Energy Focus Autumn 2017 by Energy Industries Council

energyfocus

ISSUE 29 AUTUMN 2017

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

INSIDE

VIEW FROM THE TOP Director of ADNOC’s Downstream Directorate Abdulaziz Alhajri

01_Front cover__Energy Focus 1

NEW OPPORTUNITIES Minister for Investment Mark Garnier on UK energy exports

RENEWABLES ABB on supporting a greener grid through battery storage

MY BUSINESS Find out what makes EIC member company Booth Welsh tick

Which way now? We explore diﬀerent strategies to navigate the new energy landscape: collaboration, diversiﬁcation, export, innovation, optimisation and technology

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Contents ISSUE 29 AUTUMN 2017

FROM THE EIC 5 Foreword From the Chief Executive

6 View from the top Abdulaziz Alhajri, Director of ADNOC’s Downstream Directorate

10 News and events Updates from the EIC

14 The big question We ask members: How can companies working in the energy sector widen their horizons?

16 Special report: Evolving in the new energy era Nicholas Newman looks at how the energy industry is adapting to the changing markets

22 It’s time for the UK to become a nation of exporters Mark Garnier, Minister for Investment, talks to Energy Focus

54 My business

Abdulaziz Alhajri

OIL AND GAS 27 Doing business in Iran

41 Distribution networks hold the key to the UK’s energy future

Fabrice Abalain, Middle East and North Africa Regional Analyst, the EIC

Peter Jones, Technology Strategy Manager, ABB

45 GCC in the spotlight

30 Breaking Brazil Q&A with Jeferson Leite, Marketing and Sales Manager BridonBekaert The Ropes Group

POWER

Energy Focus report

Adapting to survive

NUCLEAR 46 Is fusion the fuel of the future?

34 North America shale and oil sands

Laban Coblentz, Head of Communications and External Relations, ITER Organization

Ivan Marten, Eric Oudenot, Emmanuel Ricolﬁ, Jamie Webster and Borja Jimenez, The Boston Consulting Group

Exporting for growth

38 ADIPEC 2017 Make your mark in the Middle East

48 Global nuclear prospects: Bust or boom? David Hess, Communications Manager, World Nuclear Association

Martin Welsh, Booth Welsh

RENEWABLES 51 A bright future

America’s onshore renaissance

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

52 China and Taiwan delivering on Eastern promise Amisha Patel, Head of Power, Nuclear and Renewables, and Public Aﬀairs, the EIC

Nuclear energy’s value

The Energy Industries Council

Dr Luis Crespo, President, European Solar Thermal Electricity Association

Editors Sairah Fawcitt +44(0)20 7880 6200 sairah.fawcitt@redactive.co.uk Edward White +44(0)20 7091 8638 edward.white@the-eic.com Publishing director Aaron Nicholls Production Rachel Young Senior designer Gary Hill Design studio manager Claire Echavarry

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

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

www.the-eic.com | energyfocus

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Foreword Stuart Broadley CEO

From the Chief Executive: In this edition we explore the business strategies being adopted to meet the challenges of the new energy landscape and how companies can realise their full exporting potential We launch this issue of Energy Focus at ADIPEC 2017, where once again the EIC will be hosting the UK pavilion. During the twenty-plus years we’ve taken part in the event, we’ve seen first-hand how it’s grown to become the Middle East’s premier oil and gas conference and exhibition. Likewise, our involvement has grown year upon year, and it’s now one of the largest UK pavilions that we manage at energy events around the world. At this year’s ADIPEC we’re hosting over 50 companies that will be showcasing the innovative products and services that the UK oil and gas industry is renowned for worldwide – turn to page 38 to find out who the companies are. Taking our cue from ADIPEC, we’ve used this issue of Energy Focus to put the spotlight on the Middle East with a range of articles charting developments throughout the region. In 2016 one of the region’s biggest players, ADNOC, undertook a significant restructuring programme. The managerial re-shuffle made headlines around the world, with high-profile appointments including Abdulaziz Alhajri’s nomination as Director of its Downstream Directorate. In an exclusive interview for Energy Focus, he reveals the truth behind the rumours of an ADNOC IPO as well as plans for the company’s petrochemical and refinery portfolio on page 6. What’s really interesting about our interview with Abdulaziz Alhajri is how it shows that the whole industry, from state-owned giants all the way down to family-run SMEs are recognising the need to adjust to the new energy landscape, which is indeed the theme of this issue of Energy

Focus: How can energy companies continue to grow, given the current challenging market conditions? We put the question to four EIC member companies: Aiken Group, Carpenter & Paterson, ENGIE Fabricom and HR Wallingford, which have each put in place different strategies such as collaboration, diversification and export, to deal with the downturn (page 14). The UK has yet to fulfil its true export potential; in fact, according to government statistics, only 11% of companies (across all sectors) look for an overseas market for their products or services, and unfortunately the energy industry appears to be no different. Indeed, our EIC Survive & Thrive Insight Report found that only 8% of participating companies focused on investing in new export markets as a growth strategy in the downturn. Given the phenomenal results that exporting can achieve, it’s surprising. With Brexit looming, it’s worrying. Bearing this in mind, we spoke to the new Minister for Investment the Rt Hon Mark Garnier. On page 22 you’ll find his thoughts on the future of UK energy exports and how the Department for International Trade can help UK companies reap the rewards of moving beyond our borders. One company certainly benefitting greatly from moving into a new market is BridonBekaert. Turn to page 30 to read our interview with Jeferson Leite, the company’s first-ever Brazilian employee, and find out about their incredible South American journey and how it all started at the EIC Rio office using our LaunchPad service. Our LaunchPad service is just one of the many ways we help our members to grow. On page 10 you’ll find an update on some of the

latest EIC products and services – all of which are designed to help our companies ﬂourish. Perhaps the most exciting development is our newly launched EICAssetMap, the only operations and maintenance (O&M) database to map all major UK energy facilities across all energy sectors. As someone who worked in the global O&M market for over 20 years I can tell you this is a ground-breaking business development tool for anyone involved in, or thinking about moving into, the OPEX market. We’re already planning the next stage of its development, to cover the Middle East region. To ﬁnd out about the full range of EIC tools, events and activities, and how they can help companies of any size and sector to broaden their focus, adapt to current market conditions and generate new business, please visit: www.the-eic.com.

Stuart Broadley EIC CEO stuart.broadley@the-eic.com

www.the-eic.com | energyfocus

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Section From the Head EIC Q&A Feature Abdulaziz heading Alhajri

View from the top Q&A: Abdulaziz Alhajri Director of the Downstream Directorate at ADNOC

Downstream, we want value-adding partners who are willing to contribute both capital and technological expertise

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Q&A Abdulaziz Alhajri: From the EIC

Energy Focus meets Abdulaziz Alhajri, the man tasked with driving Abu Dhabi National Oil Company’s (ADNOC’s) ambitious downstream expansion plans to double reﬁning capacity and triple petrochemical production by 2025 A year on since managerial changes within ADNOC were announced, can you provide an insight on any resulting initiatives in the downstream business? As part of ADNOC’s 2030 smart growth strategy, we are pursuing proﬁtable and integrated downstream growth to meet the needs of a changing market. Our strategy aims to forge new partnerships and improve performance to achieve a competitive advantage. We are focused on increasing the value of what we produce, as well as investing strategically in creating new products and revenue streams.

capital and investing in high growth opportunities. There are potential partnership and co-investment opportunities within our refining and petrochemical portfolio, including at our existing refineries, a new world-scale refinery and a mixed liquid feed cracker and associated downstream petrochemical units. We are also considering listing minority stakes in our service businesses. Our partners will benefit from select access to ADNOC’s world-class asset base that is strategically and logistically located within an investor-friendly and stable environment. More detailed announcements will follow over the next 12 months and beyond.

With your responsibility being solely downstream, how much interface is there with senior colleagues in the upstream and midstream parts of the ADNOC business? All of us at ADNOC are working towards the strategic objectives of creating a more valuable downstream business, as well as a more proﬁtable upstream business and an economic and sustainable supply of gas. I meet regularly with my colleagues to address these strategic objectives, and to enhance performance and proﬁtability across the entire value chain. Our Upstream, Downstream and Marketing, Sales and Trading directorates have a very close working relationship.

Has ADNOC’s downstream supplier procurement processes changed? Our group procurement policies and procedures apply across the whole organisation, from upstream to downstream. The centralised commercial directory introduced in 2017 benefits vendors by providing a single entry point for registration and prequalification of tenders. So rather than register with all our operating companies, vendors now only need to register once with the ADNOC Group. Standardised contract terms and conditions, a streamlined negotiation process and simplified contract requirements have all been introduced. We have also adopted more transparent key performance indicators.

Given the recent upstream merger within ADNOC between Abu Dhabi Marine Operating Company (ADMA-OPCO) and Zakum Development Company (ZADCO), are there any plans for a similar downstream initiative? There are no plans to merge any of our downstream companies at this time. We are, however, pursing site integration opportunities that allow us to capitalise on synergies and streamline our costs by, for example, sharing services across diﬀerent sites and companies. Can you tell our readers more about ADNOC’s potential market ﬂotation and future partnership plans? Our reinvigorated approach to partnerships will enable ADNOC to be more agile in managing its assets, unlocking

What is ADNOC’s approach to sustainability and carbon management? ADNOC is focused on achieving both greater energy efficiency and lower carbon intensity. We are significantly changing our business practices to increase energy efficiency by 10%, by reducing our own gas consumption by 156m cubic feet per day, saving US$1bn by 2020. At the same time, we are working to mitigate greenhouse gas emissions. ADNOC introduced the first no-flaring policy in the Gulf in 1995, and we have evolved into a regional leader in flaring avoidance design and operation. We are also a leader in integrating carbon capture utilisation and sequestration into our enhanced oil recovery (EOR) strategy, capturing 800,000 tonnes of CO2 a year from the Emirate’s Steel plant and injecting it

About Abdulaziz Alhajri Abdulaziz Alhajri was appointed Director of the Downstream Directorate at ADNOC in May 2016. He has more than 31 years of experience in executive management, operations and technical services with ADNOC. Before taking the helm of the reﬁning and petrochemicals division Abdulaziz Alhajri was Chief Executive Oﬃcer of Abu Dhabi Polymers Company Ltd (Borouge), ADNOC’s joint venture with Austria’s Borealis. Prior to joining Borouge, he served as Assistant General Manager (Technical) at ADNOC’s gas processing company GASCO. He is on the Board of Directors at Gulf Petrochemicals and Chemicals Association and NOVA Chemicals Corporation.

www.the-eic.com | energyfocus

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Q&A Abdulaziz Alhajri: From the EIC

Processing and refining ADNOC has seven businesses that are responsible for all aspects of processing, refining and transforming oil and gas into a variety of products Abu Dhabi Oil Refining Company (Takreer) Takreer has a total production capacity of almost 900,000bbl/d, specialising in crude oil and condensate refining, supply of petroleum products and production of granulated sulphur Abu Dhabi Polymers Company (Borouge) Borouge is an innovative chemical and plastics solutions provider, with a total polyolefin production capacity of 4.5 metric tonnes per day (MMtpd) Ruwais Fertilizer Industries (FERTIL) FERTIL produces up to 3,300MMtpd of ammonia and up to 5,800MMtpd of urea Abu Dhabi Gas Industries Ltd. (GASCO) One of the world’s largest natural and associated gas processing companies GASCO has a process capability of 5.5bn standard cubic feet of feed gas per day

ADNOC Energy with impact

1971

46 years of managing, producing and preserving the UAE’s hydrocarbon reserves 16 companies

Upstream goals Increase capacity to 3.5MMbbl/d in 2018

Reﬁning and petrochemicals 8.6bn cubic feet of raw gas processed per day 900,000 barrels of condensates and crude process per day 4.5m tonnes of polyoleﬁn per year

Oil, gas, reﬁned products and petrochemicals sold on six continents

Exploration and production 12th largest oil producer in the world 3MMbbl/d 9.8bn cubic feet of raw gas per day 151 oil transportation and support vessels

Downstream goals Increase reﬁning capability Grow petrochemicals production from 4.5MMtpa in 2016 to 11.4MMtpa by 2025

INCREASE GASOLINE PRODUCTION TO 10.2MMTPA BY

2022

Abu Dhabi Gas Liquefaction Company Ltd. (ADGAS) ADGAS is a natural and associated gas processing company, with a process capability of 8m tonnes of liquefied natural gas, liquefied petroleum gas, paraffinic naphtha and liquid sulphur per year ADNOC Linde Industrial Gases Company Ltd. (Elixier) Elixier supplies gaseous and liquefied nitrogen and liquid oxygen Al Reyadah Al Reyadah captures, processes and uses up to 800,000 tonnes of CO2, to enhance oil recovery, each year

into our fields where it stays locked away underground, which frees up the natural gas previously used for EOR for more productive use. Can you tell us about ADNOC’s long-term strategy for petrochemicals and refining? We are pursuing integration opportunities in our refining and petrochemicals business to capitalise on synergies and enhance profitability. We will also make significant investment in new downstream projects: raising refining capability; gasoline production to 10.2m tonnes per annum (MMtpa) by 2022; and expanding petrochemical production by two and half times to 11.4MMtpa by 2025 as we target rising demand,

particularly in Asia, where the petrochemical market is set to double by 2030. To achieve these goals, what are the main challenges ADNOC will face and how will they be overcome? Shifting global trends are creating an energy landscape where new rules of engagement are required. So, we need to adopt a more open and ﬂexible mind-set when it comes to deciding how to best expand and choose the best partners or how to leverage new technologies. Downstream, we want value-adding partners who are willing to contribute both capital and technological expertise. The ideal partner brings tangible strategic value to ADNOC, including access to new markets. At the same time, we are focused on developing our own people and attracting best-in-class talent, to create a world class work force. We are investing in upskilling the brightest and best national talent, and we have raised standards through a competency-based performance management system, supported by a lifelong learning culture.

ADNOC Established in 1971, ADNOC is one of the world’s leading energy producers. Over its 46-year history, ADNOC has steadily diversiﬁed and expanded its operations, comprising 16 companies and subsidiaries to create an integrated oil and gas company spanning exploration and production, reﬁning and petrochemicals, and marketing and distribution.

www.the-eic.com | energyfocus

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

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

Worldwide business support

About the EIC Established in 1943, the EIC is the leading trade association for companies working in the global energy industries. Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require. As a not-for-proﬁt organisation with oﬃces in key international locations, the EIC’s role is to help members maximise commercial opportunities worldwide. We do this in a variety of ways:

Enabling members to expand into markets across the globe

Market insight Helping members to track global energy projects and UK assets Our projects database, EICDataStream, provides extensive information on more than 7,500 active and future projects in all energy sectors. By tracking full project lifecycles from feasibility to construction and then completion, it helps members to identify opportunities and plan their business development strategies. Our newly launched operations and maintenance (O&M) database, EICAssetMap, puts the details of every major UK energy asset at your ﬁngertips. For more details, see page 11.

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

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

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

Industry courses Enhancing members’ skills and knowledge Our quality courses, which can be delivered oﬀ-site or in-house, are led by highly experienced trainers with industry backgrounds. We tailor our training to suit a variety of levels and also work with member companies to run programmes, some of which include tours to manufacturing companies.

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From the EIC News and events

EIC Country Reports: Iran, Kazakhstan and Mozambique

Since the last edition of Energy Focus, we’ve released three new EIC Country Reports for Iran, Kazakhstan and Mozambique. If you’re thinking about making the move into any of these up-and-coming countries then these reports are a must-read. Not only will you find out about the current state of each country’s energy industry, as well as the lucrative opportunities on offer for projects across all sectors, but also, crucially, you will discover who the key players are. These country-specific reports will also get you up to speed with the political, economic and social factors in play as well as providing essential information for setting up a company.

THR E REPNEW E ORT N O AVA W S ILAB LE

EIC Country Reports are available free of charge to EIC members and for purchase (£195 + VAT each) by non-EIC members. Please contact info@the-eic.com for more information and to buy your copy.

EICAssetMap Our latest business development tool, EICAssetMap, is the only O&M database to map all major UK energy assets across all sectors Key features Fully interactive: search for facilities by location, sector and operator Make the right connections: ﬁnd out who you need to do business with at each facility Use it on the move: tablet-friendly so your sales force can take it with them on the road Unlimited company access: add as many

W NE IC SE E BA A DAT

colleagues as you like to your account Stay up to date: EICAssetMap is updated daily by our expert analysts Track the lifecycle of assets: from start-up through to decommissioning If you work in the UK O&M sector or are thinking about entering this lucrative market, get ahead of the competition with EICAssetMap. To ﬁnd out more about this bespoke EIC database please contact: membership@the-eic.com www.the-eic.com | energyfocus

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Norway Â· Sweden Â· Denmark Â· Holland Â· UK Â· Dubai Â· China Â· Korea Â· Singapore Â· Malaysia Â· Russia Â· USA

25/09/2017 09:51

From the EIC News and events

EVENTS COMING UP

Overseas delegation to Uganda When: 20–24 November 2017 Why attend? The EIC’s oil and gas trade delegation to Uganda will be led by Lord Popat, Prime Minister's Trade Envoy to Uganda and Rwanda. Visiting Kampala and Lake Albert, you’ll meet representatives from the country’s major players as well as potential local partners. Uganda is one of the fastest-growing African nations with a projected real GDP growth rate of 6.3%. With an

estimated 6.5bn barrels of oil and close to 500bn cubic feet of gas in place, the country has massive potential. EIC overseas delegations provide an excellent introduction to new markets in a supportive environment. To book your place on this delegation, please visit www.the-eic. com/Events/OverseasDelegations/ OverseasDelegationtoUganda.aspx

EIC Connect Power, Nuclear and Renewables 2017 When: 28–29 November 2017 Where: ACC Liverpool, Kings Dock, L3 4FP Why attend? This is the only supply chain conference and exhibition which covers the power, nuclear and renewables sectors. Over two days, you’ll hear from major players including ABB, EDF Energy and Siemens. The conference sessions have been designed for those companies new to, or thinking about entering, the power, nuclear and renewables industries. You’ll find out where the opportunities are and how to do business in these growing markets. A whole host of operators and contractors are set to take part in the company briefings, where they’ll provide the latest updates on their projects in the UK and around the world and what products and services they’ll need for these. Delegates will also have the chance to meet with representatives from these companies during private one-to-one appointments. The event also features an exhibition, allowing supply chain companies to showcase their goods and services to a room packed full of procurement specialists. To book your delegate place, reserve a stand or find out about sponsorship opportunities, please visit: www.the-eic.com/EICConnect/ PowerNuclearRenewables.aspx

Training: Contracts, why they matter and how to use them to your advantage When: 31 October 2017 Where: Addleshaw Goddard LLP, Milton Gate, 60 Chiswell Street, London, EC1Y 4AG Why attend? Although contracts deﬁne all business relationships, their importance is often underestimated. Huge sums of money can be lost by failing to follow the provisions of a contract. Understanding contracts better is a key part of managing risk and working proﬁtably. This course will help you to do that. You’ll learn how to draft and structure valuable contracts while avoiding common pitfalls, about the various contract types and how to

use them to your advantage. This training is suitable for directors, managers, engineers, sales professionals, ﬁnance personnel and anyone who wants a better understanding of contracts and how to use them to enhance their business. For more information on this and other EIC training courses, please visit: www.the-eic.com/Training/ AboutEICTraining.aspx

www.the-eic.com | energyfocus

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From the EIC Members’ comment

The

BIG question

How can companies working in the energy sector move into new markets?

With Brexit fast approaching and the energy industry still facing tough times, we ask: How can supply chain companies widen their horizons? Energy Focus puts the big question to four members

Danny Donald Managing Director at Aiken Group ‘Many different elements working together cohesively’ is one definition of diversity and it’s not a bad ethos to have in a multidisciplined business such as ours. I believe that corporate strength is achieved through business synergies. It’s important to embrace innovation as the shape and location of marketplaces continues to change, and current trading conditions create the ideal opportunity to pause and re-evaluate. A balance of both working independently and in collaboration with others must be found, as well as balance in supporting local and national infrastructures. In successfully developing a strong and diverse business, it’s crucial to nurture a locally based workforce that embraces the concept of ‘thinking independently together’. This is beneficial for the company as it creates a motivated, skilled workforce which understands its own remit and how this helps the organisation to achieve its goals. Our priority is to maintain a flourishing business that can compete on a global stage.

Central to this is the fact that we are independently owned and oﬀer turnkey solutions – we occupy a unique place within the Aberdeen business community. Each part of our business plays a vital role in bringing stability and sustainability, and their synergies will stand us in good stead.

Aiken Group is a leading and innovative supplier of integrated, outsourced and solutions-based engineering and specialist services: principally accommodation, engineering, construction and modification, technology and project management. Aiken Group provides services across a range of disciplines and applications covering fixed and floating installations.

Richard G Jones

In 2012, personnel experienced in the Asian market came on board. Having a well-informed team with an understanding of running a business in Asia was crucial. The correct location of the business was also vital. A low-cost base was required, one logistically well placed, as 95% of orders were expected to be exported, and one where the necessary skills were available and expat personnel would be comfortable. Carpenter & Paterson (Asia) (CPA) developed a speciﬁc marketing strategy and product portfolio for the Asian market. It was important that CPA did not distract the management team in the UK nor take work away from the UK factory. Both objectives were achieved, which meant real growth in sales and proﬁts was achieved. The company now has a 170-strong team working in Thailand, with revenues rising from US$2.7m in 2013 to US$15.8m in 2016.

Managing Director at Carpenter & Paterson (Asia) Ltd. Carpenter & Paterson Ltd had known for many years that a market existed for their products in Asia but were not able to tap into that market from their base in the UK.

Founded in 1956, the Carpenter & Paterson Group designs and manufactures pipe hanger systems, dynamic restraints, cryogenic and hot insulated supports in the UK, Thailand and India. It supplies oil and gas, petrochemical, chemical, oﬀ shore, LNG, waste water treatment and power plants worldwide.

14 energyfocus | www.the-eic.com

P14-15_EF-Autumn17_Big Question__Energy Focus 14

26/09/2017 09:55

Members’ comment: From the EIC

Iain Gunn

Andrew Mitchell

Oil and Gas Sector Lead at HR Wallingford

Strategic Development Director at ENGIE Fabricom

In an increasingly competitive market, energy companies are well aware they cannot aﬀord to stand still. This is particularly true for energy supply companies, where a focus on cost has motivated customers to invite tenders instead of contracting the single-source suppliers they may have previously relied upon. Meeting the challenges of reduced margins and growing competition from low-cost players requires a fresh approach, based on diversiﬁcation and innovation by collaborating with new partners. At HR Wallingford we are collaborating with new partner Witherby Publishing, embedding HR Wallingford’s long-standing mooring analysis capability within Witherby Publishing’s LNG PORT INFO. The result is SHIPMOOR, an innovative ship-to-shore web-based compatibility analysis tool for the LNG sector, which improves on existing methods for compatibility analysis to ensure safe operations by reducing the risk of disconnections between LNG terminals and carriers. The development of SHIPMOOR is allowing HR Wallingford to diversify into the OPEX segment, whereas our original mooring analysis tool was traditionally applied to CAPEX project developments. By broadening and developing the application of existing tools, products and services, companies can open up new segments and markets. By not only anticipating customers’ future needs, but exceeding their expectations, energy companies can maintain their positions as leading industry players and remain the supplier of choice compared with low-cost rivals.

Over the last five-plus years, companies reliant on the oil and gas markets have had to adapt and move into new markets in order to survive. In an ever-changing environment with new technologies emerging, energy companies are now presented with fresh opportunities to enter and develop within different sectors. This can be achieved by focusing on targeted diversification and adapting by changing the core business emphasis. ENGIE Fabricom achieved the transition into new niche sectors such as energy from waste, chemicals, utilities and offshore wind by moving from being a conventional construction contractor to an engineering, procurement and construction organisation

HR Wallingford is a specialist provider of analysis, advice and support in engineering and environmental hydraulics, as well as the management of water and the water environment. Its expertise in the energy industry covers oil and gas, petrochemical, marine renewable energy and nuclear power, with a particularly strong track record in LNG.

providing specialised services using in-house skills and expertise for clients. This was complemented by utilising transferrable skills within the business. Providing end-to-end solutions can provide many benefits, including increasing efficiency and reducing the need to have extensive engineering and management teams. To meet customer requirements and fulfil our goal of becoming our clients’ partner of choice, we also consolidated the number of business units from five to two in order to provide a more well-rounded, client-friendly approach.

ENGIE Fabricom, part of the global group ENGIE, is uniquely positioned within the engineering, procurement and construction market to provide end-to-end solutions to its clients. It achieves this by combining high-level engineering skills with a wealth of construction expertise and capability across all UK industry sectors, including oil and gas, power, chemical, energy from waste and renewables.

STRATEGIES FOR SUCCESS

Turning crisis into opportunity: Findings from the EIC Survive & Thrive Insight Report

Innovation

Collaboration

Technology

58%

31%

of companies see innovation as a means of growing their way through tough times

of companies say partnership-building is crucial to success

of companies see technology as key to providing a competitive advantage

Diversification

Optimisation

Export

27%

23%

of companies see diversiﬁcation as a means of futureprooﬁng their business

of companies say maximising eﬃciencies is key to survival

of companies exported their way out of the downturn

NB: Participating member companies could oﬀer multiple answers. To get the complete report, please visit: www.the-eic.com/publications/marketintelligencereports.aspx

www.the-eic.com | energyfocus

P14-15_EF-Autumn17_Big Question__Energy Focus 15

26/09/2017 12:41

Special report New energy landscape

Nicholas Newman looks at how companies are adopting more creative strategies and more ﬂexible business models to grow in a new dynamic energy market

ntil very recently, governments and oil companies feared the prospect of peak oil, a time of expensive and declining supplies. Recent exploration and production advances delayed peak oil until the mid-century but, in a rapid turn-around, the industry now faces ‘the prospect of peak demand’, according to Jon Clark, UK and Europe, Middle East, India and Africa Leader, Oil and Gas Transactions at EY – a view which has subsequently gained widespread credence. Peak demand, a time when demand for oil signiﬁcantly slows and begins to fall, is expected to arrive between the early 2020s to mid-2040s (Figure 1), depending upon the

speed of energy efficiency savings, adoption of electric vehicles, renewables and the switch from oil to gas in power generation. Already, oil companies have diversified into natural gas, unconventional shale and renewables such as wind and solar, for example, Shell bought BG, to acquire its expertise in natural gas and liquefied natural gas. Shell has also diversified into renewables and has just announced that it will begin to supply electricity to its forecourts and industrial customers in the UK. Italian oil giant, Eni, has reduced oil exploration in favour of gas and made spectacular finds off the coasts of Egypt and Mozambique. Likewise, French energy giant Total has begun to supply renewable energy to customers. Acquisition, as a means of market entry into other

16 energyfocus | www.the-eic.com

P16-19_EF_Autumn17_Energy Landscape__Energy Focus 16

26/09/2017 09:56

New energy landscape: Special report

Evolving in the

NEW ENERGY

ERA

sources of energy, is expected to increase as companies plan for peak demand. However, the logical strategy, of harvest and exit has so far only been implemented by DONG Energy, which announced its exit from oil in favour of renewable energy production and distribution. As oil fields reach the end of their useful life, especially in the North Sea, Alberta in Canada and Texas, companies are beginning to consider what to do with their redundant infrastructure. ‘At present, there are two main options being discussed – removal and leave in place,’ says Paul Jardine, CEO of Quatre Ltd, a provider of exit strategy management solutions to the oil industry. Currently, regulations favour the removal of oil and gas infrastructure from depleted fields. A case in point is the North Sea, where UKCS decommissioning expenditure could reach up to £2bn per year with a total of £17bn expected to be spent by 2025. While the oil majors have set aside funds for this eventuality, smaller companies face financial, engineering and logistical challenges in dealing with redundant infrastructure.

How utilities are changing

Figure 1. The point at which global oil demand will peak In the base case, oil demand grows throughout the BP’s outlook period (2015–2035) driven by increasing prosperity in emerging economies. The pace of growth gradually slows as transport eﬃciency improves and the degree of fuel switching builds. A simple extrapolation of these trends would suggest that oil demand may start to decline during the mid-2040s. But it might peak much sooner or later. 120

Oil MMbbl/d

115 Sensitivity to global GDP growth (+0.5% on growth each year) Sensitivity to global GDP growth (+0.5% on growth each year) Base case

110 105 100 95 90 85 80

‹– BP 20-year outlook period –›

2050

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Illustrative paths for oil demand under diﬀerent assumptions. Source: BP 2017 Energy Outlook

The power sector is also operating in a changing environment brought on by market liberalisation, tougher environmental regulations and the rise of, increasingly price competitive new sources of fuel. For example, in the UK, energy utilities such as SSE, RWE and E.ON were regional suppliers of electricity and gas. Market reforms introduced competition for customers across the country. In response, utilities have introduced innovative value added services for industrial and commercial electricity customers. For example, E.ON provides an extensive range of new business energy management services including, managing on-site generation, and heating ventilation and airconditioning operations for industrial and commercial building’s customers. In the UK, the US, Mexico and Europe, natural gas and renewables are increasingly replacing coal www.the-eic.com | energyfocus

P16-19_EF_Autumn17_Energy Landscape__Energy Focus 17

26/09/2017 09:56

O O N KI O N W G

P16-19_EF_Autumn17_Energy Landscape__Energy Focus 18

26/09/2017 09:56

New energy landscape: Special report

or expensive oil or diesel in power generation. Utility companies are therefore investing in gas peaking plants to maintain electricity supplies when neither wind nor sun are available. Moreover, utility companies face losing an increasing number of high energy consuming customers, such as BMW, IKEA and Google as they switch solely to clean energy, thus opening the way for new entrants such as Shell and Good Energy to provide renewable energy and green gas. For utilities, there is a positive aspect, a new market opportunity presented by the predicted electric car revolution. In essence, utilities could beneﬁt handsomely from the rise in demand for electricity from this new market.

IMAGES: ISTOCK

Corporate culture is changing Many of the major oil companies have been around a long time. ExxonMobil was founded in 1882, Royal Dutch Shell in 1907 and BP in 1908. In addition, with longevity came a corporate culture focused on

Oil companies have diversified into natural gas, unconventional shale and renewables such as wind and solar economic expansion by augmenting reserves and getting as much oil out as quickly as possible and at any cost. The price crash of 2014 has inaugurated significant changes. Cost cutting, efficiency drives and industrialisation by standardisation and modularisation, have displaced bespoke equipment and tailored approaches to exploration and field development. The oil and gas industry, a relative IT laggard, has adopted Internet of

Things technologies which connect equipment and use sensors to communicate with augmented-reality tablets as well as supervisors. Conventional oil and gas has traditionally been characterised by high capital expenditure, long-time scales and centralised decision-making. Companies including BP, Chevron and ExxonMobil that have entered unconventional oil and gas exploration, particularly in the rich Permian Basin, have devolved decision making to units on the ground. This is a response to the completely diﬀerent business model of unconventional energy production. The typical conventional oil and gas project has costs reaching up to US$50bn and takes decades. In contrast, a shale gas or oil well costs up to US$6m and takes about six months from drill to product. This requires speedy decision making by subsidiaries on the ground. It wasn't so long ago that energy companies faced expanding demand for their product and fossil fuels predominated. However, new sources of fuel, a price collapse and potentially big changes in the ratio of supply and demand will test companies like never before. www.the-eic.com | energyfocus

P16-19_EF_Autumn17_Energy Landscape__Energy Focus 19

26/09/2017 09:56

Innovative solutions to age old problems The growth in global demand for energy means ever greater physical and performance demands are being placed on the components used to gather and process energy. 4HUHNPUN [OPZ JOHSSLUNL PU H JVZ[ LÉ&#x2C6;LJ[P]L ^H` YLX\PYLZ PUUV]H[P]L [LJOUVSVN` ZVS\[PVUZ Actuation systems have been around since Roman times, and yet play a key role in 21st century industries like oil and gas extraction. Today, actuators need to deliver exceptional precision and reliability in extremes of hot and cold pressure and PU [OL WYLZLUJL VM JVYYVZP]L Ă&#x2026;\PKZ 6\Y actuators control the performance of valves which may be very large and require ZPNUPĂ&#x201E;JHU[ MVYJL [V VWLU VY JSVZL [OLT (U actuation failure can have a heavy cost in IV[O ZHML[` HUK Ă&#x201E;UHUJPHS SVZZLZ ( WSHU[ Z[VWWHNL JHU LX\H[L [V H Ă&#x201E;UHUJPHS SVZZ in the region of US$1 million + per day! These more demanding operating conditions and pressures require actuation systems where components start or cease operating more rapidly. Innovations such as electronic digital WVZP[PVULYZ Ă&#x2026;V^ HTWSPĂ&#x201E;LYZ HUK YHWPK positioning systems have been developed to deliver the required performance.

severe service valves, which take the biggest strain in terms of stroking and wear of packing during their lifetime. Current techniques for reducing fugitive emissions are based on periodic checks ^P[O ÂşZUPŃ?UN ZLUZVYZÂť PUMYHYLK JHTLYHZ and ultrasonic leak detection â&#x20AC;&#x201C; but they OH]L SPTP[H[PVUZ 6UJL H SLHR OHZ ILLU PKLU[PĂ&#x201E;LK [OL UVYTHS JV\YZL VM HJ[PVU PZ to shut down the plant for remedial action. Given the expense and disruption of a shutdown, operators have focused on maximising the life of packing seals, or applying a predictive maintenance regime. In response to the limitations of current techniques, IMI Critical has developed intelligent logic systems to manage [OL WYVISLT ;`WPJHSS` H THZZ TPJYV Ă&#x2026;V^TL[LY ^P[O PU[LSSPNLU[ SVNPJ JVU[PU\V\ZS` monitors the performance of control valve packings by

TLHZ\YPUN [OL LŃ&#x153;LJ[P]L SLHRHNL WHZZPUN through the primary packing seals of the valve. If the values exceed preset limits, the system automatically closes the SLHR WVY[ ]HS]L [V ZO\[ VŃ&#x153; [OL ]LU[ WVY[ and the sealing operation automatically switches to the secondary packing. The stem movement, speed and direction are transmitted to the logic unit with the position feedback signal. The logic unit compares the measurement and speed of the valve, thus avoiding false alarms due to fast stroking. The alarm signal can be sent out as a pure contact, or the communication of the packing status to the control room can be carried out via HART, Foundation -PLSKI\Z VY 7YVĂ&#x201E;I\Z protocols.

Further innovation is being driven by safety â&#x20AC;&#x201C; in particular the requirement to meet Safety Integrity Level (SIL) requirements â&#x20AC;&#x201C; and include new, even more precise control algorithms for positioners, as well as diagnostic capabilities, and the ability to communicate directly back to control rooms with key process information. Safety is also driving innovation in the Ă&#x201E;LSK VM Â¸M\NP[P]L LTPZZPVUZÂš [OL SLHR VM substances into the atmosphere from oil and gas processing plants. These are at best a nuisance and, at worst, can be highly hazardous to both site workers and local residents, especially when the emissions are leaks of odourless gases. According to the European Sealing Association, up to 70% of fugitive LTPZZPVUZ MYVT YLĂ&#x201E;ULYPLZ JVTL MYVT leaking valves. This means companies need to actively manage the emissions performance of their valves, particularly

IMI EIC_Aut17.020-021.indd DPS.indd All Pages 20

Case Study Harnessing the collective knowledge, expertise and nd innovation of the IMI Group of businesses meant that we were able to secure a bespoke solution of valves and actuators to meet the dynamic requirements of Chinaâ&#x20AC;&#x2122;s coal liquefaction projects.. A package of valves and actuators destined for use se in Chinese coal liquefaction processes showcased a variety VM 040 [LJOUVSVNPLZ 040 *YP[PJHS ,UNPULLYPUNÂťZ 040 6Y[VU 6Y[VU I\ZPULZZ Z\WWSPLK Âš JY`VNLUPJ I\[[LYĂ&#x2026;` ]HS]LZ ^OPSL 040 ^OPSL 040 STI provided quarter turn actuators. Also drawing g upon technology from IMI Precision Engineering, the project oject made \ZL VM Ă&#x201E;S[LYZ HUK YLN\SH[VYZ MYVT 040 5VYNYLU PU HKKP[PVU [V KKP[PVU [V IMI Maxseal partial stroking solenoid valves from Thompson Valves and positioners from IMI STI / IMI Watson Smith.

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22/09/2017 25/09/2017 15:52 09:52

Feature Exporting

UK-focused trade policy, a lower pound and a global switch to low carbon energy forms are opening new energy-related export opportunities for UK businesses. As the government urges companies to make 2017 the year of exporting, Energy Focus talks to new Minister for Investment Mark Garnier about the prospects for UK energyrelated exports, and why now is the time for UK energy businesses to act

ritain has a leading global position in several key energy sectors, some of which are now reaching maturity. This means, according to the government, that energy companies are particularly well positioned to benefit from new export opportunities as the UK exits the EU and introduces an independent trade policy – aimed solely at developing the UK economy and improving the country’s trade position. ‘As we leave the EU we are developing an independent UK trade policy and for the first time since 2007, trade is back at the heart of government policy making, with a seat at Cabinet. Indeed, it’s the first time since 1983 that the UK has a standalone Department for Trade. The three pillars of trade – finance, policy and promotion – are now under one roof, allowing us to be more coordinated than ever before,’ said Mr Garnier. ‘That’s already demonstrated in the 11 trade working groups we have started across 16 countries in key markets. It’s not just about new trade deals when we leave the EU, we are also working with international partners and the World Trade Organization to reduce barriers to trade and tariffs on goods like renewable energy equipment. There’s a world of opportunity out there for UK companies. The EU itself predicts that 90% of future global growth is set to occur outside the borders of Europe and UK companies should be seizing upon this growth.’ The policy changes, plus a fall in the pound since the Brexit vote, could already be producing results. Early September saw UK manufacturing up 1.9% on the year. And the latest Purchasing Managers’ Index (PMI) survey shows manufacturers remain upbeat about the future, with confidence levels staying close to the record high seen in July, with especially strong growth seen in orders from Europe and America.

New horizons Mr Garnier said that the UK’s world leading position in several renewable energy ﬁelds should mean major export opportunities as countries around the world also begin to switch to low carbon energy. The potential is enormous – currently the global renewables market is worth about £215bn/year, growing at 7% per year on average. By 2030 global exports for all low carbon goods and services

22 energyfocus | www.the-eic.com

P22-24_EF_Autumn17_UK Exporting__Energy Focus 22

26/09/2017 15:09

Exporting: Feature

IMAGES: SHUTTERSTOCK

Nuclear opportunities The UK is also a global leader in the nuclear industry, with expertise right along the supply chain, built up over 60 years. The government has estimated that in the next 10 years, the overseas market for building new

ENERGY: IN NUMBERS

NUCLEAR In the next

10 years

£930bn To be invested in global nuclear new build

£250bn RENEWABLES

£215bn Global renewables market worth £215bn/year

7% per year

Spent on decommissioning old reactors

Growing at

could be worth £1–1.8tn a year, seven to 12 times more than today. In marine energy, with installations in Cornwall, the Isle of Wight and Orkney, the UK is the global leader. The same is true of the much larger offshore wind energy sector, where the UK leads the world with almost half of all EU installed capacity, driven by UK subsidy and legal commitments under the UK Climate Change Act. The UK’s competitive position was reinforced by September’s contracts for difference auction round, which saw the cost of offshore wind fall by more than half since 2015, highlighting the maturing of an industry nurtured by public subsidy. That industry is now well placed to compete in international markets and improve the country’s earning potential. ‘Offshore wind is a prime example of where the UK’s expertise is being sought internationally. Major global firms like Siemens and CS Wind have chosen the UK for the manufacture of wind turbine blades and towers respectively, with blades already being exported. Smaller firms also benefit, such as Belfast-based Harland & Wolff, which recently secured a contract for offshore turbine equipment with Germany’s Borkum Riffgrund 2 site, supporting 80 jobs in the city.’ The UK’s existing engineering expertise is helping provide a solid base for new technologies, with skills and capacity traditionally focused exclusively on the oil and gas sector often able to expand into renewables. For example, Burntisland Fabrications moved from oil and gas steel fabrications to producing for the offshore wind, wave and tidal power sectors as well. It recently won a £100m plus contract with Dutch engineering, procurement and construction contractor SHL to supply fabrication work for the Beatrice offshore wind farm. UK-based companies working in the wind, wave and tidal energy sectors are already exporting goods and services worldwide on a massive scale.

By 2030 Global exports could be worth

£1–1.8 tn/year 7–12X greater than 2017 OIL AND GAS UK exports are expected to account for

43% (£11.8bn) of supply chain revenues in 2017 UK oil and gas exports are expected to be over

£20 bn/year Source: Business Outlook 2017, Oil & Gas UK

reactors will be worth £930bn and around £250bn will be spent on decommissioning old reactors. ‘China has 37 operating nuclear reactors, with 20 under construction and a further 183 planned or proposed. These developments, when combined with subsequent Chinese requirements for operational support, plant life extension and waste management and decommissioning expertise, will present a huge range of opportunities for UK companies,’ said the Minister. Although Theresa May has opted to pull out of Euratom, as it falls under the jurisdiction of the European Court of Justice, the UK may seek a form of associate membership, and its bargaining position should be enhanced by its key role in nuclear waste reprocessing, which the Europeans depend heavily on. ‘We recognise the importance of maintaining the UK’s reprocessing knowledge and skills base and the government is exploring options through continued investments in research facilities and programmes that will build upon our existing expertise and further promote growth and investment,’ said Mr Garnier.

Overseas hotspots Export markets with the strongest potential tend to have substantial opportunities across several energy sectors, such as Canada, China and Mexico – which have needs ranging from gas extraction to wind generation. Other countries have speciﬁc needs, such as geothermal in Kenya and wind projects in Uruguay. However, in many countries the renewable energy sector remains heavily reliant on policy, so any changes can quickly alter the picture. Oil and gas is still key in many areas, not least the Middle East, where trade ties are strong. For example, the UK is Saudi Arabia’s second largest cumulative investor, with over 200 joint ventures, estimated to be worth around £11.5bn. But even in the Middle East there is an increased emphasis on renewables and particularly gas where the UK is also strong along the whole energy chain. ‘Our expertise in oil and gas is an important selling point, but not just in the traditional Middle East upstream markets. We recently provided ﬁnancial support to secure a contract for UK-based Enka UK and General Electric to build two gas turbines in www.the-eic.com | energyfocus

P22-24_EF_Autumn17_UK Exporting__Energy Focus 23

26/09/2017 15:13

Feature: Exporting

A world of opportunity Current export opportunities identified by the Department for International Trade (October 2017)

OIL AND GAS EUROPE

Energy companies are particularly well positioned to benefit from new export opportunities as the UK exits the EU Iraq, worth £185m. We also secured a contract worth £590m for the 1.1GW Cape Three Points project offshore Ghana, which will provide much needed power to the developing nation,’ said Mr Garnier. Another hotspot is Japan, where a radical shake up of the energy sector following the 2011 earthquake and subsequent nuclear incident is producing opportunities for UK companies in low carbon energy generation, grid development, demand-side management and smart storage – all areas where the UK’s power engineering sector is strong. Japanese companies and consumers are also looking for technological solutions which conserve energy – especially smart technologies for business. ‘I think the main point is that there are opportunities for all energy sectors, from biomass and wind to solar and gas. The UK’s expertise and high-quality manufacturing is respected across the world so whatever product you have, we can help you find a market for it.’

Georgia – Underground gas storage construction Turkey – Flue gas desulphurisation Turkey – Heavy duty machinery and accessories NORTH AND SOUTH AMERICA Argentina – Laboratory measurement equipment Brazil – Autonomous underwater vehicles Brazil – Cargo vessels Trinidad and Tobago – Oil tank repair services

POWER ASIA PACIFIC Indonesia – Unmanned robotic submerged vehicle Japan – Capacitors Japan – Remote monitoring system Vietnam – Neutral reactors EUROPE Bulgaria – Power regulatory consultants Bulgaria – Power line construction

Greece – Electricity poles Hungary – Power supply transformers Kazakhstan – Electricity distribution project Russia – Durable coatings Turkey – Flue gas desulphurisation NORTH AND SOUTH AMERICA Brazil – Electrical substation equipment Brazil – Power transmission line services and equipment

EUROPE Georgia – Hydro power plant rehabilitation project Finland – Bioreﬁnery Portugal – Public lighting Romania – Heating and refrigeration parts Tajikistan – Solar panels Ukraine – Hydro power station equipment AFRICA

ASIA PACIFIC

Cameroon – Hydroelectric dam audit Kenya – Hydro power station upgrade Tanzania – Hydropower project

Burma – Renewable energies Burma – Solar panels Burma – Micro hydro power design

NUCLEAR

RENEWABLES

EUROPE NORTH AND SOUTH AMERICA Colombia – Photovoltaic systems Cuba – Wind power project joint venture Cuba – Biomass project joint venture Mexico – Hydrocarbons terminals Mexico – Port construction Trinidad and Tobago – Wasteto-energy facility

Bulgaria – Nuclear protective clothing Bulgaria – Nuclear Power regulatory consultants France – Nuclear documentation and regulations writer France – Nuclear safety and radiation protection Ukraine – Nuclear power plants power units

Bridging the gaps One deal aimed at smoothing the way for renewable exports was signed between the UK and Kenya in 2016. To further oil the wheels of trade, UK Export Finance (UKEF) is also offering export financing or insurance support for eligible projects of up to at least £250m. Exporters can often find it difficult to access markets due to demanding payment or credit terms. By improving the terms of payment, UKEF can enhance the product offering, making the deal attractive enough to proceed for buyer and seller alike. This sort of assistance has helped companies like Hobbs Valve, which was able to guarantee a three-year warranty to a new buyer (Sembcorp Industries) in Singapore

last year. The company supplies marketleading triple-offset butterfly valves to the oil and gas and marine sectors. In 2016, exports made up 75% of its business, up from 25% in previous years. Mr Garnier said UKEF’s overall risk appetite had been doubled to £5bn last year, while increasing the number of local currencies in which UKEF can offer support from 10 to 40 – from the Australian dollar to the Zambian kwacha. In the last year UKEF has provided over £1.7bn to UK companies to help them secure exporting contracts. The government’s new digital service (www.great.gov.uk/uk/) can provide further help by putting firms in touch with global

buyers and thousands of export opportunities at the click of a mouse, while the department’s energy sector team can draw on local expertise in 108 countries to help navigate legal and customs rules and to identify opportunities. ‘The fundamentals of our economy remain very strong. Our science and research excellence, widely admired system of commercial law and low tax, and low regulation economy continue to be a major draw for international investors. The impact of sterling is very complex, but our exports continue to increase and as the latest PMI report shows, UK manufacturing ﬁrms are seeing growing international demand.’

24 energyfocus | www.the-eic.com

P22-24_EF_Autumn17_UK Exporting__Energy Focus 24

26/09/2017 10:04

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25/09/2017 09:54

Oil and Gas Iran

Doing business in

Iran Energy in Iran

1st 4th

WORLD GAS RESERVES

WORLD OIL RESERVES (BP statistical review 2017)

EIC Middle East and North Africa Regional Analyst Fabrice Abalain provides a checklist of everything you need to know before going to Iran and where you’ll ﬁnd the opportunities and how to do business once you’re there

P27-29_EF-Autumn17_Iran__Energy Focus 27

2021: 4.7MMbbl/d

Gas production target 2021: 306Bcm/year

Power, nuclear and renewables IMAGES: ALAMY/ISTOCK/SHUTTERSTOCK

or the last 10 years or so, UK companies have been unable to do much business in Iran as the country has been under extensive UN, US and EU sanctions. However, all that changed on 16 January 2016 when most economic sanctions were lifted following the International Atomic Energy Agency’s announcement that Iran had dismantled signiﬁcant elements of its nuclear programme.

Oil production target

74GW INSTALLED CAPACITY (2015) Production targets 5GW of renewables by 2020 100GW of installed power capacity by 2021 20GW of nuclear energy by 2030

www.the-eic.com | energyfocus

26/09/2017 16:25

Oil and Gas: Iran

First steps checklist: Are you ready? Do your due diligence – some goods and services are still under sanction Contact the Export Control Organisation (ECO) of the Department of International Trade eco. help@trade.gsi.gov.uk to make sure that yours aren’t.

Visa – you need a visa to visit Iran Visas will be denied if you have an Israeli stamp in your passport For women, you must wear a headscarf in your visa application photo Business trips can be made using: – a single, double, or multiple-entry visa for non-fee earning trips of up to one month – an entry visa for business visitors with right to work – an investor visa of up to three years, for employees of companies investing in Iran under the Foreign Investment Promotion and Protection Act Make sure you allow plenty of time for your visa application: they are complex to acquire and the process can take months

Understand the market – deep market insight and cultural understanding is required Doing business in Iran requires gaining some objective understanding of the people, culture, etiquette, local laws and customs and approach to business. Having this

cultural awareness will maximise your chances of success in Iran.

Find the right local partner – and build strong local relationships Although it’s possible to fully own a subsidiary in Iran, it’s best to work with a local business partner (an agent, distributor or production partner) as these can help with cultural and language barriers. Carry out due diligence to make sure possible partners aren’t on any sanctions list.

Get the right bank account – most banks with US exposure won’t do business with Iran Check with EIC Dubai or download our EIC Country Report: Iran to ﬁnd a list of banks that will allow you to do business in Iran. German exports to Iran have risen greatly in the last year; most new entrants report having to use a large number of small German banks.

you will need a commercial card which is granted after registering with the: Ministry of Industry, Mines and Trade Iran Chamber of Commerce, Industries, Mines and Agriculture Foreign investors also need to register with relevant government authorities including: Iranian Foreign Investment Board Companies Registration Oﬃce Ministry of Cooperatives, the Labour and Social Welfare Local administrative divisions (municipalities) Iranian National Tax Administration

Money – the oﬃcial currency is the Iranian rial (IRR) While the rial is used as Iran’s monetary unit in government documents, budgets, and on the currency itself, Iranians will commonly express prices in tomans (a tenth of the rial) in daily transactions. Pending parliamentary approval, the Central Bank of Iran will change the oﬃcial Iranian monetary unit from rial back to toman.

Find a translator – all company documents must be written in Farsi Any documents that need to be filed with an Iranian court also need to be translated by an official translator and certified by the judiciary, or notarised by the Iranian Embassy in London.

Now back on the global energy scene and with abundant resources and a government focused on attracting foreign investment, Iran is ready to do business.

Open for business and packed with potential While primarily an exporter of oil and natural gas, Iran is perhaps the most diverse economy in the region with an established capital market, a well-developed industrial base and a large population with an increasing demand for energy. To boost its upstream oil and gas sector, Iran has offered around US$130bn worth of investment opportunities along with a new upstream investment contract – the Iran Petroleum Contract (IPC) – designed to entice foreign companies to return after a near decade-long absence. Plans to raise crude oil production capacity to 4.7m barrels per day (MMbbl/d) and gas production volume to 306bn cubic metres per year by 2021 include major projects such as the development of the West Karun oil fields, particularly Yadavaran and Azadegan, where a total of nearly US$6bn will be invested expected to be meet Iran’s shortterm output-capacity growth. Gas projects include the US$4.5bn Kish gas development, the US$1.5bn Iran-Oman Gas pipeline and the US$8.5bn Iran Gas Trunkline that plans to connect Iranian gas to Europe via a proposed pipeline to Turkey, which is currently at the design phase. The country has prioritised development of the South Pars gas field, where around US$13bn will be invested over the next five years. Downstream, four new refineries are planned as well as the upgrade of five of the existing ones. The Siraf refinery

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26/09/2017 16:26

Iran: Oil and Gas

Now back on the global energy scene, with abundant resources and a government focused on attracting foreign investment, Iran is ready to do business

Get help from Department for International Trade (DIT) Iran To increase your competitiveness in Iran, contact a DIT Iran export adviser (DIT.Iran@ fco.gov.uk) for a free consultation

UK Export Finance (UKEF) For trade ﬁnance and insurance cover please visit www.gov.uk/government/organisations/ uk-exportﬁnance. You can also check the current UKEF cover position for Iran at www.gov.uk/guidance/ country-cover-policy-andindicators#iran

EIC Dubai The EIC’s team is on hand to support you in doing business in Iran. For services including market intelligence, project data and industry connections and export assistance email dubai@the-eic.com

Iran is keen to tap into UK expertise Huge opportunities are available to companies operating at all levels in the oil and gas supply chain including: Security of oil fields and pipelines Training Master plan development of oil fields Field mapping and topography Oil reservoir recovery potentiating Risk analysis and management Safety mechanism analysis Refining technology LNG bunkering Pipelines Pipe welding Refrigeration Rotor assembly, nozzles and related parts Oil pumps Valves

project, with a budget of US$2.4bn, will bring capacity up by over 480,ooobbl/d. Iran’s downstream industry also has huge ambitions, and aims to reach 180m tonnes per year of capacity by 2025. Opportunities also lie in the power sector, where Iran plans to achieve a total capacity of over 100GW by the end of 2021. While construction of new gas-ﬁred power plant and optimisation of existing single cycle plant form the majority of this capacity, Iran has also set itself a formidable target of 20GW of nuclear energy by 2030. The renewable sector is expected to grow steadily and reach 5GW total installed capacity of solar and wind capacity by 2020.

unparalleled range of opportunities to the UK supply chain. With the approval of its sixth development plan for 2016–2021, which deals with certain shortcomings facing the country, the government has shown signs that it is prepared to listen to major concerns on such issues as guarantees, dispute resolution, enforcement of foreign arbitration awards, transparency and transfer of funds. The government, headed by moderate and outward looking newly re-elected President Rouhani, hopes that by issuing new directives and decrees, it will create the right environment to support investment.

Long-term vision needed Local content The Iranian authorities are doing their best to maximise the use of its local supply chain. Iranian manufacturers are capable enough to meet most domestic demands and in fact have the potential to supply up to 70% of Iran’s petroleum equipment requirements, where equipment can be designed and manufactured completely within the country. The Iranian authorities want to help these companies improve their eﬃciency and competitivity. For the remaining 30% of equipment that Iranian manufacturers cannot currently supply to the industry, the authorities are committed to supporting their technological advancement to be able to compete in these markets in the future.

Why Iran? Easily the biggest new market to enter the global economy in over a decade, Iran oﬀers an almost

Like most countries in the Middle East, success in Iran’s business circles is often deﬁned by whom you know rather than what you know. Taking the time to get to know your colleagues and business associates is vital to getting ahead in business. Face-to-face meetings and negotiations are a vital part of building the trust necessary to embark on a partnership. Displays of long-term commitment are an important part of this – foreign investors with a permanent base in the country will likely enjoy considerable advantages when seeking to make deals. British businesses will need to carefully weigh the beneﬁts alongside their appetite for risk when considering any investment in the Iranian market. Interested in Iran? Visit www.the-eic.com/ Publications/MarketIntelligenceReports.aspx to download the EIC Country Report: Iran www.the-eic.com | energyfocus

P27-29_EF-Autumn17_Iran__Energy Focus 29

26/09/2017 16:27

Oil and Gas Brazil

Breaking Having started by working out of the EIC’s Rio office, Bridon-Bekaert The Ropes Group now has two factories in Brazil and facilities in Argentina, Mexico and Peru. Marketing and Sales Manager Jeferson Leite tells Energy Focus about the company’s incredible South American journey As Bridon’s first-ever Brazilian employee can you explain why the company decided to make the move to Brazil? Well, this was before Bridon’s merger with Bekaert, so it’s true, I was Bridon’s first Brazilian employee. The company already had operations in North America and saw Brazil’s pre-salt area as a massive opportunity, which was the key attraction. We knew there was a big market for our specialist rope and cord solutions. How did things start out? We started in 2011 by using the EIC Rio’s LaunchPad service. Looking back, that was key to our success. One of our first objectives was to meet people in the local oil and gas market and the EIC Rio team introduced me to all the people I needed to know. We always planned to set up a factory but the first job was to make contacts, and sell our products, imported from the UK and US, to them.

You’ve touched upon your expansion plans. Can you tell us more? Our first plan was to acquire market share through the purchase of part or all of a company already active in Brazil. We weren’t the only ones to realise that Brazil had a lot of potential and no one wanted to sell! Plan B was to partner with a local company. We figured this could work as they would have operations in place, which we could add to, and of course know the local markets. However, it became apparent that local partners couldn’t deliver the quality that the Bridon is famous for – they were too focused on costs. Also, they didn’t have strong distribution networks. So, we decided on a third route; to go it alone. What happened next? Working out of the EIC office, we imported our goods to sell in the Brazilian market. At the end of 2012 we started to bring in machinery from the US and UK and set up our own warehouse,

employing local people. In 2016, we merged with Bekaert, becoming Bridon-Bekaert The Ropes Group. Bekaert Ropes Group had a new purpose-built rope factory in Brazil which finally gave us the local manufacturing footprint we had wanted, which was always part of our plan. The partnership really helped leverage our strengths and allows us to more effectively serve our customers locally in Brazil. As a result, we have been able to widen our customer base. So partnering really helped. What other tips would you give companies moving to Brazil? I would say the two things every company coming here needs are a local accountant and a local lawyer. Tax and law here are really tough to get your head around, even for a Brazilian! So invest in a local expert in both these areas. Also, hire local people. While local content levels aren’t as high as they once were, Brazilian culture is different to the rest of the world. Locals will speak Portuguese and most importantly they’ll have contacts and know the regional market. What’s next for Bridon-Bekaert? We’ll continue to transfer technology from the UK to Brazil, getting ourselves ready for the oil and gas market to pick up again. We’re also using Brazil as a base to expand into other parts of Latin America. This year we took part in an EIC delegation to Mexico, so that might well be the next Bridon-Bekaert location. We already have service centres in Ecuador and Peru, so our footprint in the Americas is getting bigger and bigger. This is really helping the group’s overall strength, as a dip in one country may be balanced out by growth in another.

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26/09/2017 10:05

Brazil: Oil and Gas

BRAZIL

Wide open to UK business Brazil is the largest energy market in South America and has the second largest oil reserves in Latin America.

Map area

British companies have been important players in Brazil’s oil and gas industry and should further expand their participation as the country relaxes local content requirements and launches its second and third pre-salt bid rounds in the proliﬁc Campos and Santos basins. The UK supply chain is also very well positioned in the market with around 200 UK suppliers already doing business in the country. Brazil is particularly interested in the UK’s expertise in the following areas: Bringing challenging oil and gas projects to completion Oﬀshore equipment and services Subsea technologies Inspection, repair and maintenance

GET INVOLVED: BRAZIL’S TOP FIVE EXPLORATION AND PRODUCTION PROJECTS

São José dos Campos Rio de Janeiro

São Paulo

CAMPOS BASIN

Santos

SANTOS BASIN 1

Thinking about making the move to Brazil? The EIC can help. Our Rio LaunchPad service, which includes serviced oﬃces, hot desks and meeting rooms, provides you with a low-cost, low-risk entry into the country. Our Rio team speak the language and know all the major players, none of which come any bigger than oil and gas giant Petrobras. We have a dedicated Petrobras Registration team, who can manage all aspects of this process. Use the EIC and not only will your team be free to do their day job, they’ll soon be ready to start working with Petrobras. For more information: rio@the-eic.com

LIBRA FIELD

SÉPIA FIELD

BÚZIOS FIELD

LIBRA FIELD

ITAPU

(PILOT PHASE)

LOCATION: SANTOS BASIN OPERATOR: PETROBRAS (100%) VALUE: US$3.5BN

(PHASE 5)

(PHASE 2)

LOCATION: SANTOS BASIN OPERATOR: PETROBRAS (100%) VALUE: US$3BN

LOCATION: SANTOS BASIN OPERATOR: PETROBRAS (40%) VALUE: US$3BN

LOCATION: SANTOS BASIN OPERATOR: PETROBRAS (100%) VALUE: US$2.5BN

The project features the installation of the fifth production unit at the massive Búzios pre-salt field. The 150,000bbl/d unit will connect to nine production wells and feature flexible lines. The project has been put out to tender and bids are expected in late 2017.

Libra’s second development phase will feature a similar 180,000bbl/d FPSO, but with optimisations such as increased separation pressure and TEG dehydration. A tender process for the FPSO is expected to be issued by the end of 2017, with a contract award in 2018.

LOCATION: SANTOS BASIN OPERATOR: PETROBRAS (40%) VALUE: US$5.5BN Petrobras’ ﬂagship pre-salt project, Libra is estimated to contain up to 12bn barrels of oil. Its pilot production phase will feature an FPSO able to process 180,000 barrels per day (bbl/d) of oil and 12MMcm/d of gas. Modec was the only qualiﬁed bidder for the 22-year charter of the unit while, Aker Solutions, OneSubsea and TechnipFMC have all tendered for the pilot’s 12 subsea trees.

Another key Petrobras pre-salt project, Sépia will also produce from a 180,000bbl/d FPSO, but with a 5MMcm/d gas capacity. Modec has been announced as the lowest bidder for a 13-year charter contract. Start-up is expected in 2020.

Formerly known as Florim, Itapu is estimated to contain up to 967m barrels of oil equivalent. The ﬁeld is expected to feature an FPSO with oil and gas processing capacities of 120,000bbl/d and 3MMcm/d, respectively. Petrobras’ development plan for the ﬁeld was approved in May and a tender for the FPSO is expected in 2018–19, with start-up in 2021.

www.the-eic.com | energyfocus

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26/09/2017 10:05

Orga

The Way Ahead

IN CAP437 Helideck Lighting From 1 April 2018, all helidecks in the UK North Sea will need to be equipped with TD/PM Circle-H helideck lighting. Helidecks not fitted with the new standard in lighting will be considered unsuitable for night operations. So, come April next year, will your operations continue or will your night flights be restricted? With the UK Civil Aviation Authority (CAA)’s deadline for installing CAP437 Touchdown/Positioning Marking Circle and Heliport Identification Marking ‘H’ (TD/PM Circle-H) lighting looming around the corner, choosing the right system for your offshore helideck is now more critical than ever. There are a number of systems available on the market but having developed and trialled the Circle-H lighting scheme with the CAA, Orga is the one company best qualified to help you make the correct choice.

Choose Orga TD/PM Circle–H… …for safe landings Designed in conjunction with and approved by the CAA, the Orga TD/PM Circle-H provides pilots with the best possible visual cues during approach and landing in all weather conditions. Delivering a step change in helicopter safety on offshore helidecks, Circle-H has been widely welcomed by the helicopter pilots. The world’s first Circle-H was installed in 2012 by Orga and since then pilots continue to report smoother and more controlled landings. By replacing floodlights with LEDs, the system eliminates the dangerous and disorienting ‘black-hole’ effect that previously challenged pilots, making every landing much safer. …for high quality and efficient technology With more than 80 systems installed and over 120,000 operational landings Orga’s non-netted TD/PM Circle-H lighting system has already proved that it is easy to install and maintain, even on an operational helideck. It is the clever design of the product – with LED light-prepared, semiflexible, low profile, metal module plates ¬– that enables easy and direct mounting on the helideck. And thanks to this, downtime is low, permitting a 30-minute medevac window for emergencies. In addition, state-of-the-art LED technology, which gives reliability, long life and low power consumption, coupled with durable and robust components helps lower the total cost of ownership. Unlike a netted system, the Orga TD/PM Circle-H is compatible with Deck Integrated Fire Fighting systems and fully in line with CAA requirements. The light panels are helideck frictiontest friendly, meaning they do not have to be removed for friction testing, and benefit from a ‘fit and forget’ design

Orga DPS.indd Page 32 Alland Pages 33__Energy Focus 32

26/09/2017 16:31

Advertising Feature

which ensures that they will never need to be recertified.Meanwhile, approved fixing methods for both steel and aluminium decks ensures structural integrity, durability and water-tightness of the helideck.Orga’s innovative Atex/ IECex Circle-H helideck lighting system incorporates a unique modular system, which works in conjunction with Orga perimeter and status lights and illuminated windsock. …for peace of mind Having been involved in the design and development of the CAP437 Circle-H lighting specification, the compliance of Orga’s system with all regulatory and operational requirements is totally guaranteed. Orga’s TD/PM Circle-H lights meet ICAO and other relevant regulatory requirements, as well as the CAA’s latest CAP437 standard for helideck lighting systems. Further testing, both in the factory and in service, enables you to implement Circle-H with the security and knowledge that you are providing the safest system available. Orga also offers survey, installation and training support to give you the quickest and smoothest Circle-H installation available in the market, while maintaining the rigorous safety standards required for mounting a lighting system in a challenging environment.

Selecting your system With time running short, Daniel Powell, Business Manager Helideck at Orga advises buyers “to look more closely at the effectiveness of the system and avoid making a decision based on initial outlay alone”. Mr Powell continues, “It is really important to understand the true

Page 32 and 33__Energy Focus 33

ongoing cost of installation, inspection, maintenance, and replacement parts as well as the resultant downtime of the system. Taking the time to ask these questions will ultimately lead you to long-term benefits, not only in terms of safety but also in whole life costs. “However, this needs to be done sooner rather than later,” Mr Powell warns, “in order to meet the CAA’s 31 March 2018 deadline for installing Circle-H and to avoid night flying restrictions.”

Orga: At the forefront of best practice Improving the lighting of offshore helidecks has long been, and will continue to be, a concern for both industry and regulators. For more than 20 years, the CAA has been conducting dedicated offshore and onshore helideck trials aimed at enhancing visual cues to aid pilots landing at night.

developing Circle-H lighting which the CAA mandated in 2013. Today, Orga continues to support the CAA in shaping helideck regulations with the design and validation of a new specification to add function to a vessel’s Helideck Monitoring System (HMS). Further afield, the Brazilian Navy (Brazil’s civil aviation authority) recently invited Orga – as an international company at the top of its field – to present on best practice in CAP437 helideck lighting.

For more information visit www.orga.nl Or contact Daniel Powell at: d.powell@orga.nl

During that time Orga has worked closely with the CAA producing the prototype for the green perimeter lighting, which was adopted as an international standard in 2004, before

26/09/2017 15/06/2017 16:31 14:39

Oil and Gas North America onshore

US shale and Canadaâ&#x20AC;&#x2122;s oil sands will be big contributors to supply growth in coming years. As new projects open and OPEC acknowledges their significant role in the oil market, consultants at The Boston Consulting Group analyse these two pillars of North Americaâ&#x20AC;&#x2122;s energy security

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26/09/2017 10:06

US shale roars back Buoyed by renewed interest, the North American shale energy industry is on the brink of a new era, write Ivan Marten, Eric Oudenot and Emmanuel Ricolﬁ

IMAGES: SCIENCE PHOTO LIBRARY/ALAMY

espite the substantial decline in oil prices that began in July 2014, US shale oil and shale gas producers have shown a tremendous resilience over the past 36 months. In fact, during that period US shale jumped from 12m barrels of oil equivalent per day (Boe/d) to nearly 15m in 2017. The secret of this resilience lies in the operators’ ability to consistently deliver eﬃciency gains, quarter after quarter, leading to an ever decreasing breakeven point for US shale basins. As a result, The Boston Consulting Group (BCG) estimates that 50% of all US light tight oil recoverable resources are now economical below US$60/ Boe and 75% below US$70/Boe.

Eﬃciency and productivity gains The cost decrease has been impressive both on CAPEX and on OPEX required. Drilling CAPEX has continued to decrease by approximately 12–15% per year and service costs for some key OPEX categories have dropped by

40–50% since 2014. Although some of these performance gains are conjectural and driven by drops in supply price, 60% of the price decrease actually comes from pure efficiency gains. In the Midland basin for example, the latest BCG study calculated that 30% of savings are driven by innovation and design and 25% by planning and execution efficiency. In addition, BCG data shows that the average estimated ultimate recovery, or lifetime production, per US shale well increased by 35%: from 530 to 717m Boe. As a result, the average CAPEX per barrel of shale oil equivalent fell by 23%, from US$13.25 to US$10.21, while the average number of drilling days per well fell by more than 30%. Low oil and gas prices have led to a natural selection amongst the US shale basins. Acreage quality and access to the midstream sector became critical. A drastic refocus in basins has happened in the last three years. The five major basins – Permian, Eagle Ford, Marcellus, Delaware and Bakken

– now account for 75% of the total US shale production with nearly 11m Boe/d, against only 50% in 2012.

Industry resilience Comparing US shale with other asset classes shows just how resilient shale has been. Across the globe, low oil and gas prices have had severe impact on planned investments in oil sands, heavy oil, deepwater, and even in mature shallow water or onshore basins. Major project sanctions have been at a virtual standstill in Angola, Australia, Canada, Nigeria, the UK and many other countries. In a ‘lower for longer’ world the proﬁtability and competitiveness of these asset classes is openly questioned by management teams of international oil companies (IOCs).

Renewed confidence drives resurgence All this has set the scene for a resurgence of US shale. Four different elements clearly highlight this trend. Firstly a number of IOCs have given a strategic vote of confidence for

www.the-eic.com | energyfocus

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26/09/2017 10:06

Oil and Gas: North America onshore

Carrizo acquired acreage for US$750m in June 2017 (at US$22,000 per acre). In the Marcellus, EQT acquired Rice for US$8.2bn in June 2017, while Noble sold its acreage for US$1bn in May 2017. Thirdly, there has been a spectacular increase in US land rig count: over the past 12 months the number of active land rigs in the US has doubled, growing from 440 to 931. Most of this increase is driven by shale oil plays, including approximately 200 new rigs focused on the Permian. This increase in rig count, coupled with the continuous improvement in drilling time may trigger a significant increase in US shale production. Finally, operators keep finding new basins, new horizons and at the same time continue to improve the effectiveness of their supply chain and their completion techniques, leading to more and more barrels of reserves being added – thus extending the lifetime and the robustness of US shale.

US shale. Chevron, ExxonMobil and Shell have all announced their intent to continue investing signiﬁcantly in US shale plays. Shell recently announced that it would accelerate its plans to boost its shale production to reach 500,000Boe/d. Chevron has also stated its ambition for 500,000Boe/d and ExxonMobil for 800,000Boe/d by 2025. It is estimated that in 2017 all three companies will invest close to US$10bn in US shale. Secondly, an intense wave of mergers and acquisitions (M&A), mostly centred around Permian and Marcellus acreage, driven by independents and private equity backed companies has demonstrated the appetite for US shale. Since Q1 2016 M&A activity on these two basins has reached US$61bn. For instance in the Permian, ExxonMobil announced a US$6.6bn deal in January 2017, Noble invested US$2.7bn to acquire acreage from Clayton Williams, and

As a result, shale has become the main pillar of the US energy landscape. The latest report from the US Potential Gas committee published in July 2017 showed that shale now accounts for 64% of US gas reserves.

Growing importance set to continue The past three years have demonstrated that US shale is not a ‘bubble’ nor a ‘house of cards’, it is a fundamentally sound asset class, which is much more adapted to a low commodity price environment than most other asset types. We believe that the importance of shale, in the US and potentially across the globe (Argentina, China and Russia), will continue to grow in the coming years. By Ivan Marten, Senior Partner and Managing Director, Vice Chairman Energy Practice, Eric Oudenot, Partner and Managing Director, and Emmanuel Ricolﬁ, Project Leader, The Boston Consulting Group

US SHALE: ENERGY FOR THE FUTURE Shale gas

US$70/bbl US$50/bbl

70Bbbl 35Bbbl

At US$70/bbl twice the resources are recoverable than at US$50/bbl

750

TCF available @ US$4/mcf

Recoverable Resources

Light tight oil

$/mcf 2

MMBoe/d Even during the price crisis, US shale production increased by 25%

12MMBoe/d

2014

2016

Cost decrease on well CAPEX

STARTING COST

-10%

-38%

2012

2014

2016

COST REDUCTION FACTORS Continuous improvements Pressure on supply chain Total cost reduction

60%

of the cost decrease actually comes from pure efficiency gains

Canada’s oil sands to remain a growth story Oil sands have never had it easy, say Jamie Webster and Borja Jimenez, but the oil is there and exploitation is proﬁtable

ince the oil price collapse in 2014, oil sands production has increased more than 500,000 barrels per day and is expected to reach more than 3m barrels per day (MMbbl/d) by the end of the decade. At the same time, oil sands sit at the top of the cost curve, have higher overall emissions and are located at the end of companies' project pipelines, with several large producers already divesting. The potential of peak demand is also adding additional long-term pressure to the resource base. Yet the resilience of Canadian oil sands during the price decline is likely to be the trend rather than a blip.

Now more competitive The second largest source of untapped oil reserves in the world has always had enviable features. A stable political environment, low decline rates on long-lived assets and virtually no exploration risk are just some of the attractions. But it is also now more competitive than just a couple years ago, with costs down signiﬁcantly. The price diﬀerential between oil sands crude oil and the West Texas Intermediate – the US

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26/09/2017 15:18

Canada

Saudi Arabia

Venezuela

North America onshore: Oil and Gas

5th

3rd Canada is the world’s 3rd largest in oil reserves

Carbon challenge

Canada is the world’s 5th largest producer after Iraq (4th), Russia (3rd), Saudi Arabia (2nd) and the US (1st)

Oil sands

57% Total Canadian output in 2017 Today Future (2030)

players now look to replenish their portfolios. In the next ﬁve years more than US$8bn is expected to be directly invested in oil sands projects.

Growth potential Conventional oil production decreases and oil sands are expected to grow over time

Despite the increased demand from US and other global reﬁneries, there are challenges ahead for the oil sands. The recently instituted Alberta carbon tax will have a negative impact on project economics. However, the current tax rate is unlikely, on its own, to swing any one project to a diﬀerent decision than without it. The early adoption of a direct carbon cost, assuming it occurs in other countries or regions, as many large oil companies anticipate in their long-term plans, gives the oil sands an opportunity to become competitive with this extra cost now, potentially allowing a shortterm disadvantage to turn into a longterm advantage.

Survival of the ﬁttest benchmark – which at times was over US$30 per barrel, has decreased and stabilised. Continued growth in pipeline capacity could reduce this discount further.

is being exported out of the Gulf Coast of the US to feed global reﬁneries in need of heavier grades, especially during this time of OPEC cuts when there is a relative dearth of medium sours available.

IMAGES: GETTY/ISTOCK

Perfect partner US shale production and an expanded refinery system continue to offer increased opportunities for the heavy grade, both for blending and as feedstock in growing US coking capacity. At the beginning of 2011, as US light tight oil production began to rise, Canadian crude exports to the US were about 1.9MMbbl/d, rising to 2.9MMbbl/d at the start of the price decline in 2014. Current exports are about 3.2MMbbl/d. Why did Canadian crude heading to the US grow by 1.3MMbbl/d as the total US import number fell by more than 2MMbbl/d over the same period? Oil sands serve as a perfect partner for the complex US Gulf Coast refining system, particularly given the reduced heavy crude imports from Venezuela and Mexico. It also serves as a great partner for some of the very light shale crudes with no heavy crude residue (bottoms), blending to a more economical grade. Finally, more Canadian crude

Continued growth This expansion in production and rise in global demand is not a one oﬀ. The Boston Consulting Group’s (BCG) analysis shows a continued rise in Canadian oil sands supply in the future, which is expected to be up more than 500,000bbl/d over the next 15 years. It will also increase its market share in the expanding global oil market, up from the current 3.1% in the 2015–19 period, rising to 3.6% in the 2020–24 period – a share it is expected to maintain throughout our forecast horizon. Costs for Canadian oil sands projects ballooned in the early part of the decade, with 2014 costs for bitumen in a steam-assisted gravity drainage project estimated at US$53 per barrel, an almost four-fold increase from a decade prior. Like nearly all projects around the world, oil sands costs are down substantially allowing investment to again proceed as many

BCG sees global oil demand potentially peaking as soon as midway through the next decade, either through the widespread adoption of electric vehicles, increased natural gas market share in the petrochemicals space or lower global GDP growth. Should any of these come to pass and peak demand occur, there is a view by some that resources sitting near the top of the supply curve, such as oil sands, will be the first to get cut. While the oil supply cost curve informs what projects are viable at different prices, this is not, however, necessarily the case when less oil is required to fuel the world. Instead the key factors will be quality and location. Decision-making based on this criteria should safeguard oil sands. Additionally, the global decline rate of already producing fields could require as much as 4MMbbl/d of annual new supply to offset it. Canadian oil sands have always faced challenges, but the industry seems well equipped to handle them as the global market continues to evolve. By Jamie Webster, Senior Director, BCG Center for Energy Impact and Borja Jimenez, Knowledge Expert and Team Manager of Oil Upstream, The Boston Consulting Group www.the-eic.com | energyfocus

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26/09/2017 10:07

Oil and Gas Middle East

ACTIVITY TO WATCH ACROSS THE REGION

ADIPEC 2017

Make your mark in the

Middle East T Looking to expand into the Middle East? Maximise your opportunities with the EIC at ADIPEC

his year marks the 20th edition of ADIPEC which looks set to be the largest to date, with over 100,000 oil and gas professionals from 135 countries converging on the UAE’s capital Abu Dhabi from 13–16 November. The EIC continues its long-standing support of ADIPEC and will once again be hosting the UK pavilion in Hall 8. Much like the event itself, the EIC’s involvement has grown year-on-year. This November, we will host more than 50 UK companies exhibiting the skills, expertise and innovative products and services for which the UK oil and gas industry is famous worldwide.

The Middle East: a buoyant market

The overwhelming success of ADIPEC, even during the current global down-cycle, reﬂects the strength and resilience of the Middle East. It’s one of the few regions worldwide still awarding contracts and where new developments are emerging. According to the EIC’s project tracking database, EICDataStream, 270 projects are proposed or under development in the six Gulf Cooperation Council (GCC) countries, worth more than US$500bn collectively. There is no better event than ADIPEC for those companies that want to establish or reinforce their position in this lucrative market.

Facilitating global business

Outlook for the region

Attracting key decision-makers from 22 national oil companies, 15 international oil companies and 2,000 exhibiting companies, ADIPEC is a great place to do business. It's estimated that over US$9bn of contracts will be signed over the four days. ADIPEC provides an incredible platform for delegates to meet new partners, network with peers and showcase their products and services to major players in the region such as ADNOC, Qatar Petroleum and Saudi Aramco.

At present, Saudi Arabia, the UAE, Egypt and Bahrain’s cutting of diplomatic, political and economic ties with Qatar is casting a shadow over the region. Whatever the outcome of this schism, it is likely that the GCC countries will continue to focus on diversifying their economies to reduce their dependency on oil, while also adapting their oil and gas industries to come to terms with US$50 a barrel – a big part of which will be their continued focus on downstream value-added products.

SAUDI ARABIA

KUWAIT

The biggest GCC economy holds approximately US$200bn of under development and proposed oil and gas opportunities. Saudi Aramco’s US$3bn revamp in the Marjan oilﬁeld could push production capacity to 300,000bbl/d by completion in Q2 2022. It is also expected to award four EPC packages worth US$4.5bn for the construction of gas facilities at Hawiyah and Haradh.

Kuwait has almost US$100bn of active and proposed oil and gas projects, including the US$32bn Kuwait National Petroleum Company (KNPC) Clean Fuels project which will see the upgrade and integration of the Mina Al-Ahmadi and Mina Abdullah reﬁneries, and the opening of the 225,000bbl/d Al-Zour reﬁnery.

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Middle East: Oil and Gas

BAHRAIN Despite being the GCC’s smallest oil producer, Bahrain holds one of the biggest downstream engineering, procurement, and construction (EPC) management contracts in the region. Bahrain Petroleum Company (BAPCO) is expected to award the multi-billion main package for the Sitra reﬁnery upgrade this autumn. The reﬁnery will be expanded from 262,000 to 360,000 barrels per day (bbl/d) at a cost of US$5bn with the upgrade to be completed by 2020.

The EIC UK pavilion at ADIPEC – Hall 8 Looking to expand into the GCC? The EIC can help If you want to make the most of the many business opportunities on oﬀer in the GCC, get in touch with the EIC. Our Dubai team knows the local markets inside out and can introduce you to the all region’s key players. Just as important as our practical advice and connections is our Dubai LaunchPad service, which provides a low-cost, low-risk entry into this booming market. We can provide you with serviced oﬃce facilities, meeting rooms and hot desks as well as as organise your residence visa for you: everything you need to start building your business in the region.

UNITED ARAB EMIRATES The UAE has started the development of the Hail and Ghasha sour gas field offshore Abu Dhabi. With an estimated value of US$12bn, it’s one of the most important projects in the country and will increase domestic gas production by 18%. The operating company, Al Hosn Gas, is also developing the US$1bn Dalma oil and gas offshore field with production set to begin in 2019.

Decades of experience in one of the world’s harshest and most demanding oﬀshore environm ents, the North Sea, have honed the UK oil and gas industry’s expertise to meet the challenges of the global energy market Please take the time to visit as many as the UK exhibitors as possible and ﬁnd out how they can add real value to your projects and programmes.

Design, engineering and consultancy AFGlobal UK Ltd, Amec Foster Wheeler, BMT International Ltd, Clarkson Research Services Limited, Colson X-Cel Ltd, Completion Products Limited, Enhydra Ltd. Goodwin International Ltd, HFI Legal Consultancy Ltd, Total Waste Management Alliance Limited, Westley Group

Hazardous area and safety equipment ABTECH Limited, Angus Fire, Apollo Fire Detectors, BS & B Safety Systems (UK) Ltd, CorDEX Instruments Ltd, Crowcon Detection Instruments Ltd, Elfab Ltd, Elmac Technologies Ltd, European Safety Systems Ltd (E2S), FFE Ltd, HESCO Group, Hubbell Ltd, Hughes Safety Showers Ltd, Knowsley SK Ltd, Orga M & C Ltd, Raytec Ltd, Wolf Safety Lamp Company Limited

Governmental Welsh Government

Instrumentation and control Advanced Sensors Limited, Delta Controls Ltd, EXHEAT Ltd, Oliver Valves Ltd, Optical Metrology Services Ltd

Pipelines and piping materials Garlock Pipeline Technologies Limited, Lokring Northern UK

OMAN

QATAR

The Sultanate of Oman boasts two downstream mega projects: the Liwa Plastics complex and the Duqm refinery. With a combined value of US$12bn, both are expected to be completed by 2020. Four main packages have already been awarded for the petrochemical complex at Liwa that aims to produce plastics from Sohar refinery feedstock. Three packages for the Duqm refinery should be awarded by autumn 2017.

The North Oil Company (NOC), a joint venture formed by Qatar Petroleum (QP) (70%) and Total (30%), started operations at the Al-Shaheen oil field in July. Total, who replaced Maersk as QP’s partner, has pledged US$2bn of investment over the next five years. Qatar’s other megaprojects also include the US$11bn redevelopment of the Bul Hanine oil field expected to last until 2028.

Logistics and load handling Cargostore Worldwide Trading Ltd

Specialist technology providers Cal Gavin Limited, Churchill Drilling Tools Ltd, CMP Products Limited, Cutting & Wear Resistant Developments Ltd, Eclipse Magnetics, Hughes Pumps Ltd, Innospec Limited, James Fisher Oﬀshore Limited, Norbar Torque Tools Ltd, Pharos Marine Automatic Power Ltd, Process Vision Ltd, IMI Precision Engineering, Whitford Ltd

www.the-eic.com | energyfocus

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26/09/2017 10:09

Keeping the World Flowing

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W rotork.com 25/09/2017 09:56

Power Smart energy revolution

Distribution networks hold the key to the UK’s energy future Peter Jones, ABB Technology Strategy Manager, says ﬂexible distribution networks are increasingly vital as the UK shifts towards decentralised and renewable generation

IMAGES: GETTY

his year’s Future Energy Scenarios document, recently published by National Grid, provides an intriguing insight into the UK’s current energy revolution. It outlines four possible scenarios, according to predicted levels of prosperity and green ambition: ‘Two Degrees’, ‘Slow Progression’, ‘Steady State’ and ‘Consumer Power’ (Figure 1). But whatever the eventual outcome, there appears to be a shift towards decentralised and renewable generation. The only diﬀerence is the pace and extent of this change. The inevitable result of this shift will be a profound change in the roles played by transmission and distribution networks,

because the bulk of solar energy and other decentralised resources will be connected at the distribution level. While in the past the main focus has been on developing transmission networks capable of working hard in winter and less so in summer, under some of the future scenarios outlined by National Grid transmission demand is set to steadily fall in winter. And it could virtually disappear in summer at certain times of the day according to the other scenarios. In fact, this trend has already started. On 25 March this year, for the very ﬁrst time, the electricity demand on the transmission network was lower during the afternoon than it was overnight due to the high level of solar generation.

Ready for the 2026 eclipse In contrast, distribution networks now need to be flexible to deal with complex, intermittent power flows. A particularly interesting example of the challenge they will face is highlighted in National Grid’s pre-planning for the UK’s next solar eclipse on 12 August 2026. By then the UK could, under one of the scenarios, have up to 26GW of solar power, over twice the 12GW we have today. When the shadow falls at 19:10 there could be a solar generation deficit of around 3.5GW for 30 minutes.

Technology boosts ﬂexibility A raft of technologies will help provide distribution grids with the required

www.the-eic.com | energyfocus

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26/09/2017 10:10

Power: Smart energy revolution

Less money available

Prosperity

More money available

Figure 1. National Grid’s 2017 Future Energy Scenarios (FES) matrix. The starting point for National Grid’s regulated long-term investment and operability planning, the FES provides a credible range of energy futures for the UK each year

Consumer Power A world which is relatively wealthy and market driven

Steady State A world focused on security of supply and short-term thinking Less focus

Two Degrees A world where environmental sustainability is top priority

Slow Progression A world focused on long-term environmental strategy

Green ambition

3.5GW UK’s next solar eclipse: When the shadow falls at 19:10 there could be a solar generation deﬁcit of around 3.5GW for 30 minutes

More focus

Source: 2017 Future Energy Scenarios, National Grid

flexibility, including demand response mechanisms. Storage will also play an important role, with up to 10.7GW installed by 2050 under one scenario, including a substantial number of battery energy storage systems (BESS). These could be critical in helping the UK’s power networks maintain a stable grid frequency. Unlike traditional generation plant, renewable energy does not typically offer the spinning mass – generally turbines and generators at the production end of the network – which creates the inertia (resistance to change in motion) to help limit frequency fluctuations when a power imbalance occurs. The strategic deployment of a BESS can help bridge this growing inertia gap by delivering vital grid frequency support, absorbing power when the frequency is too high and injecting power when the frequency is too low. Other BESS functions include load levelling, peak power shaving and power smoothing. We are finding that network operators are increasingly reluctant to commit to major investments in new infrastructure. Instead, they are more interested in seeking new approaches to get the most out of their existing networks. One example of a technology that has great potential in this area is the Flexible Power Link, which is a back-to-back (AC-DC-AC) converter. It controls and transfers power between two previously incompatible distribution grids

and allows the operator to balance generation and demand more eﬀectively. Another interesting technology is the Line Voltage Regulator (LVR). Traditional distribution networks were designed on the basis of a voltage drop along the line from substation to the consumer. However, the introduction of distributed generation means that grids can experience voltage rises. If supply exceeds demand, there is potential for the voltage to exceed the statutory limits. In this case, the operator must curtail generation to maintain stability or even invest in a new connection. Instead, the LVR can eﬀectively ‘recalibrate’ the voltage to maintain it in the allowed range.

New thinking required Overall, accommodating renewables might require a complete rethink of winter and summer network operations. Possibly operating as a solid, interconnected network

Figure 2. Microgrids could oﬀer a way to meet mounting demand for new connections

in winter and changing to a more regional operation in summer – perhaps made up of a large number of smaller-scale microgrids (Figure 2). There are some particular areas in which network design standards can help make a successful transition. More distributed energy resources in the form of renewables and other sources, such as combined heat and power, embedded in the distribution network can, by themselves, improve network security and resilience if planned and coordinated to operate together. By carefully modelling the operation of these embedded resources within existing and new distribution networks, large network cost savings could be realised and quantiﬁed. Furthermore, it would be helpful to look at the overall energy challenge. Not only focusing on electricity but also considering the role that gas and heat will play in handling peak demand to cope with intermittency well into the future. One way this can be achieved is that, as distribution network operators transition to distribution system operators, they could develop and publicise regional energy strategies. This will provide an overarching vision for the energy future of communities and industrial customers within a region and allow much closer customer involvement in planning for a clean and cost-eﬀective energy future. By Peter Jones, Technology Strategy Manager, ABB

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26/09/2017 10:10

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Power GCC

GCC in the spotlight Energy Focus rounds up the region’s power demand

IMAGE: ISTOCK

he Gulf Cooperation Council (GCC) countries, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates continue to deal with an increasing demand for electricity. Driven in part by the GCC economies’ industrialisation programmes, strong economic and demographic growth has led to a dramatic surge in GCC power consumption. In its report MENA Power Investment: Finance and Reform Challenges Persist (April 2017), energy finance firm, Arab Petroleum Investments Corporation, estimates that the GCC, which represents 43% of the 157GW of current power generating capacity in the Middle East, will require an investment of US$81bn to add 62GW of new generating capacity and US$50bn to build transmission and distribution facilities over the next five years. GCC governments are looking to independent power producers (IPPs) to provide financial support and play an increasing role. It is expected that over the next five years the private sector will be responsible for adding more than 20GW of generating capacity in the GCC. While there has been little change to the structure of electricity market over the last few years, reforms are gradually being implemented across the GCC countries, with Oman and Saudi Arabia leading the way.

Bahrain Bahrain’s current available generation capacity is 3.92GW during peak summer

months, with around 600MW of spare emergency import capacity through the GCC’s interconnected grid. For the country to satisfy the projected rise in power demand, capacity will need to grow at 6% per year requiring US$3bn to be invested over the next ﬁve years. Two projects slated to start in 2019 and 2020 are the Alba power plant 5 and Addur IWPP phase II, respectively, which will add a total of 2.8GW to generating capacity.

Kuwait To meet its increasing energy demand, Kuwait will need to invest US$14bn in electricity projects to reach 23GW by 2021. The government has earmarked US$9.9bn for infrastructure projects and is keen to attract foreign investors. Three projects in the pipeline will add about 6GW of capacity, including the 3GW Nuwaiseeb power and water cogeneration plant (phase 1), the 1.5GW Az Zour North IWPP (phase 2) (Az-Zour North II) and the 1.5GW Al Khairan water and power project (IWPP) (phase 1).

Oman In Oman, power generation capacity will need to grow at an annual rate of 9.9% over the next ﬁve years to meet rising demand for electricity. The country will need to add 5.3GW in the medium-term, involving an investment of US$11bn. Current plans include the development of plants with a combined capacity of around 4GW. Three major projects are the 1.7GW Sohar 3 IPP, 1.5GW Ibri IPP and the 750–850MW Misfah IPP.

Qatar As it gears up for the upcoming 2022 FIFA World Cup, it is estimated that Qatar will need to invest around US$9bn to add 4.3GW to meet its power needs in the medium-term. Two projects have already been awarded to add nearly 4.5GW to meet this demand. The ﬁrst is the 2.5GW Umm Al Houl power and desalination project and the second is the 2GW Ras Laﬀan D IWPP.

Saudi Arabia Saudi Arabia will need to invest US$59bn to increase capacity to 114GW as the country’s power requirements continue to grow. Over 25GW of capacity is already in the pipeline including major projects such as the 3.1GW Yanbu 3 plant and the 4GW Jazan (Jizan) IGCC power plant, which are expected online in 2018, and the 2.6GW Shuqaiq plant and 5.4GW Riyadh PP15 power plant.

United Arab Emirates The UAE is pushing strongly to diversify its energy sources in the power mix and it will need to invest at least US$35bn to meet a targeted extra 17GW of capacity. About 10.4GW of new capacity is already under development. The majority of power is generated using natural gas, but the new 2.4GW Hassyan clean coal power plant (phase 1) is expected to be fully operational by 2023 with a second coal-ﬁred power plant (1.89GW) planned for development by the Federal Electricity and Water Authority. As GCC governments prioritise investments in the power sector, the scale of the opportunity for UK businesses is large. If you're thinking of expanding your business into the GCC and would like to ﬁnd out more about the projects detailed here or prospects in the region please email us at dubai@the-eic.com

www.the-eic.com | energyfocus

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26/09/2017 10:11

Nuclear Fusion power

Is fusion the fuel of the future?

As 35 countries collaborate to ‘build a star on earth’ in the South of France, Laban Coblentz gives an update on ITER – the world’s largest fusion experiment

usion is the most prevalent source of energy in the universe, but stars create fusion at their core using gravitational force. Duplicating that natural phenomenon artiﬁcially on Earth in a commercial-sized Tokamak reactor requires staggering feats of engineering.

Pushing science to its limits Scientists must force positively charged hydrogen molecules to collide and fuse at

P46-47_EF-Autumn17_Nuclear Fusion__Energy Focus 46

ultra-high velocity and temperature. Superconducting magnets weighing hundreds of tonnes and as large as 24 metres in diameter must be placed with near-millimetric precision in order to conﬁne the superheated plasma in a tightly woven, donut-shaped magnetic cage inside a giant vacuum vessel. The magnets will be supercooled with helium to –269˚C, the temperature of interstellar space. A few metres away, the plasma will be heated to 150 million ˚C, 10 times hotter than the core of our sun, making it the hottest point in the universe. – forcing The science and engineering feats

demanded by the International Thermonuclear Experimental Reactor (ITER) machine push the limits of materials science, robotics, remote handling, vacuum systems, cryogenics, electromagnetics, and other ﬁelds. Adding to this complexity is the unique arrangement for funding and procurement: the countries involved contribute 90% of their funding in the form of components. The million-plus parts of this ultra-complex device will be sourced from all over the world, and every interface must ﬁt perfectly.

26/09/2017 10:11

Construction continues on the ITER site in Cadarache, France

Power in partnership

Fusion holds the promise of a clean, safe and virtually limitless source of energy

As ITER Director-General Bernard Bigot recently said, ‘The ITER project is built on this condition: if our partnerships perform poorly, every interface is threatened, the project is impacted, and everyone is negatively aﬀected, however, if our partnerships perform well, each partner contributes its expertise, we all learn from each other, the interfaces are well-managed, the project succeeds, and everyone wins.’ For ITER to succeed, disciplines such as project management, risk management and systems engineering have to perform extraordinarily well. The ITER agreement purposefully called for this complexity, because each country involved wanted to learn from the other and to share its own expertise.

Moving towards First Plasma ITER reports to its stakeholders routinely on a pre-agreed set of technical milestones, mapped to the master project schedule. For the past two years, every milestone has been met, and the project has stayed on schedule and on budget. ‘First Plasma’, the event that will mark a fully operational machine, is targeted for December 2025. That milestone will be followed by a staged series of experimentation and additional assembly phases, to culminate in full deuteriumtritium fusion in 2035. The ITER worksite is buzzing with activity.. The gigantic assembly hall, where arriving components are to be pre-assembled before being painstakingly placed into the Tokamak, dominates the landscape. Pieces of the cryostat, the 30-meter-diametre refrigerated vessel that will house the Tokamak, have been arriving from India and are being assembled by a renowned team of German welders. Spools of superconductor are being shaped into magnets in the Poloidal Field Coil building. Week after week, giant components arrive at the Marseille harbour and make their

way to the site. The cryogenics plant, magnet conversion facility, radiofrequency building, and electrical switchyard are all taking shape. And at the centre of the complex, ﬂanked by the tritium recycling plant and a diagnostics building, the massive form of the ITER bioshield is slowly rising, level upon level.

The way to new energy Concerns about the effects of Brexit, which will see the UK withdraw from Euratom – the organisation that governs the participation of the European Union and Switzerland in the ITER – have caused no panic at the project. As with other transitions that can cause support for ITER to fluctuate at the political level, ITER’s senior management keeps a steady focus on what they can control: project performance. Why? Because the stakes are so high. Fusion holds the promise of a transformational energy legacy for generations to come: a clean, safe and virtually limitless source of energy, capable of baseload power generation with enough fuel to power human society for millions of years. No other energy source can make that claim. And unlike any other science endeavour in history, fusion has a six-decade track record of international collaboration, transcending the Cold War and other past and current political divides. ITER’s stakeholders understand that the ITER mission – demonstrating the feasibility of magnetic confinement fusion at full scale – is a gateway step for the commercial deployment that will follow. For the thousands of committed ITER contributors, whether at the worksite in Provence or in hundreds of companies, laboratories, and universities across the globe, the strong belief is that the payoff will be worth every bit of the effort. By Laban Coblentz, Head of Communications and External Relations, ITER Organization www.the-eic.com | energyfocus

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26/09/2017 10:12

Nuclear Global outlook

Global nuclear prospects:

bust or boom? Worldwide nuclear energy is growing and industry prospects have been recovering ever since the Fukushima nuclear accident in 2011. However, the current rate of expansion is nowhere near enough if we truly care about avoiding climate change and improving the lives of billions of people says David Hess at the World Nuclear Association

IMAGES: SHUTTERSTOCK

uclear energy plants currently supply about 11% of global electricity. As of writing, there are 447 reactors operating across 31 countries whose combined populations make up about 60% of the world’s total. Of these countries, a sizable subset is making steady progress with their nuclear new build programmes. China leads the way with 20 reactors under construction (and has committed to starting construction on eight more in 2017) but in total 15 countries have new reactors under construction and others like the UK, Hungary and South Africa are about to join that list. There are 20 newcomer countries that are advancing plans to develop nuclear energy and build their first reactors. Notably, the UAE has just finished construction of its first nuclear power reactor and three more will be commissioned by

Positions of countries with operating nuclear power plants Category

Countries

New unit(s) under construction

Argentina, Brazil, China, Finland, France, India, Japan, Republic of Korea, Pakistan, Russian Federation, Slovakia, Ukraine, US

New unit(s) under construction with more planned/proposed

China, Finland, India, Japan, Republic of Korea, Russian Federation, Pakistan, US

No units under construction but with plans/proposals for building new unit(s)

Armenia, Canada, Czech Republic, Hungary, Islamic Republic of Iran, Romania, South Africa, UK

Firm policy not to build new units

Belgium, Spain, Switzerland

Firm policy to close existing units

Germany

Source: IAEA, International Status and Prospects for Nuclear Power in 2017

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26/09/2017 10:14

Global outlook: Nuclear

Nuclear industry performance indicators 2016

80.5% GLOBAL AVERAGE CAPACITY FACTOR (EXCLUDING JAPAN)

2,476 TWh ELECTRICITY GENERATED IN 2016

10 NEW REACTORS BROUGHT ONLINE

9.479GW NET INCREASE IN GENERATING CAPACITY

74 months AVERAGE CONSTRUCTION PERIOD FOR NEW REACTORS STARTING IN 2016 Source: World Nuclear Association, Nuclear Performance Report 2017

20 newcomer countries are advancing plans to develop nuclear energy and build their ﬁrst reactors 2020, while the ﬁrst Belarusian reactor is scheduled to start-up sometime in 2019. There are indeed a handful of countries which are actively reducing and phasing out nuclear energy – Germany being the most famous example – or have recently postponed plans to introduce the technology, like Vietnam. These developments have led some authorities, like the International Atomic Energy Agency (IAEA), to scale back their current projections for expected nuclear growth. This is alarming, and it obscures the fact that there are many countries where nuclear reactors continue to operate without much controversy and at generally superb performance levels.

Nuclear health check Global nuclear industry performance on some key metrics is much better than most people realise. An annual health check of the industry from the World Nuclear Association shows that: Installed nuclear generating capacity was higher than ever by the end of 2016, having grown in almost all of the last 45 years. Nuclear generation is close to matching pre-2011 levels despite the slower than anticipated restart of the Japanese reactor ﬂeet There are about 60 nuclear reactors under construction today. A 25-year record high was achieved in 2015 when there were 68 reactors under construction More nuclear reactors came online than any time in the last 25 years – over 9GW in 2015 and 2016 Construction times for new reactors have improved over the last 15 years. Reactors coming online in 2015 had an average construction time of around six years Nuclear reactor capacity factors have improved steadily over the last 35 years. Importantly, reactor performance is not fundamentally aﬀected by reactor age; older plants operate as well as younger plants www.the-eic.com | energyfocus

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26/09/2017 10:15

Nuclear: Global outlook

The improvement on construction times is particularly encouraging news, demonstrating that there are learning benefits to be found in standardised series construction, and that with practice, countries (and companies) can become skilled at building nuclear plants efficiently. This is a particularly relevant finding for the US as it considers the current fate of the recently cancelled V.C. Summer nuclear project in South Carolina.

Re-evaluating nuclear energy The principle selling point of nuclear technology is that plants can generate electricity with a high degree of reliably and with a tiny environmental footprint. Importantly, nuclear energy does not produce significant amounts of atmospheric pollutants (including carbon emissions) and the fuel is comparatively cheap and easy to store in sufficient quantities to guard against theoretical disruptions in supply or sudden fuel price movements. This makes nuclear energy a very attractive proposition in a world where energy demand is growing and which faces an ever-evolving array of geopolitical risks. Figure 1 outlines some of the many benefits that nuclear brings to the energy mix. For countries that are already lucky enough to have nuclear plants many of these social and environmental benefits are very often taken for granted. Nuclear plant owners effectively provide these services for free. When the electricity price was high this was not a problem as utilities made enough profit to justify keeping generating plants running. However, the electricity market price has collapsed in markets throughout Europe and the US due to a combination of low gas prices and renewable energy subsidies. It would now be foolish not to value these additional benefits and preserve them if at all possible. For developing countries and emerging economies introducing nuclear energy boosts the economy and stimulates productivity. It also helps to build up an engineering base and supports technological innovation and development. South Korea is a salient case, with nuclear energy playing a vital role in the country’s transformation from an importoriented agrarian economy to an exportoriented technology one. It is therefore worrying that the new president currently seems intent on pursuing a phase out there.

FIGURE 1. NUCLEAR'S KEY ROLES IN THE ENERGY MIX Avoids carbon emissions

Anchors the local community: jobs, tax base

Runs when needed

Provides clean air compliance value

Provides price stability Supports grid stability

Contributes to fuel and techniology diversity

NUCLEAR ENERGY’S VALUE PROPOSITION Source: US Nuclear Energy Institute, Nuclear by the Numbers 2017

Beyond energy, nuclear technology has important applications in the health, research, agriculture and manufacturing sectors of a country. Developing a nuclear sector – with electricity generation at its centre – should be recognised as one of the key steps on the path to scientiﬁc and sustainable development for every country. Nuclear technology can help countries in directly reaching no less than nine of the

UN sustainable development goals Nuclear technology supports the following nine United Nations sustainable development goals. This adds substantially to nuclear energy’s value proposition for developing countries.

Zero hunger Good health and wellbeing Clean water and sanitation Aﬀordable and clean energy Industry, innovation and infrastructure Climate action Life below water Life on land Partnerships for the goals

United Nations’ 17 Sustainable Development Goals, and may support in the others.

Achieving energy harmony The World Nuclear Association has long been concerned at the discord between most of the oﬃcial scenarios for nuclear growth and the rate of growth actually required if climate and development priorities are to be successfully balanced. Rising to this challenge, the Association launched the Harmony programme in 2015. Harmony envisions a diverse mix of low carbon generating technologies deployed in such a manner that the beneﬁts of each are maximised while the negative impacts are minimised. The core goal is for nuclear energy to provide at least 25% of electricity in 2050, requiring roughly 1,000GW of new nuclear capacity to be constructed – depending on certain factors. It takes the International Energy Agency (IEA)’s two degree scenario (2DS) where planetary warmth is limited to 2˚C, as its reference, but increases the expectations from 17% for nuclear growth as it is expected that some technologies are unlikey to deliver. The Harmony programme envisages a lower carbon world which also allows for the economic growth of developing countries, with nuclear energy at the heart of this vision. Working together we can create a more sustainable, fairer world. By David Hess, Communications Manager, World Nuclear Association

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26/09/2017 10:16

Renewables Solar energy

olar thermal electricity (STE), also known as concentrated solar power, is a carbonfree source of electricity best suited to areas with strong solar radiation including southern Europe, the Middle East and North Africa (MENA) region, South Africa, parts of India, China, the southern US states and Australia. STE plants use mirrors to concentrate the sun’s rays to a temperature typically between 400˚C and 560˚C. There are a variety of mirror shapes and sun-tracking methods to provide energy, but they all work under the same principle: driving a heat engine, usually a steam turbine, to generate electricity that can then be fed into the grid. The thermal energy collected in a plant can be stored and used to produce electricity when it is needed, day or night. In 2016, 110MW of capacity came online, bringing global capacity to more than 4.8GW by the end of the year. Despite this being the lowest annual global growth rate in 10 years, the outlook for STE remains positive, with as much as 900MW expected to enter operation in 2017. Solar thermal power could meet up to 6% of the world’s power needs by 2030 and 12% by 2050.

IMAGE: GETTY IMAGES

Key players Spain is the global leader in existing STE capacity, with 50 plants constructed between 2007 and 2013, totalling 2.3GW. Today, STE delivers 5 terawatt-hours per year and in some periods contributes close to 10% of Spain’s electricity needs. The US follows, with around 1.8GW of installed power. And although there has been a signiﬁcant shift to developing countries, Spain and the US still accounted for over 80% of global installed capacity in 2016. For new capacity, South Africa leads the market with 100MW added in 2016. At the start of the year, the country had a further 300MW under construction, expected to come online in the next two years. Additional plants are currently under development and should be ﬁnalised once state-owned Eskom signs power purchase agreements with energy producers. As part of its ambitious STE programme

Rashid Al Maktoum solar park. The lowest bid came in at US$9.45 per kilowatt hour (kWh), nearly 40% below the previous world-record low price for electricity generated from this technology. The three other bids ranged from US$10.58–US$17.35/kWh.

The real value of STE

A brighter future Solar thermal electricity has the potential to meet the challenging demands of the changing global energy landscape, writes ESTELA’s Dr Luis Crespo to install 1.4GW by 2018, China brought its ﬁrst 10MW of capacity online in 2016 and has as much as 650MW at varying stages of construction. Morocco continues to be a key driver of STE expansion with plans for 2GW of solar power by 2020. The Noor II (200MW) and III (150MW) projects are expected to start commercial operation in 2017 and 2018, respectively, and will bring Morocco’s total capacity to over 500MW. Elsewhere in the MENA region, the big news is the record-low solar bids submitted from four consortiums for Dubai’s upcoming 200MW fourth phase of the Mohammed bin

Signiﬁcant progress is being made in understanding the real value of STE with thermal energy systems (TES) in providing dispatchable power to grids with increasing shares of variable renewable power. While STE remains more expensive than wind power and solar photovoltaic on a pure generating cost basis, the overall value of STE with TES can be higher due to its ability to dispatch power in periods of peak demand. A strong deployment programme, ensuring an STE market volume of around 30GW per year, could avoid the need for new fossil fuel power plants and replace the decommissioned ones. In this way, STE technologies would strongly contribute to the reduction of global CO2 emissions. STE dispatchability capabilities would also enable a further reduction in emissions by allowing increased penetration of intermittent renewable energy technologies in a reliable and aﬀordable way.

Making the right connections There is a need for pure market-led ﬁnancial structures to maintain growth in mature solar markets, as well as foster development in emerging markets. Interconnectors for cross-continent connection will provide better utilisation of solar generation, balancing production and usage within and across much larger markets and landscapes. Stable, long-term support for research and development is crucial to fully exploit the potential for further technology improvements and cost reduction. With these key measures in place, UK businesses will have signiﬁcant opportunities in this promising market as STE takes its place as an important part of the world’s energy mix. By Dr Luis Crespo, President, European Solar Thermal Electricity Association (ESTELA) www.the-eic.com | energyfocus

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26/09/2017 10:17

Renewables Oﬀshore wind

lthough Europe remains the global leader in the oﬀshore wind sector, having a total installed capacity of 12.6GW, Asia is catching up fast. With a renewed push in China and an ambitious programme in Taiwan, both these countries represent huge potential growth markets for oﬀshore wind.

China East Asian giant China is quietly taking the lead in the race to become the world’s leading oﬀshore wind developer. The country installed more than 1.6GW of oﬀshore capacity at the end of 2016 and is expected to add around 900MW more before the end of 2017. Next year, it is due to surpass 1GW of

installations per year as part of a ﬁve-year plan to have 5GW grid-connected by 2020, plus another 10GW under construction (Figure 1). China is on target to install 13GW between 2017–26, bringing its total capacity to nearly 10 times today’s level. In the mediumterm, it is the only country that can compete with the UK and Germany in terms of market size. Jiangsu and Shanghai are the most active provinces for oﬀshore wind development. Guangdong, one of the country’s richest provinces, has seen an increase in activity, while Fujian is expected to deploy seven projects. Having been awarded a €4m contract to design infrastructure for a 400MW project in Jiangsu province, Ramboll claims to be

the first foreign company hired to design a Chinese offshore wind farm. PowerChina Huadong Engineering Corporation Limited has drafted and obtained approval for its offshore wind development plans in Jiangsu and Zhejiang provinces. Recognising European expertise Huadian Heavy Industries has cooperated with some European companies efficiently. Cost of energy is already the key challenge for offshore wind in China, despite the industry starting from a lower cost base. While the Chinese have benefitted from their knowledge of wind turbine supply leveraged from its onshore experience, parts of the offshore wind supply chain are still immature with components including control systems and power converters

China and Taiwan

delivering on Eastern promise The EIC’s Amisha Patel analyses China and Taiwan’s oﬀshore wind markets, both of which are keen to draw on the UK supply chain’s expertise

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Oﬀshore wind: Renewables

currently being sourced from foreign players. Lack of experience is a common challenge right across the supply chain. And although China will gain experience from early projects and build capability signiﬁcantly through learning-bydoing, there will be signiﬁcant potential to make use of existing solutions from Europe. The UK’s experience in successfully driving down the cost of energy will be invaluable to the Chinese market as long as it is applied selectively.

The island nation’s offshore aspirations made headlines this year when it announced a target of 3GW of capacity to be built by 2025. While paltry compared to developments in neighbouring China, for leading original equipment manufacturers, its big attraction is that it is an open market with no dominant established players when it comes to winning contracts. Today, there are only two offshore turbines operating in the country which were demonstration turbines installed at the 8MW Formosa 1 project in October 2017, however, two more projects totalling 320MW are due to be in place by 2020. Formosa 1 is being developed in two phases. The two 4MW Siemens turbines comprising phase I were installed in October 2016. In phase II, a further 120MW of capacity is planned to be added by 2019, subject to a final investment decision. In January 2017, DONG Energy and Macquarie Capital agreed to buy stakes in the Formosa 1 project. Macquarie Capital holds a 50% interest in the project, DONG 35%, and Swancor Industries the remaining 15%. DONG is providing advisory services, with Swancor Renewable leading the project through site development and

By Amisha Patel, Head of Power, Nuclear and Renewables, and Public Aﬀ airs, the EIC Want to know more about offshore wind? The EIC’s Global Oﬀshore Wind Insight Report is available free of charge to members and for purchase by non-members. To get your copy of the report, contact: info@the-eic.com

FIGURE 1. CHINA'S OFFSHORE WIND AMBITION

72.95GW of oﬀshore wind approved by national government China’s commercial oﬀshore potential 500GW Water depth (5–50m) LIAONING 1 project 600MW TIANJIN 1 project 90MW

PROVINCIAL PLANS FOR OFFSHORE WIND ENERGY IN CHINA

IMAGES: FREEVECTORMAPS.COM/ GETTY IMAGES

Taiwan

construction. Macquarie Capital is also working with DONG and Swancor Renewable to complete the development and construction of the project. The Danish major is also active in other areas of the country, having bagged four of the 21 available sites offshore Changhua County. Provided that the environmental impact assessments are approved and subject to investment approvals, DONG Energy intends to develop at least 2GW of capacity at the sites, with construction potentially starting in 2021–24. Taiwan’s offshore wind power industry is still in its infancy (Figure 2) and the need for support from experienced overseas markets is recognised. The Taiwanese government is keen to enhance its industrial capability and has focused on technology transfer from leading companies worldwide through international cooperation programmes as a means of doing so. The Department of International Trade has identified potential commercial opportunities for UK expertise including engineering design, installation equipment, operations and maintenance and services for prospective UK investors. The UK’s 12-year history of renewable energy collaboration with Taiwan means its supply chain already has a firm footing from which to win work in this emerging market.

HEBEI 5 projects 1.3GW JIANGSU 18 projects 3.49 GW

15GW

ZHEJIANG 5 projects 900MW

5GW of oﬀshore wind in operation and 10GW will be installed, according to the 13th Five-year Plan (2016–20)

FUJIAN 7 projects 2.1GW GUANGDONG 5 projects 1.7GW HAINAN 1 project 350MW

China’s commercial oﬀshore potential 200GW Water depth (5–25m)

Source: The EIC using information from China Three Gorges Corporation

FIGURE 2. POTENTIAL TAIWAN OFFSHORE WIND PROJECTS 2020–23 Project

Location

Hai Long Oﬀshore Wind Farm

Chang Hua County

Formosa 2 Oﬀshore Wind farm

Miaoli County

Changhua Oﬀshore Wind Farm (South) - Taipower

Chang Hua County

Changhua Oﬀshore Wind Farm (North) - InfraVest

Chang Hua County

Taihai Taoyuan Floating Oﬀshore Wind Farm - EOLFI Penghu Oﬀshore Wind Farm 4 - Taipower

Taoyuan County Penghu Island

Taoyuan ZoP 3 Oﬀshore Wind Farm - InfraVest

Taoyuan County

Guanyin ZoP 2 Oﬀshore Wind Farm - InfraVest

Taoyuan County

Yunlin Oﬀshore Wind Farm - Infravest

Yunlin County

www.the-eic.com | energyfocus

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26/09/2017 10:18

EIC Member Focus Booth Welsh

MY BUSINESS

Martin Welsh, Booth Welsh Can you tell us a little bit about Booth Welsh? Booth Welsh is an international engineering services provider. My father, John Welsh, founded the company in 1989 and I joined him the year after. By following my father’s ‘one-step-at-a-time’ mantra, the business grew into a complete integrated solution for industrial process control. After a management buyout in 2011 we evolved into a multidiscipline engineering services business, employing 240 people. Booth Welsh was acquired by Australian company Clough in 2014.

IMAGES: ISTOCK

What do you know now that you wish you’d known when you started the company? There are easier ways to make money! But maybe few are as rewarding. Looking back, perhaps the hardest thing to get right is people skills. I think that this particular life skill can take years to master but is so important in building trust and relationships. What’s a typical day like at Booth Welsh? As you can imagine, day-to-day operations inside the business needs to be relatively fluid. We have structured meetings but flexibility is one of the strengths of an organisation our size. If a client has an priority we will divert resources to accommodate that client. I like to be hands-on, so I could be looking at office improvements with our facilities team one moment and the next, brainstorming our future entry strategy into a new region with the board. Being an international business means late nights and early mornings too – not a speciality!

What would it surprise our readers to know about you? I have now run two full and four half marathons. Even one in Palma! After collapsing with dehydration during my ﬁrst-ever event in Glasgow, aged 48, I decided that giving up wasn’t an option. Running helps me tremendously and I would recommend it highly. I suppose like the business it’s a long-distance event with plenty hills and challenges, but also highly rewarding.

Energy Focus caught up with Managing Director Martin to ﬁnd out what day-to-day life is like at Booth Welsh What’s been the biggest change in the past 25 years? I would say that being acquired by Clough in 2014 was the biggest change, although buying the business from the family was also a big step. Both of these pivotal events have shaped the business we have today. What’s been your biggest highlight to date? We are now part of a large international business so looking back on my career journey – starting as an apprentice engineer to becoming a manager then ultimately becoming a managing director of a family business – representing Booth Welsh in a global forum at world events has been the biggest highlight. I am very proud of our people here in the UK and what we have achieved together.

You’ve recently won contracts with EDF and Veolia. What’s the secret to working with major operators and contractors? Lead with your strengths. If you have a real speciality then sell it ﬁrst. The rest will follow. Today we have long-term frameworks in place with many blue chip clients, most of which have been built on collaborative relationships. In the early days it was sometimes about being brave enough to punch above your weight. Also, a little free consultancy goes a long way. And once you have the customer make sure you are there for them and always deliver what you say you will. In this issue of Energy Focus we explore how companies can expand into new markets. What advice can you oﬀer SMEs thinking about moving into new countries? Take advantage of government support and group delegations, including EIC events. Sell your service, but also stand out from the crowd. Tuning into your value proposition and thinking how your future customers would be interested in it is crucial. The EIC has been a tremendous help in getting our brand out there and I would highly recommend exhibiting at one of their range of international events.

54 energyfocus | www.the-eic.com

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