and a lot of developers are interested in the tidal drive train facility, to test their equipment before they put it in the sea.’’

And here the interest is not so much from the big players, as from the SMEs, operating against a long history of tidal generating devices proving themselves incapable of standing up to the tremendous tidal forces.

“The cost for them testing their equipment here is relatively small,” says Caseley. “The marine market tends to be dominated by SMEs which have great ideas but don’t have much money behind them, so they tend, even during the first round of financing, not to have built in provision for a testing regime before they deploy.

“We are working with them, explaining they need to build in some provision to test these devices or you are just going to have failures and you are wasting your time.’’

Narec also works with SMEs through its new financing arm, Narec Capital, a joint venture with venture capital group Ashberg, to bring in private finance to support new renewable projects and bring them to market.

Caseley explains: “We would do the technical due diligence, so if somebody comes to us with an idea, we would have a look at it see if we think it’s a good technology which would work.

“Narec Capital might then look at it and decide it’s a proposition that could be invested in and then they will try to raise some capital.’’

Narec also has its Electrical Networks arm, which looks after cabling to bring the power to shore. In an old dock at Port of Blyth, it can create different sub-sea conditions for testing cabling and submersibles and ROVs. “We are also looking at the connectivity and how you get these cables connected through substations into the Grid,’’ says Caseley.

The organisation also provides training and has a 27m high training facility – the UK’s first wind turbine training tower to allow education and training providers to deliver academic and industrial training programmes.

Distributed Energy was set up by Narec about two years ago to provide a consultancy service and works with a number of local authorities

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The marine market tends to be dominated by SMEs which have great ideas but don’t have much money behind them across the region to provide them with energy master planning.

Caseley says: “To green up your city is very expensive but there are obligations placed on local authorities by central government and European legislation to make them reduce their carbon dioxide emissions and to save money they have to reduce the amount of energy they use. So Distributed Energy provides anything from energy efficiency advice all the way through to helping to create a revenue stream from renewable technology.’’

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So now Narec is gearing up to commercialise its activities and develop close relationships with key large organisations.

“The hard bit has been designing and building test facilities to test equipment that hasn’t been built yet. Now we are packaging the whole thing together to offer the customer and end-to-end solution,’’ says Caseley.

All that is now required is for the development of large-scale offshore renewables to get under way and then Narec hopes it will really have the wind in its sales. n

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taking it further subsea Customised umbilical systems for the global offshore oil and gas market DUCO Ltd, part of the Technip Umbilical Systems group of companies, manufactures bespoke umbilical systems for the offshore oil and gas industry, providing power and communications between subsea equipment and offshore platforms.

Employing over 600 people located in dedicated facilities in Newcastle, UK; Texas, USA; Angola, West Africa and Tanjung Langsat, Malaysia, Technip Umbilical Systems (TUS) has designed, manufactured and supplied subsea umbilicals to the oil and gas industry for over 30 years.

Contact us: contact-tus@technip.com www.technip.com

Keep your feet on solid ground University spin-outs are playing a vital role in helping Scotland realise its ambition of being a global centre of excellence for renewables, but academics need to be realistic about commercial opportunities, says Darran Gardner

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Recognising the types of activities that give universities, as well as those involved in commercialisation projects, the best chance of success is critical

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Cynical business types might suggest that the phrase “university entrepreneurship” is dangerously close to being something of an oxymoron.

However, it is all too easy to dismiss or underestimate the efforts of those in “ivory towers” to transform ideas into something of substance that can provide the foundations for a viable new business.

While commercialisation, often appearing to be a Sisyphean task at the best of times, can’t be the prime focus of universities, commercially exploiting university-generated intellectual property is regarded as a key activity, requiring technology transfer offices to balance a university’s need for knowledge dissemination with the protective impulses of the commercial world and the demands of the commercialisation process.

Balancing the demands of creating a successful teaching and research institution with generating licence deals and spin-outs is a skill many Scottish and UK universities continue to develop. While there is no perfect way to secure a regular supply of lucrative licence deals or generate high-growth new companies focused on the dynamic energy, renewables or oil and gas sectors, recognising the types of activities that give universities, as well as those directly involved in commercialisation projects, the best chance of success is critical.

One of the most underdeveloped parts of commercialisation plans can be the market research element. Turning ideas and research into something more tangible means knowing as much as possible about the market or markets that might be entered. Indeed, it requires more than knowing, it requires understanding – moving beyond mere facts to analysis and comprehension.

Grant Wheeler, who manages the University of Edinburgh’s Research and Innovation’s Company Formation and Incubation team, confirms that given how risk-averse investors currently are, business plans need to be properly stress-tested: “Wild promises of upside no longer work,” he says. “Unsubstantiated forecasts of exponential growth based on spurious data trends are now seen as a warning sign rather than an indicator of great potential.” >>

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With Wheeler’s team supporting the formation of 143 companies (including 24 actual spin-outs as well as the renewables-focused NGenTec) over the last five years, he is well aware of the challenges of commercialisation: “In short, investors have become better able to make sound investment decisions even at a very early stage,” he says. “As a result, early-stage technology companies have to be similarly well-informed and they have to build their teams accordingly.”

No amount of late-night Googling, accessing historical quasi-relevant market research reports or relying on the sort of ham-fisted assumptions that bedevil too many start-up business plans, is a substitute for proper research. This means talking to as many relevant global contacts as possible.

As Professor Stephen Logan, senior viceprincipal at The University of Aberdeen, which produced the oil and gas focused spin-out Brinker Technology, confirms: “There are clearly challenges in translating research results into real world applications. For example, typically there will be a considerable development gap between research output from a university lab and what ends up being installed offshore. We find that early engagement with industrial partners is a key part of successful commercialisation.”

What is the market being targeted? Who operates in it? What are its dynamics (buying cycles, nature supply chain, etc)? While those involved in commercialising can worry too much about size (impossible to estimate especially in emerging markets), they can never worry too much about accessing it and operating within it.

Beyond decisions on what IP should be utilised and how it should be protected, information on competitor technology and IP, and the commercial exploitation structure to be pursued, the market questions continue. What is being sold? Who will be the customer (remember buyers are different again)? Why should people buy from the new entity and how does the product or service distinguish itself in terms of performance, ease of use, integration with existing systems?

Understanding a “value proposition” and its bedfellow “window of opportunity” may

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A company surviving long enough to take advantage of new opportunities requires access to funds in a country where access to funds is limited

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sound like clichés, but the positioning of a new company is crucial for fundraising and sustainability. In emerging and rapidly-evolving markets such as energy and renewables, the market research and positioning exercise is even more critical given the obvious challenge of aligning research with what emerging markets actually want.

With few certainties (apart from change) and little visibility of future potential, knowing if there is a window of opportunity and recognising if (or when) it is really presenting itself is a thankless task. A company surviving long enough to take advantage of new opportunities requires access to funds in a country where access to funds is limited. And with new technologies inevitable taking more time and money to get to market than expected, the inexactness involved in developing such a business will mean sleepless nights for those managing a spin-out.

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“Finding ways to address the developmental funding gap is a continuing challenge” says Prof Logan, who highlights the value of the university’s involvement in the SFC Horizon renewable power and subsea programmes, as well as strategic partnerships with organisations such as the Aberdeen Renewable Energy Group, the National Subsea Research Institute, and the Energy Technology Partnership.

“However, funding from industry, for example through ITF and from public sources such as the Scottish Enterprise Proof of Concept programme have enabled several projects to be progressed. Combining a structured commercialisation process with determined and motivated academics who can work with equally-determined and motivated businesspeople, is likely to be pre-requisite for success. Making the transition from university research to viable business is ultimately much

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more of a people process than simply a legal one. Without the right mix of people (which will change over time) even the best university IP will struggle to emerge as a valuable commercial proposition.

“Building a credible board,” concludes Edinburgh’s Wheeler, “with people willing to get their hands dirty, and more critically understand, the questions investors will ask is absolutely critical. Their input at an early stage will provide the solid foundations needed…

They can challenge the assumptions and spot the fantasies. And they can integrate new technology companies into existing supply chains to generate early income and reliable evidence of long-term demand.” n Darran Gardner was Commercialisation Champion on a 2011 Scottish Enterprisefunded Proof of Concept project at the University of Aberdeen.

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back to high skill One of the challenges of renewable energy is to ensure we have a qualified workforce.

Peter Jackson takes a look at a new academy hoping to meet that challenge Students looking out of the large windows on the first floor of the new Energy Academy in Wallsend are treated to an inspiring view.

They can look across the road to Swan Hunter, where some of the world’s most famous ships were built and then to their left to take in the vista of towering cranes which mark the Tyne’s winding course to the sea.

So, at a glance, they can take in the North East’s heavy industrial heritage and hopefully

be inspired in their studies to become key agents in driving the industries of the future.

For this is what Newcastle College’s new Energy Academy is all about. Located by the old Swans site, which it is planned should be transformed into a “learning village” offering training and employment in green industries, it will be a training hub for offshore wind and wind technologies.

It is being developed in partnership with >>

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Non-traditional: Jim Hubbard, director of Newcastle College’s School for Applied Science and Technology

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We link theory with some practical aspect. You learn more quickly, you learn more efficiently and you learn better if you can immediately relate to what you are being taught Shepherd Offshore Group as part of its plans to create a world-class manufacturing, training and R&D centre on the north bank of the Tyne.

It is believed to be the first educational facility of its kind in the UK. It is, undeniably an educational facility but Jim Hubbard, director of Newcastle College’s School for Applied Science and Technology, is determined that it should not be like a traditional academic institution.

He says: “We are trying to have a college that isn’t a college. I want our students to see how everything links together, so when we are talking about the aerodynamics of a wind turbine, they will be able to see wind turbines from here.

“When we are talking about the reliability of gearboxes, which are the components that take the stress and strain, they will be able to see inside a gearbox and take it apart. We want the kind of environment where they can link theory with some practical aspect. You learn more quickly, you learn more efficiently and you learn better if you can immediately relate to what you are being taught.’’

To this end, the 20,000sq ft centre not only has suites of classrooms but also welding bays, computer numerical control, CNC, machines, electric workshops and soldering facilities, hand skill areas, sheet metal working facilities.

The academy is the result of conversations between the college and industry and the sector skills councils over a few years and the government’s renewables agenda.

“Because of the demographic profile, there’s a distinct shortage of engineers and, as a college, we are trying to revive interest in engineering because, if we don’t, we won’t have any of these infrastructures in place for the future,’’ says Hubbard.

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A model for the Energy Academy is the Aviation Academy which the college set up three years ago at Newcastle International Airport and which now has, in a daily basis, about 400 students whose training covers all aspects of the aviation industry from aircraft engineering and aviation engineering to airport and airline management.

Hubbard explains: “That was the forerunner of this sort of concept of being right next to where the students are going to work in the future.’’

Just as Newcastle College partnered with Newcastle International Airport for that academy, so it has a number of partners for the Energy Academy.

“We have worked with a lot of companies from around this area that are either into sustainable energy or would like to move into sustainable energy, companies such as Duco and Wellstream, British Engines,’’ says Hubbard.

The academy has been funded with £1.3m from Newcastle College and £300,000 from One North East. Partner companies will donate equipment, such as the subsea Christmas tree provided by Duco for the colleges subsea engineering facility. David Brown Gear Boxes, based in Huddersfield, have committed to donating a gearbox.

Hubbard says: “We have worked alongside a lot of companies, including companies that are not necessarily in the field of renewable energy or sustainable technology but which have seen that there is a shift in the market that they can get into. Their influence has helped us to look at how we design this centre. We want the input of the companies because we want them to utilise this facility and see it as a part of their own operations.’’

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The focus of the academy, certainly in the initial stages will be on training for the manufacture.

“The prime focus of this building will be on the manufacture of products for sustainability,” says Hubbard. “There will have to be a different mindset for the manufacture of wind turbines. These turbines are going to be stuck out in the middle of the North Sea so they have to have reliability as a built-in quality.

“People producing these have to have skills other than just production skills. We are trying to put together a package for people that will enable them to see that the reliability aspects mean that this is not just a question of normal manufacturing.

“It’s not just a question of being an engineer; a lot of other disciplines have to go alongside that. New quality standards will be devised and taught.’’

The academy will be drawing together teaching on standards, engineering techniques and working with new materials.

“One of the things we will also be looking at is carbon fibre technology because the turbine blades will be made of carbon fibre. That links into our automotive sector, our science sector and our aerospace sector and we are trying to get all those to dovetail together.’’

Equipment will include an autoclave pressurising apparatus – normally used in the pharmaceutical industry – for growing and linking carbon fibres together.

“By buying that one bit of equipment we show even people who come in on the engineering side that there are other avenues within the manufacturing process,’’ says Hubbard.

Of course, however reliable the wind turbines are – and the plan is that there should be thousands of them on Dogger Bank alone – they will need maintenance and this will provide training opportunities for the Energy Academy for years to come.

“Once you have done the manufacturing, then the maintenance side becomes easier,’’ says Hubbard. “I don’t see it just stopping at manufacturing, there’s a progression going right the way through. Whatever we teach our students will give them transferable skills. I don’t want them to

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be specifically maintenance people or specifically manufacturing.’’

The Academy will focus primarily on 16- to 18-year-olds and they will have access to a wide range of qualifications from specialist diplomas through to foundation degree.

Honours and masters degrees relevant to offshore wind and wind technologies will also be developed.

“We will be giving them some engineering skills alongside some practical skills utilising the industrial type equipment that will be in the building,’’ says Hubbard.

It will also provide B Techs, NVQs and City & Guilds, as well as welding qualifications and the academy is talking to the sector skills councils to develop apprenticeships in

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renewable energy and in energy in general.

“What we are trying to do is to give people as many opportunities to go into an industrial environment as possible, to give them the best toolkit possible to go into this new industry.’’

The plan is also to encourage SMEs to use the facility, using office space and CNC machines to develop their own prototype components for wind turbines and subsea.

“We have already had inquiries from companies which want to use the welding facilities to train their people in different welding techniques which will be applicable in building towers for wind turbines,’’ he says.

Short, bespoke courses for industry will be revenue generating to help build Academy partnerships with industry and raise its profile.

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So far the profile raising has been a success.

Hubbard hoped the first cohort starting this term would be about 16-strong, but, in the event, they have recruited no fewer than 54, six of whom are girls. He is confident of attracting at least the same number next year.

Students are drawn from Northumberland to Teesside and they have even had one inquiry from Australia.

Ultimately, the Energy Academy’s success will be proved by imitation when similar institutions are set up in other parts of the country, but Hubbard is not afraid of the competition.

“We have just got to make sure that the quality of what we do in here is greater than anybody else’s.’’ n

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The oil and gas companies undoubtedly have a role to play with their significance in such areas as deepwater design and construction, contract procurement, and offshore health and safety

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A return to the North Sea’s bonanza The announcement by BP to invest £4.5bn in the next stage of the Clair field, in the deeper waters west of the Shetland Islands, is a massive boost for the UK economy, for jobs – and for the renewables industry too.

Kenny Kemp reports

The North Sea oil and gas industry – which has fuelled prosperity in the UK for 40 years – is not ready to surrender its mantle to the upstart renewables industry, just yet.

If anything, the recent £4.5bn investment announcement by BP, welcomed by prime minister David Cameron in Aberdeen and Scotland’s first minister Alex Salmond, shows that we still require the black gold to give us energy security for as long as possible. And there is plenty of oil left in the North Sea tank.

Bob Dudley, BP chief executive, announced that the oil major has joined partners Shell, ConocoPhillips and Chevron in receiving UK

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government approval for the second phase of development of the giant Clair field to the west of the Shetland Islands – the Clair Ridge development.

This is a £4.5bn project with BP saying oil reserves will last until 2050, which will give the renewables industry – and especially tidal and wave – a breathing space to find the funding and technological development that it requires. The BP announcement covers the design, engineering and construction of two bridge-linked steel platforms which will reach an estimated 640 million barrels of oil equivalent, and provide hundreds of UK >>

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We are determined to progress those projects that remain economically strong, to bring much-needed energy security, revenue and jobs to the nation engineering, drilling and oilfields services jobs over the field life.

This is in addition to the 600 people working directly on this project at present. The field is planned to come on-stream in 2016, and will extend the productive life of the greater Clair area beyond the year 2050. Bob Dudley also announced a successful exploration and appraisal of an additional extension to the Clair Field, called “SouthWest Clair”, which confirms estimates for the overall Clair Field complex at over seven billion barrels.

The American boss of BP talked with passion about Aberdeen, where he lived and worked in the 1980’s.

“The city vibrated then as the global centre of the offshore oil and gas industry,” he said.

“And it continues today to provide innovation and expertise for the global energy industry.

I have heard the North Sea oil and gas industry described as the UK’s greatest post-war industrial success story. It is hard to disagree with that when you look at some of the achievements.”

Bob Dudley said that since late 1960s, the oil and gas industry has invested approaching £300bn in exploration drilling and field developments. A similar figure has been paid into the UK Exchequer in corporate taxes. BP alone has invested around £35bn into the UK North Sea, and has contributed over £40bn to the Government in taxes. More than 40 billion barrels of oil and gas equivalent has been produced from the UK Continental Shelf, and the industry still supports almost 450,000 jobs in the UK. However since 2000, UK production has been in a “decade of decline” – steeper than many predicted.

Although around 90% of the UK’s oil demand, and well over half of its gas demand, is still met by British supply – today’s production is

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only around half what it was a decade ago.

“BP now sees the potential to maintain its current levels of production in the North Sea until the year 2030,” said Dudley. “What happens beyond 2030, is of course harder to predict, but we are currently working on projects that will take production for some of our largest fields out towards 2050. To date, BP has produced about five billion barrels of oil and gas equivalent from its North Sea acreage.

Based on current estimates, we believe we have the potential for at least three billion more. Realising this potential will not be easy or straightforward, but we believe we are laying the foundations for success.”

BP is employing enhanced oil recovery techniques, and looking to take that technology even further as it plans new field developments.

“We are investing huge sums to improve the reliability of our platform and pipeline infrastructure – so that they can operate efficiently for many years to come. We are also determined to progress those projects that remain economically strong, to bring much-needed energy security, revenue and jobs to the nation.”

Over the next few years, BP will be bringing on stream four new UK field developments. These projects represent almost £10bn of new investment into the UK Continental Shelf by BP and its partners. This is in addition to the £1.5bn invested annually to operate and maximise recovery from the existing fields, and to maintain platforms, plants and pipelines.

In the central North Sea, BP and RWE have also reached a significant milestone in the development of the Devenick gas field which will be tied back to Marathon’s East Brae platform. The 600-tonne Devenick module constructed at the McNulty yard in South Shields has been successfully lifted onto the

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East Brae platform. This £550m subsea development provided more than 1,000 design, engineering and construction jobs in the UK, and when it comes on stream, will make a major contribution to the UK’s gas supply needs – meeting about 2-3% of demand.

“This investment reflects our confidence in the region, in our UK suppliers and service providers, and in the fantastic people we have working for us in our North Sea business,” said Bob Dudley. “In our industry, there will always be challenges to overcome, and rightfully, we focus the majority of our time and attention on overcoming those challenges and running safe and reliable operations.”

The investment by the major players brings many positives but poses a challenge for the renewables sector. It means there will continue to be a battle for top-level engineering talent, where the oil and gas industry requires a raft of young engineers as the older hands of the international oil industry reach retirement.

But there are also early signs that the oil majors are thinking more about how renewables fits into their wider portfolios. The summer sale of SeaEnergy PLC to Repsol, an integrated Spanish energy firm for £39m is a significant deal for the UK’s developing offshore renewable sector.

“The deal delivers a £30m return on SeaEnergy’s modest investment in SeaEnergy Renewables, which was only established three years ago,” says Chris Gotts, of leading law firm Burness. Gott, who was corporate finance adviser on the deal, says SeaEnergy Renewables had 1.5GW interest in three offshore wind farm projects off the east coast of Scotland. He says it was the first merger and acquisition in relation for a UK Round 3 or Scottish territorial offshore wind farm and it shows that oil and gas companies are looking seriously at entering the market.

“The oil and gas companies undoubtedly have a role to play with their significant expertise and experience in such areas as deepwater design and construction, contract procurement and offshore health and safety,” he says.

The recent BP deal can only help create the environment where oil and gas and renewables become a much more integrated way ahead for the UK. n

RENEWABLES & OFFSHORE

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INTERVIEW

AUTUMN 11

seams natural Coals from Newcastle could still supply much of the UK’s (green) energy needs, as Professor Dermot Roddy explains to Peter Jackson Imagine an energy source that could satisfy the UK’s needs until the end of the century and which could be harnessed without releasing CO2 into the atmosphere.

No, it’s not shale gas, but coal, the very stuff on which the North East built its prosperity and of which, it is estimated, there is still enough to last for at least 100 years.

Professor Dermot Roddy of Newcastle

SPECIAL REPORT | AUTUMN 11

University’s School of Chemical Engineering & Advanced Materials says that conventionally it is said that there are 200 to 300 billion tonnes of coal reserves in the world – that is, coal that can be extracted by conventional means. But, actually on the planet, there are some 18 trillion tonnes.

The good news is that there is now the technology which would allow the extraction

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of a good part of that – enough Prof. Roddy believes, to quadruple what are currently termed reserves.

The technique is Underground Coal Gasification, or UCG, which has been extensively studied by academics at Newcastle and Durham universities. Now Newcastle University has formed a spin-out company, Five-Quarter Energy, of which Prof Roddy >>

RENEWABLES & OFFSHORE

AUTUMN 11

INTERVIEW

We make chemicals for the world, we make aluminium for the world and we make steel for the world

RENEWABLES & OFFSHORE

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SPECIAL REPORT | AUTUMN 11

INTERVIEW

AUTUMN 11

is a director. The company has been awarded four licences covering 400sq km of the sea bed, under which there are extensive coal reserves.

Prof Roddy puts it in context: “A really big coal mine used to produce one or two million tonnes of coal a year. We have licensed two billion tonnes of coal and that’s an awful lot of coal. That’s not to say that we will turn every last kilogram of that coal into synthesis gas and energy, but there’s still an awful lot there.

“But if, for the sake of argument, we did manage to gasify every last kilogram of coal within our licensed area, the amount of gas we could bring ashore in energy terms would be equivalent to about three-quarters of all the North Sea gas the UK has ever landed – and that’s just our licensed area.’’

And their licensed area only represents perhaps less than 5% of the coal under the land and sea around the UK. UCG has been around a long time. In fact, it was first conceived in Durham almost exactly 100 years ago by Nobel prize winner Sir William Ramsey, who reasoned that by combusting coal underground, miners would not have to go down to extract it. It was then largely forgotten, although it was taken up in some parts of the Soviet Union.

Essentially, it entails drilling down to the coal seams, injecting oxygen and steam, igniting the coal, then reducing the oxygen to control the reaction and avoid burning the coal.

Gasification means reacting coal with a lean supply of oxygen to produce synthesis gas, or syngas – hydrogen, carbon monoxide, methane and carbon dioxide – which, with the carbon dioxide stripped out, can fuel a power station.

The chemistry is relatively straightforward, but the drilling requires some clever engineering.

Prof Roddy explains: “If you were doing it onshore all you would have to do is drill two vertical wells and then create a path through the coal seam that links them, and people have come up with all sorts of suggestions for how you can do that. What makes this particularly appealing now is that over the past 20 years directional drilling technology has come of age in the oil and gas industry.’’

The directional drilling through the coal seam would only require perhaps a three-inch

SPECIAL REPORT | AUTUMN 11

There are a number of prospective investors who have heard what we are doing and are saying, can we come and talk to you. We are getting in front of very credible people diameter hole and a large number of those would be drilled off the same injection well, all converging on the same production well.

For coal seams which are not too far offshore, the injection wells and production wells can both still be onshore with curved directional drilling going out under the seabed up to perhaps 10km offshore, coming back to the production well. Distances beyond that would require floating platforms.

This all sounds very well, but what would the cost be? Would it be economically viable?

“From the work we have done and the work we have collaborated with other people on, we are confident we can deliver synthesis gas on shore at or below the cost of natural gas,’’ says Prof Roddy.

But what about the environmental cost? If we revert to burning coal for our energy – whether underground or not – we will be producing huge amounts of carbon dioxide and contributing to the greenhouse effect.

“I don’t think it would be credible in the UK or in Europe to say UCG technology is a fantastic idea and people should be helping us to do it if you weren’t doing it in conjunction with a carbon management plan,” he says. “You have to decide what you are going to do with your carbon dioxide.

“The extra thing we are looking at – and not many people in the world are looking at it – we have asked ourselves, can we store the carbon dioxide back in the place from whence it came?

“If you took a very conventional approach to this, you might be able to store 10% or a little bit more of the CO2 back in the void created underground but we know how to store 100%.’’

This is because after coal has been removed, the overlying strata sag and settle; they develop increased porosity and there is a zone

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of net compression above which there is a seal. Prof Roddy points out that in the entire history of coal mining up to 14km out under the North Sea, there has never been an uncontrolled ingress of sea water, thanks to that seal provided by the zone of net compression.

“Nothing can get in and nothing can get out.’’

This would mean gasifying series of seams in turn, allowing them to settle for a few months and then filling them with the CO2.

“A more convenient alternative would be to store the CO2 in saline aquifers,” says Roddy.

“You could store several hundred years’ worth of the whole of Europe’s CO2 production in the UK’s saline aquifer storage.’’

The CO2 can also be used for enhanced oil recovery as it is an extremely effective solvent for oil. In Texas, carbon dioxide is piped for thousands of miles for injection into ageing oil fields. It has been estimated that if this technique was applied to the North Sea, it could enable the extraction of a further three billion barrels of oil. The CO2 helps maintain pressure in the oil field; it helps “sweep” the oil from the point of extraction to the point of production; it can reach different parts of the rock’s fabric and, being a solvent, it dissolves the oil and fizzes it to the surface like driving beer from a keg.

It is believed that in UK territories it is possible to store about 100 times more CO2 through saline aquifer storage than in an enhanced oil recovery context. There is, though, no reason why we cannot do both.

The technology is, to a large extent proven. In Texas, CO2 currently sells for about $18 a tonne for use in onshore enhanced oil recovery and, since 1996, CO2 has been injected into offshore saline aquifers in Norway’s Sleipner oil field and has been extensively studied.

“As to which you do first, it depends on what

RENEWABLES & OFFSHORE

AUTUMN 11

the investor in your pipeline wants to do first,’’ says Prof Roddy. “They can send if a short distance to a saline aquifer, or, with extra pumping costs, they could pump it a bit further and sell it for enhanced oil recovery.

All that can be done and the carbon dioxide could have come from UCG or been captured from one of the big chemical plants on Teesside.’’

There is an obvious importance for this technology and these techniques for the North East, where there are not only the huge coal resources but also where the big CO2 producing industries make up a quarter of the region’s economy.

“We make chemicals for the world, we make aluminium for the world, we make steel for the world and we produce a lot of CO2 in the process, often in concentrated form,’’ says Roddy.

The next step for Five Quarter Energy is to find a commercial partner interested in the exploitation of its licences.

He says: “There are a number of prospective investors who have heard what we are doing and are saying, can we come and talk to you.

We are getting in front of very credible people.

We are seeing very strong signs of interest.

“If someone said tomorrow that they liked what we are looking at, we could have a reasonable sized unit up and running within two years.’’

He points out that most of the UK’s coal-fired power stations are scheduled to close before 2020 and the only ones remaining operative will be those that have invested heavily to remain compliant with emissions legislation.

He believes that, in addition to wind and nuclear generation, the UK should have about 10 carbon-capture and storage power plants, starting with four. That would allow the UK to eliminate about 10% of its CO2 emissions.

One or two of those plants could be UCG plants.

“I think the right thing to set out to build is a 50MW power station because to build a 500MW plant would take an awful long time to raise the funding, particularly when it hasn’t been done before.

“If we did something at a 50MW scale, we could do that quickly, we could show that it performs exactly how we said it would

RENEWABLES & OFFSHORE

INTERVIEW

Scalable technology: Professor Dermot Roddy of Five-Quarter Energy perform. The good thing with UCG is that if one that was 10 times bigger was wanted, all that we need to do is to build a small number of additional injection wells and put all the syn gas through one power station. It’s an easily scaleable technology.’’

If Five-Quarter Energy is right, the UK is sitting on a resource comparable to North Sea gas and discovering how to exploit it, could hardly have come at a better time. However, the company is determined that the legacy of UCG should be longer lasting than that of North Sea gas.

Prof Roddy says: “When you think of the economic decimation that happened here in the North East of England when much of its heavy industry closed, and then think of the North Sea oil bonanza – what did we do with all that money? It certainly wasn’t reinvested in

37

communities which were struggling and it wasn’t reinvested in renewable energy technology. It was all just, let’s just milk this for what it’s worth.

“When we talk to government about what we want to do here in the North East with Underground Coal Gasification, we say that right up front we want to structure FiveQuarter so that some proportion of the money that we make from Underground Coal Gasification gets diverted in those two directions – some kind of pot that’s there for the acceleration of the development of renewable energy, because the country needs that for the longer term, and also some of it needs to go into the communities on our doorstep.

“We want them to be our supporters and see this as part of their future.’’ n

SPECIAL REPORT | AUTUMN 11

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SPECIAL REPORT | AUTUMN 11

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RENEWABLES & OFFSHORE

AUTUMN 11

REPORT

The race for offshore wind enters the home strait Global warming warrior Al Gore gave his backing to Scotland’s renewables programme at an investment conference where funding was a key issue. Antony Akilade reports

In Scotland’s favour, the waters off its coast promise greater electricity generating potential, though this has to be extracted from a harsher climate

RENEWABLES & OFFSHORE

The Scottish renewables sector is on track to deliver on the potential of Scotland’s wind wave and tidal resources, according to attendees at the Scottish Low Carbon Investment conference held in Edinburgh in September.

The upbeat tone was boosted by a keynote address from Al Gore, the former vicepresident of the US, who praised the Scottish government’s vision of renewable energy’s place in the country and its support of the sector.

Gore said: “Scotland has not only provided inspiring leadership, you are exploiting one of the greatest resources anywhere on the planet, with wind, onshore and particularly offshore.

“People and businesses have this opportunity of enormous potential for jobs. The amount of energy to be harvested once it’s worked out is enormous.”

First minister Alex Salmond also pointed out to delegates that the low-carbon market was on an impressive growth trend. From an estimated value of £8.5bn in 2007/08 the low-carbon market is expected to rise to £12bn by 2015/16 which would represent 10% of the Scottish economy, he said.

The Scottish Government’s desire to secure a share of the critical turbine manufacturing market is being backed by hard cash. And at the SLCI conference Salmond announced the

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establishment of a £35m fund to support the development of offshore renewables in Scotland. This money would be used to support the production of full-scale prototypes of the next-generation of offshore wind turbines.

The fund will aim to build on successes in attracting turbine manufacturers such as Gamesa and Mitsubishi to the region and leverage up to an additional £80m in private investment.

Scotland does not have a clear field in the race to develop a market leading position in the low carbon sector and the offshore wind sector in particular. There is at present a fierce battle with Humberside also in the running for the lucrative bounty of jobs and spin-off benefits to local economies.

The North of England has the advantage of already having turbines in the shallow waters off the coast. In Scotland’s favour, the waters off its coast hold the promise of greater electricity-generating potential, though this has to be extracted from a harsher climate.

Scotland is also favoured by the close proximity of engineering expertise from the North Sea oil and gas sector which is firmly rooted in Aberdeen, with tentacles reaching out across the Central belt.

Some insight into which way the wind is blowing will be provided when a decision is >>

SPECIAL REPORT | AUTUMN 11

REPORT

AUTUMN 11

made by Spanish turbine maker Gamesa on the location of a £150m wind turbine manufacturing plant, with Dundee vying against Hartlepool for what could bring 800 jobs to either place.

Gamesa has already opened a £12.5m centre to develop offshore wind technology at Strathclyde Business Park in Bellshill, near Glasgow. The company, which employs 40 engineers at the centre, hopes to have more than 100 staff by the end of the year and 180 within three years.

The choice of Scotland for research facilities has a track record with Doosan Power Systems announcing a major initiative to enter into the Scottish wind power business with investment of up to £170m over the next ten years, announced in March of this year.

Supported by Scottish Enterprise, the South Korean engineering company will locate its R&D Centre of Excellence for Renewables at its current site in Renfrew, near Glasgow creating up to 200 jobs. It is hoped that a second phase will see the establishment of assembly and manufacturing facilities in Scotland.

The Japanese wind industry has also declared its interest in Scotland as a viable base for turbine development with Mitsubishi Power Systems Europe announcing an investment of £100m in a research and development centre for the development of advanced offshore wind turbines in Edinburgh in December of last year.

However, it may not prove to be the case that the race to become the leading location for offshore wind facilities is a winner takes all.

Niall Stuart, chief executive of industry trade body Scottish Renewables, believes the potential for low carbon technologies is such that there will be enough business for everyone.

“The next couple of years is going to be crucial for offshore wind in Scotland,” says Stuart.

“But no single place is going to do it all. It’s too big.”

Indeed, Siemens has had meetings with the large Scottish ports following its decision to set up a turbine manufacturing plant in Humberside, indicating that plants may be needed in more than one location.

“That so many companies such as Mitsibushi, Doosan Babcock and Gamesa are now

SPECIAL REPORT | AUTUMN 11

The quality of management in the renewables sector in Scotland is generally very good with key players in position investing here show that there are definitely things happening,” says Stuart. “However, big developments are still a long way away from planning consent. Until there is certainty over order book these companies are not going to make decisions.”

Stuart also praised the Scottish government’s efforts in promoting Scotland’s potential in the renewable field.

“There’s is no doubt that what makes Scotland so interesting is the support of the first minister and the Scottish government. The commitment to targets, smother consenting regimes and prototype development - the market has taken note. The industry feels there is not the same level of support from Westminster as from Scotland.”

Politically, Alex Salmond has put his neck on the line with ambitious targets for generating both jobs and electricity from renewables. But, says Euan McVicar, partner in the energy and infrastructure team at McGrigors, these targets are realistic.

“The 130,000 jobs target set by Alex Salmond is achievable though it will take a bit of time,” says McVicar.

“Sir Ian Wood (of oil services company Wood Group) made a great speech at SLCI conference where he compared the emerging industry to the nascent Scottish oil and gas services sector of the 1970s. He made it clear that we are not aiming to compete with the oil and gas sector but that renewables would be additional to oil and gas strengths. The skills base is complementary.”

Despite the distinction being made between the stance of the Holyrood and Westminster governments McVicar still has fears that the

40

development of renewables both in Scotland and elsewhere could be hampered by wider political concerns.

“At the moment there is a growing feeling of nervousness in the industry around energy pricing, what with Cameron holding talks with the Big Six, that there may be a knee jerk reaction leading to the withdrawal of support for low carbon technologies,” he cautioned.

“In Scotland we need to keep looking at ways to improve our appeal whether that be by looking at business rates or further grants.”

Further out there is considerable potential and growing interest in the marine energy sector with the Carbon Trust predicting that there is the potential to generate up to £76bn to the UK economy by 2050, supporting more than 68,000 UK jobs.

Most recently the poster child of the wave and tidal sector in Scotland is Aquamarine Power with a recent announcement of a £3.5m commercial loan from Barclays Corporate and a further £7m from stakeholders signalling the sector’s proximity to maturity.

It is the first time a UK marine energy project has succeeded in securing bank debt finance.

Aquamarine Power’s Oyster wave power technology captures energy in nearshore waves and converts it into clean sustainable electricity. The loans will provide funds Aquamarine Power needs to complete a 2.4MW Oyster array, located at the European Marine Energy Centre (EMEC), Orkney.

According to Jan Love, director of project finance for Barclays Corporate Scotland, the Aquamarine loan deal was sealed by the fact that the company had the strategic support of key stakeholders. Love also praised the quality of the management team in place and that the company had already attracted grant funding.

“The quality of management in the renewable sector in Scotland is generally very good with key players in position,” she says. “There are also very large energy companies involved in the sector. The Scottish government has been very helpful in boosting the marine sector here where they get a higher ROC level than elsewhere in the UK. But it’s not just the marine sector where we see potential. We’re actively looking at onshore wind, solar, hydro and biomass.” n

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AUTUMN 11

REPORT

Q&A session Lady Susan Rice, of Lloyds Banking Group in Scotland, finds answers at the Scottish Low Carbon Investment Conference.

Q: Last year, at the first SLCI, you outlined the financial challenges and your desire to “unravel” the complex issues involved. How far have we come and what are the main challenges ahead?

A: Many of the challenges remain. If we look at traditional debt finance, there’s still a pre-construction funding gap. But developers are beginning to recycle funds and that’s freeing up balance sheet capacity and finance. At the opposite end, where we have mature, operating assets, there’s increasing interest amongst the investor community to move into this space as long as projects fit their particular investment model. Banks and financiers are becoming increasingly familiar and therefore more comfortable with low-carbon financing.

Even where challenges remain, familiarity and experience help mitigate the issues of risk, time and indeed cost that I highlighted last year. As we gain experience with one technology which may reduce the perceived risk associated with financing that technology, we create the scope to focus on new ones as well. For example, Lloyds Banking Group has a large onshore wind portfolio, but has invested significantly in biomass as well over the last year to 18 months.

Q: How would you assess the current attitude of the banks to financing offshore renewables?

A: Appetites vary amongst the banks – some are becoming more comfortable with offshore and are providing finance, others aren’t there yet. I can’t speak for other banks, but I can speak about my own institution, Lloyds Banking Group. We’re the UK’s biggest bank and we have a leading renewables portfolio – we’ve built up experience in over 40 projects in the UK and globally and have invested £2.5bn of capital into renewable energy. In Scotland, we have a dedicated Renewable Energy team who’ve supported Scottish projects generating 128MW in biomass and wind in the last 18 months. Lloyds Banking Group knows the renewables market well and has the capability and appetite to support projects. That appetite only comes from experience.

Q: You have identified the financing and delivery of the supply chain and port infrastructure as essential to driving the renewables agenda forward. How do you assess the progress in this area in the last year?

A: The supply chain is a critical piece of the puzzle. As chairman of the 2020 Climate Group’s finance sub-group, I brought together many of the major Scottish engineering and technology companies, along with port and vessel operators, and asked PA Consulting to co-ordinate their deliberations. The group has identified a number of ways to begin tackling supply chain issues. We hope this will build clarity and increase investor confidence. One example is the technology route-maps they have designed to clarify where we need investment. We hope the supply chain scales up so that Scottish companies can compete successfully with others for this work. But, remember, we don’t need to “own” every aspect of the supply chain. We do, however, need to be clever about owning those aspects where we can take a leading role internationally, and so that we can continue to lead our own renewables activity. In terms of investment itself, in addition to the activity I’ve already mentioned, the announcement of the International Technology and Renewable Energy Zone (ITREZ) is significant and a number of us are making what we believe is a compelling case for bringing the Green Investment Bank to Edinburgh. What impresses me is the widespread clarity of focus that comes from having so many entities around the table. We’re so much stronger when we work together in this way.

Many of the challenges remain. If we look at traditional debt finance, there’s still a pre-construction funding gap.

But developers are beginning to recycle funds and that’s freeing up balance sheet capacity and finance

RENEWABLES & OFFSHORE

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SPECIAL REPORT | AUTUMN 11

INTERVIEW

AUTUMN 11

deep sea diversity SPECIAL REPORT | AUTUMN 11

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RENEWABLES & OFFSHORE

AUTUMN 11

The cables at the bottom of the ocean must work in an increasing hostile environment, yet their reliability is paramount. Kenny Kemp visits Oceaneering Umbilical Solutions in Fife to see their new testing centre

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INTERVIEW

The subsea umbilical does exactly what it says on the tin. It is the lifeline that keeps all of the oil and gas operations in the North Sea alive and kicking. The intricate arrays of pipes, hoses, risers and control systems need to be robust and resilient.

But with oil and gas exploration in increasingly deeper water and less benign ocean conditions, and the offshore renewables explosion requiring specialised pipework to carry thicker copper cables, then new research and testing is essential.

Oceaneering Umbilical Solutions (OUS), a global leader in the design and manufacture of subsea control umbilicals, has recently invested nearly £2m in a pioneering test, qualification and reliability laboratory in Scotland to >>

SPECIAL REPORT | AUTUMN 11

INTERVIEW

AUTUMN 11

evaluate and assimilate the long-term behaviour of umbilical cables.

The TQR facility at Rosyth, on the shores of the Firth of Forth – and an umbilical spools-length or two from another great engineering feat, the Forth Bridge – employs 284 engineers, sales and administration staff, serving a global market.

But the Fife facility is keen to encourage young engineers from Scotland and the North of England to choose a career in subsea engineering work.

Greg Scott, OUS’s general manager for global management, says: “There is a war for talent in the offshore engineering sector. We need interested young people to understand that there are some lucrative and rewarding jobs in oil and gas. So bringing this testing facility to Rosyth underlines our commitment to Scotland and the UK’s engineering prowess.”

This battle resulted in the Rosyth operation taking a group of engineering undergraduates from nearby Heriot-Watt University for project work during their summer holidays, retaining them for a few extra weeks per year and then offering them eight-month full-time contracts after graduation. A similar project is under way with Aberdeen University.

“It’s a two-way benefit,” says Scott. “The students gain practical industry experience and we are able to see the calibre of the people coming through the universities.”

Mike Smith, the American-born head of the OUS centre in Rosyth, says umbilical systems have become a commodity with cut-throat pricing, so research and development to enhance the specification and design are crucial for Oceaneering.

“There are fresh challenges for the umbilical makers because we are operating in much harsher environments. In the Gulf of Mexico, they are now operating in depths of 11,000 feet, and we have umbilicals operating now at the depth of 9,000 feet. What we want to do is help the client by showing the optimal operational data. This is what our facility in Rosyth will help us to do.”

There are other factors, such as the significantly warmer waters off the Australian coast, where thermal dispersal has an impact on both performance and life-span.

Greg Scott says: “The umbilical is a complex

SPECIAL REPORT | AUTUMN 11

Commitment: Greg Scott, OUS general manager for global management

If an umbilical fails, production stops. Within the whole energy infrastructure it is one of the most critical components

pipeline. It has to work in very extreme environments under pressure, temperature and movement with the tides and shifting ocean floors. It has to deal with power supplies and fluids and be extremely reliable. The offshore industry is extremely risk averse.”

The installation costs are high and clients in the past have bought the umbilicals almost off the shelf and been unable to properly evaluate the product.

“Increasingly, there is more knowledge within the industry about what works for particular jobs, so we are looking at a collaborative design with the clients to help them

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implement their requirements at an optimal level,” he says.

“In-house tests of an umbilical’s operational behaviour at various stages of its life cycle is vital information for our clients and they’ll be reassured that our testing capability exceeds the set industry standards.”

Umbilicals generally have a 25-30 year life-cycle but the operational stresses caused by ocean currents and tidal wave movement can cause fatigue and allows corrosion to set in earlier than anticipated.

OUS says its investment in the TQR facility will help act as a safeguard against sudden operational failures.

Greg Scott says: “If an umbilical fails, oil and gas production stops. Although the umbilical is a comparatively inexpensive product within the whole energy production infrastructure, it is one of its most critical components.

“We have been developing sophisticated testing to work out how to extend the life of umbilicals and we are modelling increased reliability.”

Oceaneering Umbilical Solutions’ design and manufacturing plant has a new 600m2 facility housing the team of specialist analysts who will evaluate test data and carry out performance tests, including the use of heavy crushing equipment and guillotines to simulate falls on a line.

“We have made a significant investment in the new TQR centre,” says Mike Smith. “Part of this will provide a comprehensive ‘data shop’ generating analysis which helps our proposition as a one-stop-shop for umbilical manufacture, test and supply.”

The TQR laboratory can carry out testing to industry standard ISO 135628-5. OUS subcontracted much of this testing, but the TQR laboratory means better in-house understanding of how an umbilical performs.

Oceaneering Umbilical Solutions is a division of Oceaneering – a global oil field services and products firm, focusing on deepwater applications. Founded in 1964, Oceaneering has grown from an air and mixed gas diving business in the Gulf of Mexico to an advanced applied technology organisation operating around the world, currently with around 37% of the North Sea market working for many of the oil majors. n

RENEWABLES & OFFSHORE

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quay investment One logistics operator is taking advantage of Teesside’s geographical advantages and making big investments to service the offshore industry, as Peter Jackson discovers >>

SPECIAL REPORT | AUTUMN 11

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RENEWABLES & OFFSHORE

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SPECIAL REPORT | AUTUMN 11

INTERVIEW

AUTUMN 11

Teesside offshore support specialist AV Dawson is investing more than £3m to meet increased demand from the oil and gas industries.

The investment – to extend its quayside by 200 metres to allow larger vessels to use its 1,000ft wharf is part of a £10m development of its 80-acre site at Riverside Park in Middlesbrough, which has secured backing from the Government via its Regional Growth Fund.

And it comes on top of an investment of £120,000 this year to increase water depths at the wharf to eight metres.

AV Dawson operates a multimodal logistics business and one of its key facilities is its North Sea Supply Base which boasts the largest fabrication halls on the River Tees and which stand 160ft tall and 330ft wide. It also has heavy lift and loadout quays; a railhead with cargo handling and warehousing; a road transport fleet and a project management team.

The fabrication halls and the rest of the North Sea Supply Base are used by companies such as subsea specialists Modus and GEMS which also charter and fit out larger offshore support vessels.

AV Dawson managing director, Gary Dawson says: “The investment will be able to support the ambitions of companies like Modus which look to charter vessels either on a permanent basis or for a project and those vessels may be alongside for up to two weeks being fitted out and made ready.

“We have embarked on an infrastructure improvement plan through to 2014 and the regional growth fund grant which has enabled us to make these investments much sooner than we could otherwise.’’

This investment comes as a result of a strategic decision made more than 10 years ago. AV Dawson was founded in 1938 with £50 capital to buy a horse and cart to deliver coal. It grew into a logistics business based on the Tees, but never took part in the offshore oil and gas boom of the 1970s.

But, in the late 1990s, AV Dawson bought an adjacent 22-acre site from Kvaerner which also brought 200,000sq ft of buildings, including the fabrication halls, which was to become the North Sea Supply Base.

SPECIAL REPORT | AUTUMN 11

Our ambitions to get into the container world changed focus to utilising the facilities to the best of our ability for whatever projects we could get onto the site. We considered all kinds of options

“We weren’t involved in project work or offshore oil and gas in any way shape or form, whether it was supplying freight services stevedoring activities or accommodation, until we bought the North Sea Supply Base site in 1998,” says Dawson.

“That gave us the platform to approach these markets and say we have more water, we have big fabrication halls and we have a lay-down area, so that was our first introduction. Until then, more than 80% of our turnover had been in steel and the transport of steel.’’

This reliance on steel prompted the acquisition of the Kvaerner site as part of a strategy of diversification with the plan being to use it to get into the container market.

“We had these huge sheds and wondered what on earth we were going to do with them,” says Gary Dawson. “Then we realised that people wanted fabrication facilities and project accommodation for as little as a month and as long as a year when they were building things. Our ambitions to get into the container world changed focus to utilising the facilities to the best of our ability for whatever projects we could get onto the site.

“Just prior to 1998, oil prices were pretty high and investment programmes were strong, but shortly after buying the facility oil prices went through the floor and so we were concerned about whether or not these sheds could be used for oil and gas. We considered all kinds of options about what we might store in them and what activities might take place in those sheds. Fortunately the markets recovered.’’

AV Dawson invested heavily in the facility’s road, drainage and power infrastructure as well as quayside crainage to make it a multi-user flexible facility.

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Dawson says: “It is a very easy solution for people now because they can move in and everything is up and running and they can move out again, but what we have actually found is that most people who have moved in have continually come back to us and some who have moved in for a short time have never gone away.’’

The company is on target to see 150 vessels using the site this year, which is almost double the activity two years ago.

“We see more cargoes, we see bigger ships and that’s why we are looking to extend the quay and why we have bought additional land to support it with rail freight services and additional warehousing.’’

Offshore related work now represents more than half of AV Dawson’s turnover, having grown from only about 10% four years ago.

“It’s a big sea change, if you’ll excuse the pun,’’ says Dawson. “That’s deliberate and a result of our intention to diversify and to track the growth markets and to attract people to the site who then require our additional services, giving them accommodation and a base to operate from and then providing transport, freight forwarding and ships’ agency and so on.

“Effectively, what we are providing is a platform for companies to have somewhere to either base themselves permanently or to have a project-type facility that they can move in and out of and therefore just have an overhead for the length of the project.’’

AV Dawson boasts 1,000 metres of quay frontage and eight metres depth to cater for the larger offshore supply vessels such as a recent visitor, the 90-metre Maersk Lancer. The craneage can lift 215 tonnes onto a vessel. >>

RENEWABLES & OFFSHORE

AUTUMN 11

INTERVIEW

Base well suited for a variety of projects Global project logistics specialists and project forwarder Bertling has been consolidating and exporting project cargo from AV Dawson’s North Sea Supply Base since 2003 and the multi-national decided to open a full-time office at the Middlesbrough site in September 2006. It has also located its heavy lift and engineering department there.

A privately-owned company founded in 1865, Bertling’s head office is in Hamburg with a UK HQ in Wembley. It combines ship-owning, chartering and freight-forwarding, as well as port and warehouse management and operations.

From the North Sea Supply Base, Bertling is continuing to supply project cargo for a long-term oil and gas project in the Caspian Sea which has already seen it ship 64,000 freight tonnes off the River Tees.

Its Teesside project team has so far loaded a total of 58 Russian-flagged sea-river vessels to move cargo to Baku and then into the Caspian Sea. Mike Hetherington, technical director at Bertling, pictured, says: “We were first drawn to the Tees mainly by the heavy cargo routes from our supplier in Leeds as a lot of the cargo we were moving – turbine driven pumps and compressors – was either overweight or overheight and Middlesbrough is well connected to a series of abnormal load routes. So this became a UK cargo consolidation point for us and we load straight out of here onto small sea river ships to ship into the Caspian.

“This year is the start of the fifth phase of the project in the Caspian where we are effectively delivering flat-packed oil rigs and refineries. We are moving high value equipment from Middlesbrough that is then assembled in Baku and launched into the Caspian Sea. “The North Sea Supply Base is well suited for this project as it is right on the coast and there are good links to the highways network. We can have as much or as little of the facility as we need as well as plenty of storage space. We also have use of the 600-tonne crane on the quay and two mobile port cranes.”

Bertling has also used AV Dawson as a base for projects in West Africa, Italy and Bulgaria. It runs a team of 13 from the Teesside office where it also rents warehousing.

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INTERVIEW

AUTUMN 11

“Were our customers to hire a crane in to do a lift of that size, they would be talking upwards of £30,000 for the first day’s crane hire,’’ says Dawson. “A lot of that cost is in the transport and building of the crane and its eventual demobbing but we have it permanently on site, so we can offer much better value for lifting.’’

There are also two Gottwald cranes, which can each lift pieces up to 63 tonnes.

AV Dawson sees itself as a port within Teesport, operated by PD Ports, and believes its services are complementary to the main port and, while it may be something of a competitor, it is also a partner and, in the words of Dawson, “adds to the River Tees portfolio’’.

Last year, the company has also acquired a ships agency, Cockfield Knight & Co, which allows it to offer vessel charter, port agency, customs documentation and clearances.

The agency is based on site. Companies now operating from AV Dawson’s North Sea Supply Base include project logistics specialist Bertling, which supplies cargo for a long-term oil and gas project in the Caspian Sea; Geotechnical Engineering and Marine Surveys; seabed intervention specialist Modus; pipeline protection specialist Pipeshield; marine engineer Tekmar; and Mech-Tool Engineering.

It is to cater for this growing list of customers that AV Dawson is creating more quay space.

“Because we see a growth in the offshore supply side we need to create more quay space to accommodate our conventional business,’’ says Dawson. “That will be able to support the ambitions of people like Modus who look to charter vessels either on a permanent basis or for a project and those vessels may be alongside for up to two weeks, being fitted out and made ready.

“Likewise, when those vessels come back in, there’s a demob, which again can take a week or so and we don’t want them to suffer from congestion and we want them to be able to charter pretty much whatever size vessel they require and not have to move their equipment off-site to mobilise it at a deeper quay somewhere else.’’

Happily for AV Dawson, and for the industry, offshore has – as Gary Dawson points out – remained largely recession-proof. Oil prices

SPECIAL REPORT | AUTUMN 11

We have invested a huge amount of money throughout the recession period. We have bought three additional sites and have secured another one in the immediate vicinity

have remained high, which has stimulated investment programmes and most of the big energy players are gearing up for renewables which rely on traditional offshore skills and assets.

“We see a massive potential, not only during the installation phase but in the ongoing service and maintenance when it comes to the offshore wind installations, particularly with the Dogger Bank development not too far away now,’’ says Dawson.

“To that end, we are forming additional strategic alliances with people who are already in those markets and I think that’s going to be a key driver for the Tees over the next 10 years.’’

Nothing is likely to happen with the Round 3 offshore wind development at Dogger Bank before 2014, but, AV Dawson is now getting an increasing number of offshore wind-related inquiries.

This is the experience of most port facilities on the east coast and is a reflection of the enormous demands that will be placed on capacity if these thousands of turbines have to be manufactured, installed and then maintained.

“People are now starting to talk about what facilities are available, what capacity is there

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and I think that capacity is going to be in very short supply. We are full at the moment and I see no reason why we are not going to be full for the next 12 months and then there’s this flurry of new inquiries coming through.

“We are looking at a strategic alliance with a Danish company at the moment, which has vast experience in offshore wind related forwarding and transportation and they are looking to support not only the installation of the turbines in the Dogger Bank area but also to support the ongoing maintenance thereafter.

“That’s the big market – once the construction has taken place, how do we look after these things and support them and I think that’s a huge opportunity for us.’’

AV Dawson accepts its facility is not big enough to attract an offshore wind turbine OEM, but it is confident that its tenants and customers will be part of a huge supply chain.

Having said all that, the entire renewables sector – wind, biomass, biofuels, syngas and anaerobic digestion – are all based on government subsidies and tariffs.

Dawson says: “While they are popular and current at the moment and there are promises that they will continue for some years – could they be axed?

“In reality, yes they could be. If the carbon agenda changes, it could affect those businesses. So there are serious worries about that.”

But, the hopes far outweigh the fears and AV Dawson is driving ahead with its ambitious growth plans.

“We have invested a huge amount of money throughout the recession period. We have bought three additional sites and have secured a further one in the immediate vicinity. The next five-to-10 years will see us developing that land, putting in additional rail infrastructure, servicing, warehousing and investing in the quayside. Those are our immediate ambitions. We would like to continue to diversify the services we offer and therefore the markets we can attract with them.

“As long as we can continue to keep making the right decisions and support the ambitions of our clients then there is no reason to fear the future.’’ n

RENEWABLES & OFFSHORE

Proving reliability for offshore Working with industry to reduce development timeframes and improve the reliability of technology offshore

Hann-Ocean Technology Narec conducted cross correlations and evaluation tests of its hydrodynamic, mechanical and electrical performance to predict how the Drakoo III wave energy converter device would react when deployed in the open sea.

Cathie Associates Narec performed simulation modelling of environmental loads on a monopile foundation of a meteorological mast to be constructed for the planned Round 3 offshore wind farm in the Moray Firth, Scotland.

RWE npower renewables

Tekmar Narec performed prototype, demonstration and factory acceptance trials on Tekmar Energy’s unique cable protection system (TEKLINK®) for offshore wind turbines. TEKLINK® will help to improve the resilience and longevity of underwater cable connections as well as reducing offshore wind turbine installation costs.

New testing and development facilities for wind and tidal turbines will be operational from Spring 2012, supporting the growth of offshore renewables in the UK.

www.narec.co.uk

There is a war for talent in the offshore engineering sector. We need interested young people to understand that there are some lucrative and rewarding jobs in oil and gas greg scott, oceaneering umbilical solutions

www.bq-magazine.co.uk