Energy Focus Autumn 2019 by Energy Industries Council

energyfocus

ISSUE 33 AUTUMN 2018

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 VIEW FROM THE TOP IHS Markit Vice Chairman Dr Daniel Yergin on Trump, China and the GCC

ENERGY SYSTEM OF THE FUTURE The UK energy landscape is changing

OIL AND GAS How the Oil & Gas Authority is making Vision 2035 a reality

Keeping the lights on

How future fuels, technology and policy will affect the worldâ&#x20AC;&#x2122;s energy security

RENEWABLES Could hydrogen hold the key to decarbonising heat and transport?

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Contents ISSUE 33 AUTUMN 2018

FROM THE EIC

OIL AND GAS 26 Working towards Vision 2035

5 Foreword

POWER

Daniel Yergin

37 Fuel of the future

Laura Cozzi, Head of Energy Demand Outlook Division, IEA

Stuart Payne, Director of HR and Supply Chain and Co-Chair Supply Chain and Exports Taskforce, OGA

From the Chief Executive

6 View from the top Dr Daniel Yergin, Vice Chairman, IHS Markit

10 News and events Updates from the EIC

14 The big question

We ask members: How can energy companies future-proof their businesses?

16 Special report: All change for the UK’s energy system

Jeremy Bowden on what our future energy system will look like COVER IMAGE: GALLERY STOCK

29 iPhone, iRobot, iCloud – should iWorry?

Professor Paul de Leeuw, Director, Oil and Gas Institute, Robert Gordon University

39 Decentralising the UK energy system Dr Craig Edgar, Chief Engineer – Project Development, SNC-Lavalin

Looking to 2035

NUCLEAR 42 Advancing nuclear through innovation

31 Local content in the GCC: What you need to know

Andrew Storer, Chief Executive Officer, Nuclear Advanced Manufacturing Research Centre

Energy Focus shines the spotlight on GCC local content plans

20 The GCC’s path to a diversified energy future

Nicholas Newman on GCC energy security plans

34 ADIPEC 2018

A region ripe with opportunities

50 My business

Paul Hennessey, atg UV Technology

The year of electricity

RENEWABLES 45 Repowering onshore wind

Fuelling the future

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

Editors Sairah Fawcitt +44(0)20 7880 6200 sairah.fawcitt@redactive.co.uk Edward White +44(0)20 7091 8638 edward.white@the-eic.com Account director Will Hurrell Production Rachel Young Senior designer Gary Hill Picture editor Akin Falope Content sub-editor Kate Bennett

Richard Vale, Energy Analyst – Power, Nuclear, Renewables, EIC

47 Making the move to a hydrogen economy Paul Dodds, Associate Professor in Energy Systems, University College London, and Nigel Holmes, Chief Executive, Scottish Hydrogen and Fuel Cell Association

Transforming nuclear

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

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Foreword Stuart Broadley CEO

From the Chief Executive: Our recently launched EIC Survive and Thrive Insight Report Volume II identifies growth strategies being used to beat the downturn, as well as the most pressing issues facing the industry In September we launched the second edition of our EIC Survive and Thrive Insight Report. Volume II once again charts the journeys of 26 EIC member companies, of all sizes and working across all energy sectors, as they emerged from the industry downturn – in many cases stronger than ever before. As well as identifying the growth strategies these organisations have put in place, the report also takes a look at the key issues facing the energy industry. Brexit is inescapable, but what does it actually mean for the supply chain? It seems most businesses are tired of trying to predict the future with regards to Brexit and are instead just waiting for the outcome, whatever it may be; the consequence is that most companies have given up trying to plan for it. Only five of the participating companies said they’d been impacted – positively or negatively – by Brexit, and just one was making contingency plans for when we leave the EU in March 2019. Borders are at the heart of Brexit negotiations, and another key finding was that companies shy away from crossing new ones and investing in new export markets during a downturn. Although the number of organisations turning to export as a growth strategy during the industry downturn has risen since last year, from 8% to 19%, export remains the least used Survive and Thrive strategy. The fact is, while potentially lucrative, exporting is a tough task. It requires an upfront investment of both cash and time, neither of which are palatable for a struggling business. Innovation leads the Survive and Thrive table for a second year running. In fact, the figures across the two studies are remarkably similar: innovation, including the use of

technology, was adopted by 73% of the participants in 2017, compared to 69% this year. Unlike exporting, innovative products and services produce a quick return on investment. When facing a crisis, time is obviously of the essence. Survive and Thrive Volume II is full of remarkable case studies describing how companies are getting back into the black, but only 42% of the participants scaled-up their tools and solutions. Why aren’t these firms maximising the hard work they’ve put into developing products and services that obviously work? It’s become apparent to me that in the UK, while we produce an abundance of incredible solutions for energy projects, we lack the infrastructure and financing mechanisms to encourage and enable businesses to scale them up. Although funding is an issue when it comes to scale-up, a pleasing finding of Survive and Thrive Volume II is that the number of companies receiving government support has increased, with 65% of this year’s respondents having benefitted from the services and funding offered by agencies such as the DIT, UKEF and SDI, compared to just 27% in 2017. Informing our members about the help available from government agencies is a big part of what we do at the EIC, and it’s good to see that our work is getting results. It’s very much a two-way street, though. The report includes more than 20 supply chain recommendations for government, covering the areas of Brexit, financial support and non-financial support – invaluable first-hand material that we’ve passed on to the government. Meeting with government and leveraging the EIC’s unique understanding of the UK supply chain is just a part of our Survive and Thrive II follow-up work, though. We’re

committed to expanding the UK supply chain’s horizons. To help it make the most of the world of opportunity that is out there, we’re launching the first ever Energy Export Conference in Aberdeen in June 2019 to enable UK companies to export their products and services to new international markets. This will be the largest event the EIC has ever organised and we’re extremely excited about it – we’ll be bringing 20 major energy project buyers to Aberdeen and aim to inspire hundreds of UK businesses to export for the first time. To make sure that companies of all shapes and sizes fulfil their potential, we’re also delighted to have just launched the Fit4Energy course in partnership with Robert Gordon University and Opportunity North East. This course will provide participants with all the tools they need to scale-up their operations. I’d like to finish by thanking all the companies who took part in Survive and Thrive Volume II for sharing their success stories with the rest of the industry. For those of our readers who haven’t done so already, please take the time to read it – it’s free to download for all. The growth strategies it contains are proven, having generated more than £357m in new orders and savings in one year alone, and could be working for your business, too.

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

www.the-eic.com | energyfocus

From the EIC Q&A Dr Daniel Yergin

View from the top Q&A: Dr Daniel Yergin Vice Chairman of IHS Markit

The GCC countries clearly need to futureproof their economies against cycles 6 energyfocus | www.the-eic.com

Q&A Dr Daniel Yergin: From the EIC

Global energy expert and Pulitzer Prize-winning author, Dr Daniel Yergin, talks to Energy Focus about the driving forces shaping the new energy future Shale was the last big GCC disrupter. What technology will hit next? Shale is the biggest energy innovation of this century. It has changed the balance in the world oil market, and it has changed global perspectives. We now have the Big Three: the US, Saudi Arabia and Russia. Not only has it been a very important contributor to the US’ economic performance, one other notable response, as a result of the impact on the market, is the new Vienna Alliance of OPEC and non-OPEC. Solar and wind are really innovations from the 1970s and 1980s, although it’s only in recent years that we have seen the big declines in costs. It’s a little hard to predict a disrupter until it disrupts. The triad of electric vehicles (EVs), ride-hailing and autonomous vehicles might be one, but that will take time. In IHS Markit’s Reinventing the Wheel study, we anticipate, based on our Rivalry scenario, that EVs will be 26% of a much larger auto fleet by 2050. The list of other technologies might include the impact of biology, carbon capture and use, and of course artificial intelligence. The GCC countries can anticipate an energy market that is more competitive and diverse, but also one in which oil demand continues to grow for a couple of decades and natural gas becomes more important while climate policies become over-arching. They clearly need to future-proof their economies against cycles.

IMAGES: ISTOCK

What do you think the future holds for US shale? The US has become a predominantly short cycle producer, highly responsive to prices, and the impact can be felt over a period of several months. While interest rate hikes are attracting a lot of attention, the rate of rise shouldn’t have too much of an impact on the US shale market. More significant are pipeline bottlenecks and the new activism by shareholders who are seeking a financial return and pushing oil producers to operate within their cash flows. What impact will sanction campaigns have? Sanctions have become a much more widely used foreign policy tool for the US. The impact

is already obvious with Iran and in the oil market. It’s affected Western participation in the Russian oil industry and has helped accelerate the closer relationship between Russia and China. The growing application of sanctions also reflects contention between the US Congress, which has been very active on sanctions, and the administration, as well as the split between Democrats and Republicans. What are the possible consequences of the ‘trade war’ between the US and China? There are deep-seated issues involved here. It’s certainly worrying to see a ‘trade war’ between the world’s two largest economies, and many are very concerned about the impact on the global economy and the way in which it makes other issues more difficult to handle. One of the positive effects of the shale revolution in the US has been that, instead of China and the US being rivals for energy supplies, they have become partners, with China becoming a big buyer of US oil and also of LNG. But now that positive development is being impacted by tariffs and changes in trade flows. The US is now among the world’s top crude oil producers. Is energy independence a realistic goal for the US? Energy independence has been a mantra of US politics ever since the 1970s, when it became clear that the US was not energy independent. But it was really about oil. Aside from oil, the US was self-sufficient in energy, allowing for some natural gas imports from Canada. Now its oil position has changed dramatically – a drop from 60% net imports a decade ago to an average of 15% so far this year. Also, because the ban on crude exports is coming to an end, the US is much more fully integrated into the global oil market. It is almost 18 months since President Trump withdrew from the Paris Climate Agreement. How do you think this has affected the US and the wider world? The withdrawal of the US from the Paris Agreement was not exactly popular with other governments around the

Shale is the biggest energy innovation of this century. It has changed the balance in the world oil market and global perspectives

Sanctions have helped accelerate the closer relationship between Russia and China

www.the-eic.com | energyfocus

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Q&A Dr Daniel Yergin: From the EIC

About Dr Daniel Yergin Dr Daniel Yergin is a highly respected authority on energy, economics and international politics, and is the Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil Money and Power and The Quest: Energy, Security, and the Remaking of the Modern World. Fortune called him ‘one of the planet’s foremost thinkers about energy and its implications’. He is Vice Chairman of IHS Markit, one of the leading information and advisory firms in the world, and founder of IHS Cambridge Energy Research Associates. He served on the US Secretary of Energy Advisory Board under Presidents Clinton, Bush and Obama, and he served on President Trump’s Strategic and Policy Forum. Dr Yergin holds a BA from Yale University and a PhD from Cambridge University, where he was a Marshall Scholar. Dr Yergin will receive a Lifetime Achievement Award in Abu Dhabi in November 2018.

world. Nevertheless, governments continue to apply climate policies, although in some countries these are also pollution policies. The Trump administration is seeking to roll back or modify some of the climate policies that were implemented under Obama. Many policies remain in place, the individual states continue to impose new mandates favouring renewables and strong incentives remain for EVs. The administration has put a renewed emphasis on carbon capture and use. At IHS Markit we have just completed a major study on energy innovation in the US, and the budget for R&D in the Department of Energy has gone up, not down. How will Europe meet its energy demand in the future? Europe is going to face the need for more natural gas imports because of the decline of domestic supplies, especially from the giant Groningen field, which has been a backbone of the European gas supply since the 1960s. Some of the growth will come from pipeline gas, which means Russian gas. But, as we argue in our report The Globalization of European Gas, the European market is being transformed by the growth of LNG supplies and much greater flexibility in the domestic pipeline system. The European gas market will become more competitive with the rise of LNG. Buyers will have options and choices. Price will be key. Has the industry learnt how to avoid boom-bust cycles? One of the lessons I took away from writing

both The Quest and The Prize is that cycles are an inherent feature of this commodity industry. Certainly boom and bust are not healthy, but cycles will continue. What particularly hit me when I looked back at The Prize is that whenever big new sources of oil supply come into the market, a price decline or collapse follows. The industry focus has changed from peak oil to energy transition. What does energy transition really mean? At our CERAWeek in Houston in October, I was struck by how many people talked about energy transition and how little agreement there is about what it means. The other week, I was at the annual meeting of the Oil and Gas Climate Initiative in New York City and it became clear to me that this lack of consensus arises from the fact that no one knows what the impact of technologies we see and may not yet see will be. Can big oil really be part of a low-carbon future? The global oil industry is determined to be part of that future, and it has formidable technological capabilities to bring to bear. Natural gas is part of that picture, but the industry is involving itself across the technology spectrum. What kinds of emerging or new technologies should we expect to see in the next five years? Could it be artificial intelligence? One thing this industry has is a lot of data. Maybe it will be the cohabitation between Silicon Valley and the global oil and gas industry. Might this technology shift the international balance of power? Energy is a very critical element in the global balance of power. That’s the subject of my new book, and that’s what I’m writing about now. There are many ramifications. What role will innovation play in future energy development? It’s central and always has been. However, the last five years has seen a renewed emphasis and more focus on collaboration with research institutions and the world of start-ups. What needs to be done now to deliver a balanced global future energy system? Investment. And it’s critical that the industry be engaged in the global dialogue, that it be a player, that it avoid being ‘late’ on issues. It needs to bring to that dialogue its realism about scale and execution and its responsibility to the world’s people, who depend on it for their wellbeing.

The European gas market is being transformed by the growth of LNG

Whenever big new sources of oil supply come into the market, a price decline or collapse follows

www.the-eic.com | energyfocus

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 members to regional energy markets and their major players.

Worldwide business support

IMAGES: ISTOCK/SHUTTERSTOCK

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 EICâ&#x20AC;&#x2122;s role is to help members maximise commercial opportunities worldwide. We do this in a variety of ways: 10 energyfocus | www.the-eic.com

Enabling members to expand into markets across the globe

Market insight

Helping members to track global energy projects and assets Our projects database, EICDataStream, provides extensive information on more than 8,500 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 operations and maintenance database, EICAssetMap, puts the details of every major UK and Norwegian energy asset at your fingertips.

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

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

Business intelligence Keeping members informed and raising their profile

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

Industry courses

Enhancing membersâ&#x20AC;&#x2122; 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.

From the EIC News and events

New EIC market intelligence reports out now

EIC reports bring you up to date with the latest project and contracting activity across all energy sectors, as well as provide guidance on how to do business around the world. The latest reports cover Egypt, India, the UK Continental Shelf and nuclear new build, with more coming all the time. Stay informed: www.the-eic.com/Publications/ MarketIntelligenceReports

REPNEW ORT N O AVA W S ILAB LE

EIC Survive and Thrive Volume II The second volume of our EIC Survive and Thrive Insight Report is out now, containing case studies detailing the growth strategies put in place by 26 EIC members companies of all sizes – from family-run SMEs to Tier 1 contractors – and covering all energy sectors: oil and gas, power, nuclear and renewables. We revisit the six strategies for growth during a downturn identified in Volume I (collaboration, diversification, export, innovation, optimisation and technology) to see if these are still relevant and whether their use is increasing or decreasing as well as focusing on two new business development strategies being put in place to tackle the tough times: digitalisation, and service and solutions. Survive and Thrive Volume II also takes a timely look at how the participating companies are preparing for Brexit. The solutions and best practices in the report are proven, having generated more than £357m in savings and new orders in one year alone for these 26 companies. They could – and should – be working for your business too. To download your copy of the EIC Survive & Thrive Insight Report Volume II please visit: www.the-eic.com/ Publications/MarketIntelligenceReports.aspx

www.the-eic.com | energyfocus

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From the EIC News and events

EVENTS COMING UP

EIC Renewable Energy Membership As the energy landscape continues to evolve, so too does the EIC. With the transition to a lower carbon world, the renewables sector has grown substantially, offering a wealth of opportunities to suppliers. Given the ever-increasing importance of this sector, we have launched a Renewable Energy Membership option for those companies focused on these markets. Our bespoke Renewable Energy Membership package provides market intelligence and access to key operators and

contractors from across the full range of renewable energy sectors, including wind, solar, biomass, tidal and wave, as well as transmission and storage projects. To find out how we can help you win work on renewables projects around the globe, please contact Amisha Patel, EIC Head of Power, Nuclear and Renewables: amisha.patel@the-eic.com

NE ME EICW B CAM TEGERSH ORY IP

EIC Connect Oil & Gas 2018

When: 27–28 November 2018 Where: Manchester Central Why attend? Our flagship supply chain event returns to Manchester for two days of conference sessions, project briefings and one-to-one appointments with more than 25 operators and contractors looking for tools, services and solutions to support their developments. To book your delegate place, reserve your stand or sponsor the event, please visit: www.the-eic.com/ EICConnect/OilGasManchester

Energy Exports Conference When: Aberdeen Exhibition and Conference Centre Where: 18–19 June 2019 Why attend? We’re excited to announce the launch of this major new energy conference and exhibition, supporting UK supply chain companies to export their products and services to international markets. Consisting of two conference programmes and an exhibition, the RT CE O inaugural event is P N EX ERE expected to attract F N CO at least 1,500 UK supply chain delegates

OR J A M EW N

and buyers from worldwide energy projects. The Global Opportunities Conference programme will host 20 speakers from major international operators and contractors responsible for some of the world’s largest

energy projects. More than US$150bn worth of project opportunities will be presented to delegates during the two days, with a specific focus on those supply chain gaps to be filled by UK content. An Inspiring Exports Conference session will introduce delegates to agencies who offer funding, tools and advice to enable companies of all sizes to export successfully. Partnering with the EIC on this event are the Oil and Gas Authority, the Department for International Trade, Oil & Gas UK, Opportunity North East, Scottish Development International, Scottish Enterprise and UK Export Finance. www.the-eic.com | energyfocus

From the EIC Members’ comment

The

BIG question

How can energy companies future-proof their businesses?

The energy landscape in the UK and the world as a whole is changing drastically as we continue to reduce our dependence on fossil fuels and a centralised grid. But how can companies stay ahead of the curve? Energy Focus puts the question to three members

Ford Garrard Managing Director of Europe, Middle East and Africa at Airswift As digitalisation takes hold of the energy sector, companies can adapt in a number of ways to future-proof their businesses. First, companies need to provide development opportunities to stop employees moving into fields including aerospace and defence to work with new technology, such as artificial intelligence and robotics. For example, the 2018 Global Energy Talent Index Report (GETI), the world’s largest energy recruitment and employment trends report, highlights that over a third of oil and gas and renewables professionals are happier due to training and development

14 energyfocus | www.the-eic.com

It’s about understanding the transferable nature of skills and backgrounds and taking a less rigid approach to recruitment opportunities. So, to retain top performers, it’s essential that companies empower them with the tools to take control of their careers. Second, digitalisation requires specialist tech talent, and attracting candidates from other industries will be vital. The renewables sector has done a good job of achieving this and there’s no reason other sub-sectors can’t do the same. According to GETI, cyber-

security and data analytics skills will be most in demand. For the energy industry, it’s about understanding the transferable nature of skills and backgrounds and taking a less rigid approach to recruitment. Finally, the future is flexible. Energy firms can’t drag their feet in embracing digitally-enabled working practices, such as remote or flexible working. Alongside providing new challenges for existing workers, this is another key aspect of the vibrant working environment that companies will need to create to retain and attract talent in the coming years.

Airswift is the global workforce services partner of choice for clients, contractors and candidates

Members’ comment: From the EIC

in the global energy, process and infrastructure sectors. With more than 35 years’ experience, it provides scalable workforce solutions including consultancy services, global mobility, managed solutions and talent acquisition.

Pieter Barendrecht Managing Director at PROCENTEC In a fast and continuously changing world, data is key. More important than the data itself, however, is the information it can provide the user with – giving it value to the customer will be essential. In an industry where mixed-architecture networks are becoming more common, whether in transition or as a natural progression, customer solutions should be able to manage this and translate the data in clear and concise dashboards. It should also give the user the necessary information to maintain full control over their networks and processes. Following on from that vision, PROCENTEC has launched its newest mobile solution, PROCENTEC Mercury. The software on this robust tablet has been specifically designed for troubleshooting, maintaining and monitoring Industrial Ethernet and PROFIBUS networks. To allow for easy and intuitive use, PROCENTEC has developed this software

While data is key, the information it provides is far more important – giving it value to the customer will be essential

together with end-users and other stakeholders from all over the world. The input from day-to-day operations from all types of industries were invaluable for the development of this versatile product. To help users in the industry we have also developed PROCENTEC Delphi, which is an integral part of PROCENTEC Mercury and provides insights into networks and how to improve them. In effect, we are sharing the knowledge we have gathered during the past 20 years to strengthen clients’ networks.

For more than 20 years, PROCENTEC has been providing solutions and products focused on PROFIBUS, PROFINET and Industrial Ethernet. It works closely with its clients to help them maintain control of, and improve, industrial networks. PROCENTEC is a certified competence and training centre as well as an accredited test laboratory.

John Bright Business Development Director at Proserv For the energy industry to progress, intelligent technologies are needed. However, there are challenges: reduction of operational costs, adherence to environmental standards and maintaining operational excellence. Due to the oil price drop, there has been a notable shift in operators’ mind-sets to focus more on repairing and upgrading existing assets (OPEX) rather than replacing with new CAPEX. Digitalisation is emerging as part of the answer, presenting the possibility to transform operations and create additional profits from existing capacity. It is bringing much-needed efficiencies, but also makes it possible for energy companies to develop powerful new capabilities. As the industry seeks new approaches that require alternative service models, adopting a life-of-asset view

Digitalisation can transform operations and create additional profits from existing capacity, bringing muchneeded efficiencies and new capabilities opens doors for range of new digital services, from which clients can benefit. Proserv provides AEGIS – Asset Enhancement Global Intelligence Solution – as a comprehensive solution that is designed to increase the return on assets in any stage of their lifecycle and grow with clients’ business needs. Benefits range from enhancing efficiency and planning at an early stage to achieving CAPEX optimisation with higher safety and quality standards. Asset condition monitoring through historical and real-time data lets operators improve maintenance and inspection regimes while keeping running costs to a minimum. Real-time data from wells will allow proactive rather than reactive decisions to be made on underperforming wells and other potentially high-cost issues. In other words, no costly breakdowns. Being able to monitor the life of asset and capturing data enables collaboration between different teams, sharing best practices and bridging the knowledge gap – increasing the productivity and agility of operational teams while lowering training costs.

Proserv is a global leader and a fresh alternative in the delivery of engineering and technical services to the energy, process and utility markets. Supporting clients for the lifecycle of their assets, it operates in 12 countries throughout 22 facilities, offering 24/7 local support services.

www.the-eic.com | energyfocus

Special report Energy security

All change

for the UK’s energy system

The energy system of the future won’t look like today’s, writes Jeremy Bowden

number of factors are leading to a rapid change in the UK energy landscape, including actions to reduce emissions, technological change and shifting geopolitics – Brexit being the most pressing of these. While there are supply concerns related to over-reliance on intermittent renewables, the capacity market has so far proved an adequate safeguard and higher renewable energy generation does increase self-sufficiency, offsetting declining domestic gas production. Moreover, according to many experts, the real solution to supply security is to be found in distributed energy, which lowers the call on centralised grids and may eventually link the transport and power sectors.

IMAGES: GETTY/ISTOCK

Does a rise in renewables mean a rise in risk? Security of supply is a very different issue today to what it was a few years ago. The diversity of generation and gas sources is far greater than at any time in the past, especially as centralised utility generation assets become augmented with smaller and more distributed sources of smart power and storage – something that is expected to accelerate in future as consumers seek to minimise costs. While there is some concern over the increasing size of the intermittent renewable

16 energyfocus | www.the-eic.com

component of the generating mix, regulator Ofgem’s view is that the UK has a resilient energy system: ‘National Grid (which is the system operator for gas and electricity) has the right levers in place to manage supply and demand,’ says an Ofgem spokesperson. ‘The government’s capacity market also gives an incentive for investment in the overall level of reliable electricity capacity needed. For example, last winter was the first winter that the capacity market was in full operation and the capacity margin (extra generation above demand) for electricity improved considerably.’ Aidan Dodgson, Renewables Manager at recruitment specialist Samuel Knight notes

Evolving energy markets are leading to a build-up of distributed generating assets such as on-site combined heat and power plants, solar and biomass, along with distributed storage

that the ever-growing rise in renewables was in fact a major enhancement to the country’s energy security by increasing domestic supply. ‘However, the focus on dispatchable energy and the ability for our system to handle the demand peaks of a cold winter’s day become more of a priority as the switch to renewables continues,’ he adds. Nevertheless, Ofgem has noted that secure supplies have been maintained without substantial intervention to balance supply and demand since 2005. Over recent years, National Grid has slightly overestimated peak winter demand, ‘so we have had too much in the capacity market reserve, pushing up costs to consumers unnecessarily,’ says the spokesperson. National Grid’s costs of balancing the electricity system increased by around £250m in 2016-17, to more than £1.1bn. While Ofgem acknowledges that pressure on cost is likely to increase as the system adjusts to more electricity produced by inflexible generators, it says improved forecasting should make such major jumps in costs less likely. ‘The capacity market should provide adequate capacity, but close monitoring is needed to balance cost and security for consumers.’ Looking at gas specifically, Ofgem does not expect a shortfall, despite the closure of Rough – the country’s largest storage facility. ‘National Grid’s analysis suggests that

Energy security: Special report

www.the-eic.com | energyfocus

Special report: Energy security

reserves for the coming winter will be enough to cope with all but the most extreme circumstances,’ says the spokesperson.

A shifting energy landscape

Distributed baseload

80% 50%

While energy security continues to be a national concern that leads to national plans for centralised reserves, some in the industry suggest that this approach is no longer appropriate, because evolving energy markets are leading to a build-up of distributed generating assets such as on-site combined heat and power plants, solar and biomass, along with distributed storage. These facilities will increasingly be the ones supplying the baseload power, with centralised grid sources only accessed as backup. By the time future large centralised plants, such as Hinkley Point C, and their new transmission lines are built, the demand for centralised generation may be lower. Much of the on-site capacity is built (and often owned and operated) by large utilities for their business customers. This, along with rooftop solar, is reducing demand on the grid, rather than being seen as additional supply to meet peak demand. Steven Redmayne of Yorkshire Energy, said that when these assets are used together in smart micro-grids, they can remove large chunks of demand from wider areas, leaving less need for centralised supply. ‘Blockchain could even be utilised for tracking generation and usage. Suddenly, the reality of micro-generation looks increasingly realistic,’ he says. ‘Distributed generation helps by further reducing our reliance on any one particular power source or individual plant,’ says Mr Dodgson. ‘There are further benefits relating to reducing losses when distributing electricity and to giving control to end users – both commercial and residential – so they can manage their own supply and demand. It also offers the possibility, when used with storage and a smart connected grid, for virtual power plants to be created, and for demand to be adjusted to match supply, using connected devices and IoT systems.’ Looking further ahead, if electric cars take off, the system could be augmented by a large volume of energy storage, which, along with grid storage, can also help balance supply and demand – reducing the impact of irregular renewable output. ‘Cars sit idle 95% of the time, so each battery could feed energy back

18 energyfocus | www.the-eic.com

The UK’s electricity system is changing dramatically

By 2050, the UK is tasked with achieving an 80% reduction in carbon emissions

In 2017, for the first time, more than 50% of all electricity consumed in the UK was generated from zero-carbon sources

British power generation saw its first coal-free day since the Industrial revolution on 21 April 2017

12.8GW

The UK’s installed solar capacity is 12.8GW; it could rise 25% by 2020

54%

Electric vehicles are on track to accelerate to 54% of new car sales by 2040

x50

In megawatt-hours, battery energy storage capacities installed in the UK by the end of 2022 will be 50 times what they were at the end of 2017

into the grid to compensate for surges in demand and ultimately charge back up as demand drops again,’ says Mr Redmayne. ‘All of this reduces our reliance on imported gas and oil, which improves the security of supply from a geopolitical standpoint.’

How secure will our energy supply be post-Brexit? At present, the UK only takes 4% of its energy supply from interconnections. As such, on leaving the EU, the risk to the UK’s energy security from a supply and demand perspective is ‘fairly minimal’, particularly with new generation coming online in the coming year, according to Mr Dodgson. ‘There may, however, be some impact on the cost of our energy, as currently we can import at times of low-cost production in Europe, and export when our demand is low.’ The EU has rules and regulations covering the allocation of capacity in the connectors, and the concern is that they will fall away when the UK leaves the EU, creating a gap. The European Commission has warned that interconnectors may not work. ‘That’s probably an unlikely scenario, but one we must address,’ says Paul Dawson, Head of Regulatory Affairs for RWE’s Supply and Trading division in a recent interview. ‘Having said that, we’ve only had the rules for three or four years… The interconnectors always worked okay before and currently work well with third parties.’ ‘The likeliest outcome is that we will maintain something very close to the current status quo… I don’t think there’s any scenario where you see the whole thing breaking from a security of supply perspective. I think the market will out, and if there is threat of that dislocation then we’ll see that reflected in prices, and that will bring forward a supply response.’ However, the UK will need special agreements to remain in the Emission Trading Scheme (ETS) – the EU carbon pricing system – although the UK already has its own £18/t CO2 minimum price in place. Similarly, other areas where there is currently cooperation under the EU umbrella will also require deals. This includes the Balancing and Settlement Code (BSC) (under the TransEuropean Replacement Reserves Exchange (TERRE)), where Ofgem has recently approved a package of reforms in preparation for a new Europe-wide balancing platform.

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Feature Middle East

The GCCâ&#x20AC;&#x2122;s path to a

DIVERSIFIED ENERGY FUTURE Nicholas Newman looks at how GCC states are facing up to the challenge of combining energy diversity with security

Renewable energy is set to grow six-fold by 2020

20 energyfocus | www.the-eic.com

Middle East: Feature

(Left/Below) Miraah Solar Thermal Project, Oman

IMAGES: GETTY/GLASSPOINT SOLAR OMAN

ike the rest of the world, the Gulf Cooperation Council (GCC) countries are experiencing an energy transition. This region, a leading crude oil and gas producer, is changing the way it exploits this resource while taking an increasing interest in other energy sources. This interest includes investment in wind, solar and nuclear power generation, in order to meet rapidly increasing demand from growing populations and economic development. This feature looks at the ongoing developments of the regionâ&#x20AC;&#x2122;s states as they aim to apply science and artificial

intelligence (AI) to upstream oil activities; diversify power generation away from oil to nuclear, solar and wind; and encourage a shift away from petrol combustion engines to electric cars, and from heavy fuel oil and diesel to liquid natural gas in shipping.

Fossil fuels In the oil and gas sector, investment in research and development is geared towards increasing exploration success, as well as improving the efficiency and effectiveness of upstream operations. Saudi Aramco has invested heavily in AI to process and analyse large unstructured datasets generated by

seismic studies, and uses deep-learning processes to determine rock types and geological features for better well placement and field development. The potential of AI to increase efficiency of upstream operations is also being trialled. AI can be used to analyse well and drilling rig performance, troubleshoot under-performing fields, prescribe corrective actions, and deploy and guide robots to carry out maintenance tasks. The national oil companies are also moving down the hydrocarbon chain. Saudi Aramco is expanding its refineries at Jubail, while the UAEâ&#x20AC;&#x2122;s ADNOC is creating a refinery complex at Ruwais. Both these

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Middle East: Feature

US$25bn The Barakah nuclear energy plant in the UAE – a US$25bn joint public and private venture – is expected to be online in late 2019

the first 13MW facility was launched in January 2012. It is worth noting that desert dust storms are a key obstacle to solar panel efficiency in this hot and arid region. If dust is left in place for more than a day, it adheres to the panels, causing a daily baseline yield loss of 0.4% to 0.8% and energy yield losses of 60% during and after sandstorms. NOMADD’s robot-on-rails, which automatically brushes the sand from solar panels, is still in the development stage. The Gulf states have cooperated to construct a power interconnector linking their individual electricity markets, thus achieving greater energy security, economies of scale and the ability to trade power across the region. Now there are plans to expand the network to neighbouring countries.

Transportation

IMAGES: ISTOCK/ EMIRATES NUCLEAR ENERGY CORPORATION

facilities are designed to produce highdemand products such as jet fuel, heating oil and feedstocks for the region’s petrochemical industries. Natural gas is often used to create steam to inject into oil wells, a process that improves oil recovery from mature fields and depleted wells. Oil-rich but gas-poor, Oman is hoping that solar power could replace gas in the recovery of oil and power generation. Shell is currently testing solar steam generators, produced by GlassPoint Solar, to recover oil from depleted fields. The use of solar steam generators can reduce an oilfield’s natural gas consumption by up to 80%.

Power generation The rapid growth in demand for electricity and water, combined with the need to conserve oil and gas export revenues, have increased interest in nuclear and renewable power. For example, the Barakah nuclear energy plant in the UAE – a US$25bn joint public and private venture – is expected to be online in late 2019. Saudi Arabia also aims to build 16 nuclear reactors in order to produce 17GW, or 15% of its power needs, by 2040 – at an estimated cost of US$80bn.

However, it is renewable energy that is set to grow six-fold by 2020. Oman has several solar projects on the go, including rooftop solar panels, and Bahrain, the smallest GCC country, is aiming for renewables to contribute 5% of its electricity by 2020. Qatar, the world’s biggest exporter of liquid natural gas, aims to have 1.8GW of solar power generation by 2020, rising to 10GW by 2030. Kuwait, facing a tripling of domestic energy demand by 2030, expects 15% of its electricity to come from solar and wind. Even Saudi Arabia, the world’s largest oil exporter, aims to build 3.45GW of solar and wind plants by 2020, and expects to have 9.5GW of renewables contributing 10% of its generating capacity by 2023. The UAE, meanwhile, aims for leadership in renewable energy, and wants to become a global hub by mid-century. The signing ceremony for the fourth phase of Dubai’s solar park in September launched the world’s largest single-site 700MW concentrated solar power project. The second phase for the 200MW was completed in March, and

Modes of transport on both land and sea are also undergoing change. Onshore, there is growing interest to move away from diesel and oil combustion engines and towards a cleaner energy alternative, namely electric cars. Ford, Nissan and Tesla electric cars and charging stations can be seen across the region, including in Saudi Arabia, the UAE and Kuwait, and the Saudi Sovereign Wealth Fund is investing US$1bn in an electric carmaker to compete with Tesla and other manufacturers. The UAE is to replace government cars with eco-friendly imported cars and has introduced attractive incentives for the public to follow suite, further burnishing its green credentials. Dubai, for instance, aims to have 32,000 electric cars by 2020, rising to 42,000 by 2030 – 10% of its vehicle fleet. To comply with the International Maritime Organisation’s global 0.5% sulphur fuel standards, coming into operation in January 2020, the region’s ship owners are looking to use of cleaner liquefied natural gas in place of heavy fuel oil and diesel for their fleets and container ship offshore support vessels. Total is developing new bunkering services for ships at the Omani port of Sohar. In sum, the GCC region is actively taking part in the energy transition from fossil fuels to cleaner gas, nuclear and renewable energy, as well as the application of AI to its crown jewel sector – oil and gas. www.the-eic.com | energyfocus

In from the cold: overcoming the challenges of harsh environments By Mike Semens-Flanagan, Chief Technology Ofﬁcer, IMI Critical

nergy and industrial processes have never been so high, so deep, so cold or so hot – increasing the already significant challenges of processing volatile materials and fluids safely, cleanly, reliably and efficiently. The ZapSib-2 facility that is being constructed at Tobolsk Petrochemical Complex in western Siberia illustrates the challenges perfectly. The new facility, which is part of CJSC Sibur Holding’s largest production complex, will be the biggest integrated complex for the production of polymers in Russia when it comes online in a few years time. The complex will integrate a steam cracker for the production of ethylene, propylene and butanebutylene fraction (BBF), and will also include polyethylene units and a polypropylene unit. The facility, is thought to be the biggest in industry history, and IMI Critical is one of over 320 companies from 23 countries that are providing services and materials to it. As well as meeting the challenges of the extreme processing environment for polymers, which includes a highly corrosive atmosphere, suppliers have the additional challenge of ensuring their equipment can withstand the stress of extreme climate conditions, in this case, the potential for temperatures to fall as low as -52°C. As a world-leading provider of critical flow control solutions, with decades of critical service experience, IMI Critical was a natural choice of partner for a project of this kind.

Our products are at the heart of complex energy and production processes, controlling the ﬂow of steam, gas and liquids in harsh environments. They are designed to withstand temperature and pressure extremes, as well as intensely abrasive or corrosive cyclical operations. For the ZapSib-2 facility, two IMI Critical companies were chosen and worked together to produce anti-surge valves and actuators. IMI CCI provided the valves and IMI STI the actuators. The anti-surge valves ranged from 500mm to 1050mm, and the actuators ranged in size and stroke from ND200 with a stroke of 70mm, to an ND500 with a stroke of 300mm. The particular challenge was to tailor the actuators to the speciﬁc requirements of the Tobolsk complex, namely a highly corrosive atmosphere, and very low temperatures. This meant that most components for the actuators had to be made in grade 316 stainless steel, whose composition includes molybdenum, which gives it higher resistance to corrosion in harsh environments.

More challenging was ensuring the actuators could work in a very low ambient temperature of -52°C without losing performance. Actuators are typically required Braving arctic conditions in northern Siberia to work in Another IMI Critical company was contracted to temperatures supply valves and actuators for the Yamal LNG of between project. This is one of the largest industrial projects -20°C to in the Arctic to develop the huge South Tambey +70°C, natural gas ﬁeld, where reserves are estimated at although more than 1 trillion cubic metres. IMI STI, our Based in the estuary of the Ob River in Northern actuation Siberia, which is ice-bound for nine months of the specialists, year, it’s a highly challenging environment for LNG has previously production. supplied Experts from IMI Orton were able to demonstrate actuators the technical advantages of the IMI Orton TRI-X to operate solution in this remote environment. Its replaceable in -60°C. In seat and seal ring on the valve’s body and disc addition, the respectively allow the sealing elements to be stroking times replaced locally if necessary, an important factor on speciﬁed a remote site. were that all actuators

must move within two seconds in opening and within three seconds in closing, without overshoots, and while also guaranteeing the high dynamic performances required by antisurge applications. The solution developed by IMI STI, working with its technical and R&D departments, was to design a bespoke cabinet, also constructed in grade 316 stainless steel, to house the actuators – a first for IMI STI. The cabinet was designed to contain heater cables, to maintain a higher temperature inside. In addition, the design of the actuators incorporated a number of other common features to cope with the combination of a corrosive atmosphere and very low temperatures. The vent port faces inwards to avoid water entry or ice buildup or formation. All the accessories were manufactured in grade 316 stainless steel, as was the FasTrak® positioner which is TR CU certified for -55°C. The actuators were manufactured in IMI STI’s first class facilities in Italy, which produces over 7,000 actuators each year. They were tested in-house using a purpose-built test sequence to simulate their performance in the harsh conditions they are designed for. With correct use and periodic maintenance, the actuators are expected to have a lifespan of up to 20 years. By bringing a half century of know-how, design capability, experience and innovation to bear, IMI STI was able to design bespoke equipment to withstand the harsh environment of the ZapSib-2 facility – delivering a safe, reliable and durable solution.

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Oil and Gas UK

s we approach the final quarter of 2018 with cautious optimism, it is crucial that complacency does not set in, and that we do not lose the hard-fought efficiencies that are helping the North Sea compete for investment. There are many positive signs; by September 2018 the Oil and Gas Authority (OGA) had approved a greater number of projects than in the whole of 2017, indicating billions of pounds of potential investment.

The big opportunity Looking to the future, the UK’s offshore oil and gas industry can continue to make a vital contribution to the economy for many decades through the shared ambition – Vision 2035 – which offers an exciting opportunity to enhance production rates by maximising economic recovery of our oil and gas resources (MER UK) and doubling the service sector’s share of exports by 2035. Based on current production profiles and export share, our industry stands to generate just over £600bn in revenue by 2035. This number grows to £900bn if the dual ambitions of MER UK and export growth can be achieved. For the 282,000 people who currently work either directly or indirectly in our industry, this represents a great opportunity. The OGA forecasts for production show an additional 3.7bn barrels of oil equivalent (boe), compared to 2015 forecasts, which translates to being around halfway to the Vision 2035 target – a fantastic achievement in just three years. The Supply Chain and Exports MER Taskforce is working to address the exports challenge and, as a result, it is the core focus of the offshore oil and gas sector deal currently being negotiated with UK ministers.

IMAGES: GETTY

Positioning for the energy transition The sector deal is mainly centred around the service sector, and proposes joint investment and commitment between industry and government in three ‘centres of excellence’ (decommissioning, underwater engineering, transformational technology). It builds on the model of the Oil and Gas Technology Centre. The deal is underpinned with five focus areas – skills; carbon capture and storage; efficiency and productivity; exports; and culture and

26 energyfocus | www.the-eic.com

Working towards

Vision 2035

Oil and gas has a vital role in providing energy now and in decades to come. But it must demonstrate real value and continue to change and adapt, says Stuart Payne at the Oil and Gas Authority (OGA)

UK: Oil and Gas

behaviours – all of which have been developed with industry experts. Central to the sector deal is an understanding of the unique and valuable role our industry can play in the energy transition, supporting both the UK and Scottish governments’ commitment to a lower-carbon future. The current relatively high oil price provides positive cashflow, and we are hopeful that operators will reinvest funds into exploration, extending the life of their assets and ensuring their supply chain relationships are fair and sustainable. We encourage supply chain partners to continue to work on efficiencies, innovation and cost control, and to maintain the discipline that has made such a difference to the economics of projects and fields across the UKCS. During the past three years, the OGA has tracked hundreds of millions of barrels’ worth of future production that has been unlocked using innovative technology. We are seeing a drive towards transformational approaches through the Oil and Gas Technology Centre and others, and there is a

sense that industry is embracing new technologies such as digital. The courage for companies to be the ‘first mover’ in new technologies is a vital component of achieving breakthroughs in this area.

Ensuring ongoing competitiveness For our part, as the regulator, we must ensure we are doing all we can to regulate, promote and influence the industry. The OGA continues to have a strong focus on stewardship and clear expectations of industry, in our view, the response has been positive: production has increased for a third year in a row, production efficiency increased for a fifth consecutive year and cost efficiency efforts continue. An example of where we are innovating to support MER UK is the introduction of Supply Chain Action Plans (SCAPs), which are now required for projects, whether new field developments or decommissioning. These ensure operators are partnering with the service sector to drive good project delivery. One of the key audiences for our ‘promote’ agenda is the international investor community, where there is strong competition for capital. Work continues in this area to demonstrate that the UK is a very competitive place to invest from a fiscal point of view – with pay back periods, rates of return and profit-per-barrel more attractive in the UK than competing locations. The UK recently saw its 2,500th exploration and appraisal well successfully drilled, and it will shortly be into production. However, levels of exploration drilling need to increase, as it is the lifeblood of any basin. We were pleased to see the success of the recent 30th offshore licensing round, with

The UK’s offshore oil and gas industry can continue to make a vital contribution to the economy for many decades through the shared ambition of Vision 2035

Safeguarding the supply chain Oil and gas companies are now required to have an approved SCAP in place as part of any field development plan (FDP) or decommissioning plan (DP) approval. The purpose of a SCAP is to facilitate and evidence that operators are deriving maximum values from UKCS project activity, including a reduction in capital expenditure and to support an operator’s demonstration that they are well positioned to deliver on the FDP or DP that has been submitted. SCAPs are reviewed based on four key criteria, which were designed by an industry working group: engagement, trust, innovation and quality. Through showing how they will ensure an effective working relationship with their suppliers, the operators can use the SCAP as a key supportive project management tool, integrated into their overall contracting strategy.

123 licences awarded in more than 229 blocks or part-blocks to 61 companies.

Realising the vision Government, regulators and industry are all aware of the challenges that remain, which risk our ability to achieve the goals set out in Vision 2035. Some of these challenges involve greater focus on behaviours and culture change, some require greater use of innovation and technology and some will depend on us all not doing things that we have done in the past. At a recent meeting with a cross-party group of Scottish politicians in Edinburgh, it was agreed that one real risk to our industry would be returning to old behaviours around ‘boom and bust’, with escalating costs and short-sighted actions that generate cash in the immediate term but ultimately erode the competitiveness and attractiveness of the UK as a place to invest. We have all seen, during the past few difficult years, this sector’s willingness to adapt, to learn and to be resilient. It is our firm belief that, through harnessing the leadership and delivery shown during this period, our industry will be able to face up to the next set of challenges – and thrive. By Stuart Payne, Director of HR and Supply Chain and Co-Chair Supply Chain and Exports Taskforce, OGA www.the-eic.com | energyfocus

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Oil and Gas Technology

iPhone, iRobot, iCloud –

should Worry? As digitalisation re-shapes UK oil and gas, assessing changing skills requirements will be critical to help future-proof the sector, writes Paul de Leeuw

IMAGES: SCIENCE PHOTO LIBRARY

verywhere you look, change is happening: in politics, in business and in the way we all live and work. In recent years, virtually every industrial sector around the world has experienced rapid and sometimes devastating change. Technology and new ways of working have transformed industries and business: Amazon has changed the retail sector; Uber and Lyft are changing the personal transport business; and Airbnb is materially impacting the hospitality industry. Similar change is inevitable across the energy sector. Technology, innovation and the transition to a lower carbon future will reshape the oil and gas industry during the next few decades. Against this backdrop, we will need an increasingly adaptable, flexible and technology-enabled workforce, with new high-tech skills becoming part of day-to-day life in the energy sector. Energy skills body OPITO, in partnership with Robert Gordon University (RGU), recently published the UK Workforce Dynamics Review. This highlights the changing skills and capability requirements for the UK oil and gas industry during the next 20 years. In the UK alone, more than 40,000 new people are likely to be required to join the

industry in that time, with 10,000 of those needing to be recruited for technology and innovation roles that do not currently exist.

Digital upskilling Although traditional disciplines such as subsurface, operations and projects continue to be key, there will also be significant new demand for expertise in areas such as low carbon energy, data science, data analytics, artificial intelligence (AI), machine learning, robotics, material science, change management, remote operations and cybersecurity. In addition, a substantial proportion of the workforce will need to be upskilled, providing a key role for training providers, vocational institutes and universities to help futureproof the skills and capabilities in the sector. It’s not just the skills base that will change – business models are likely to change, too. It is expected that the industry will see an increased separation between the provision of expertise and actual execution. Many of the tasks currently done on location will be managed from onshore centres in the future, with the execution happening on-site by multi-skilled operatives. This is already happening to some extent through the application of remote operation centres. It is

40,000 The UK oil and gas industry will need to recruit

people over the next 20 years, including 10,000 in new posts such as data science and robotics

expected, however, that this will accelerate significantly during the next decade. Specifically, the impact of AI, machine learning and predictive algorithms will have the potential to transform the sector. The combination of real-time data analytics, AI and cognitive reasoning will shift insight and decision-making deeper into organisations, which will likely require a significant upskilling for supervisory, management and leadership positions.

A new way of working The application of new technology will also enable far more adaptable and agile work environments, in stark contrast to traditional, matrix-type organisations. Teams will need to be far more flexible and nimble compared to what we see today and will be formed around revenue, value or customer-specific opportunities. When a task is completed, such teams can easily be dissolved and reconstituted around future value or revenue prospects. Although many will benefit from the opportunities created by the next industrial revolution, it has the potential to be disruptive for others. Going forward, equipping and upskilling people to adjust to the rapidly changing environment will likely be one of the top priorities for the energy sector. History has shown that technology continuously changes the way we work, but also that after every industrial revolution, more jobs are created – even if many of the new jobs will be in different disciplines or practice areas. This technology revolution will be no exception. By Professor Paul de Leeuw, Director, Oil and Gas Institute, Robert Gordon University www.the-eic.com | energyfocus

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Oil and Gas Local content

Local content in the GCC: What you need to know National oil companies are fuelling economic interests by adopting local content requirements. But what does this mean for your business?

IMAGES: REUTERS/GETTY

etermined to maximise the gains of foreign direct investment, many resourcerich countries in the Middle East are increasingly introducing local content requirements into their legal framework through legislation, regulations, guidelines, industry contracts and bidding practices. The intention is to encourage foreign companies to participate more actively in the local economy, train and hire workers, and build local supplier networks for goods and services. In response, companies must rethink their approach to local content if they are to achieve lower costs, access further development programmes and maintain and improve their relationships with host governments. As national oil companies look to fuel the economic development of their countries, we look at the local content plans of ADNOC, Saudi Aramco and Kuwait Petroleum Corporation.

ADNOC As part of its role in the development of prosperity in the UAE, the Abu Dhabi National Oil Company (ADNOC) launched and adopted the In-Country Value (ICV) programme in February 2018. A procurement-led initiative, it aims to foster local content by encouraging local supplier selection, localisation of critical functionalities in the oil and gas industry and development of UAE nationals – especially SMEs. All suppliers will be asked to provide an ICV certificate when participating in tenders, however, while the ICV certification is not mandatory, failing to have one will result in a 0% rating. This does not preclude suppliers from participating in a tender, but will have an impact on their final evaluation score. Suppliers of goods are issued certificates based on local value-add activities such as local manufacture, investment and employment levels. Suppliers of services are issued certificates based on levels of

investment, in-country value of goods procured, subcontractors engaged and employment levels. Requirements for ICV certification are defined and calculated according to certain formulas accounting for Emiratisation targets and local value-add. All suppliers are encouraged to undertake an ICV evaluation and certification process to obtain the ICV certification from the ADNOC appointed certifying bodies. Full details of ICV process, evaluation and accredited certifying bodies are available on the ADNOC website: www.adnoc.ae/en/ incountry-value

Saudi Aramco In December 2015, the world’s largest oil company – Saudi Aramco – launched the In Kingdom Total Value Add (IKTVA) programme. IKTVA supports the Kingdom’s Vision 2030 programme, which aims to localise 70% of procurement and services by 2021. www.the-eic.com | energyfocus

Oil and Gas: Local content

Companies must rethink their approach to local content if they are to achieve lower costs, access further development programmes and maintain and improve their relationships with host governments IKTVA promotes local production and aims to increase employment for Saudi nationals, boost local supply chain sourcing and increase the country’s exports. Its objective is to encourage foreign companies to consider long-term business ventures in Saudi Arabia, share expertise and consider the Kingdom as a manufacturing and servicing hub. It should also be seen as a stepping-stone into the wider GCC and MENA region in the future. A steady flow of foreign companies are already shifting their base of operations to Saudi Arabia. IKTVA provides a level playing field for suppliers through consistency, transparency in application and process. The most effective business approach for companies is to include their IKTVA content in their corporate business plan.

32 energyfocus | www.the-eic.com

Looking ahead, IKTVA is an essential requirement for both local and international businesses to work with Saudi Aramco. There is financial support and investment available through the Saudi government and Saudi Aramco to incentivise companies on this journey. UK Export Finance (UKEF) is also a key tool offered by the British government to support work with Saudi Aramco. The British Trade Office in the Eastern Province is ready to assist UK companies who wish to pursue opportunities in Saudi Arabia, together with the British Embassy Riyadh and the Consulate General in Jeddah. Full details of how to participate in the IKTVA can be found: www.iktva.sa

Kuwait Petroleum Corporation Kuwait Petroleum Corporation (KPC) adopted a holistic approach in its local content 2030 strategy and this approach is being further developed as part of KPC’s new 2040 corporate strategy. In line with government plans, KPC aims to: Leverage refining and petrochemical businesses to deliver downstream manufacturing opportunities to the private sector Increase local private sector share in KPC spending and achieve a minimum of 30% for local suppliers and contractors contributions in capital projects spending Enhance private sector participation in KPC through existing and future activities/investments Any new supplier who wishes to get prequalified or participate in tenders must

register on the eSourcing portals: Kuwait Oil Company for upstream operations: https://ebusiness.kockw.com/ Registration/RegistrationDetails ?regType=APPLY Kuwait National Petroleum Company for downstream operations: https://esourcing. knpc.com/esop/kuw-kpc-host/public/web/ login.html UKEF is engaged with KPC with opportunities for UK SMEs. Shell and BP are the only international oil companies operating in Kuwait, having won the latest enhanced technical service agreements, while Petrofac and Wood are also active as engineering, procurement and construction and project management consultancy contractors, respectively. Worley Parson, Flour and Technip do much of their Kuwait-based work from the UK.

Looking to do business? The Department for International Trade (DIT) works closely with different government bodies and corporate entities to ensure that UK companies are able to establish their presence, invest and conduct business smoothly. Ensuring success will involve tailoring the local content programme to your company’s and the country’s specific needs and capabilities, close collaboration between the partners from the outset, an understanding of each other’s priorities and goals, and the willingness to remain flexible as to how to meet them.

UAE

Contact: Imad Arafat, Trade and Investment Adviser – Oil & Gas Location: DIT British Embassy, Abu Dhabi Email: imad.arafat@fco.gov.uk

Saudi Arabia

Contact: Khalid Darazi, Senior Trade and Investment Adviser – Oil and Gas, Energy, Petrochemicals Location: DIT British Trade Office, Al Khobar Email: khalid.darazi@fco.gov.uk

Kuwait

Contact: Alan Menezes, Senior Trade Adviser – Oil and Gas, Renewables Location: DIT British Embassy, Kuwait Email: Alan.Menezes@fco.gov.uk

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Oil and Gas Middle East

ACTIVITY TO WATCH ACROSS THE REGION

ADIPEC 2018

A region ripe with opportunities Amid energy diversification, investment in oil and gas projects across the Middle East remains strong. For UK companies looking to do business in the region, ADIPEC is the place to be

et to welcome more than 110,000 visitors during 12–15 November, the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) stands as one of the world’s top energy events, and is the largest in the Middle East. Now celebrating its 21st edition, ADIPEC has long been recognised as the go-to hub for meeting key players with real buying power in the Middle East, delivering real business opportunities. Around 82% of attendees are decision makers, purchasers or influencers, and this year, more than US$10bn of business is expected to be concluded during the exhibition. Across the region, the speed of the transition to a new energy mix is accelerating and renewable energy output is forecasted to triple by 2035. However, the Middle East continues to attract huge capital-intensive hydrocarbon investments. In Gulf Cooperation Council (GCC) states alone, around US$330bn has already been committed to 192 oil and gas projects, which will move forward between now and 2026.

Doing business in the GCC As the UK develops its first independent trade policy for more than 40 years, the opportunity for UK firms to trade with GCC markets has never been greater. When assessing whether or not to do business in the Middle East, companies should be encouraged by the vast appetite for British goods and services in the region, as well as prospects for a free trade agreement and reaffirmed bilateral ties with many GCC countries. Exporting to the GCC can present exciting challenges and rewards. But as government regulations vary – each state has its own unique requirements – it is vital to know what the export rules are for each one. The article on page 31 spotlights the local content requirements of three national oil companies – ADNOC, Saudi Aramco and Kuwait Petroleum Corporation. Having a physical presence is very important when establishing a business, and a high level of business loyalty, as well as a flexible, long-term approach, is essential for success.

34 energyfocus | www.the-eic.com

SAUDI ARABIA

While its much-publicised IPO has been delayed, Saudi Aramco continues to invest across all sectors, the largest being the US$15bn spend on developing the Marjan field plus the upgrade of interconnecting pipelines from the Haradh and Hawiyah gas plants. On the power side, there have been announcements concerning a possible nuclear power plant and investments in renewable projects covering the wind and solar sectors.

KUWAIT

With the Al-Zour Refinery approaching completion, the focus is now on developing a new petrochemical complex alongside the refinery. Total costs are expected to be in the region of US$7bn. In the upstream sector, Kuwait Oil Company intends to develop oil fields in the that require the very latest EOR technologies in the northern part of the country. The planned 1.5GW Al Khairan power and desalination plant is at the pre-qualification stage.

Middle East: Oil and Gas

BAHRAIN

Earlier this year the country announced a very significant oil and gas find in the Khaleej Al Bahrain Basin and plans to have this new field onstream by 2023. The Saudi Arabia to Sitra refinery pipeline upgrade has been completed and some major contracts for the Sitra upgrade project have been awarded.

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 all the 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

ADNOC has been implementing its In-Country Value initiative, applying it to recent contract awards. In addition, it has announced plans to invest US$46bn in its downstream sector, focusing on developing Ruwais as a world-leading petrochemical hub. In Dubai, DEWA is carrying out several solar projects.

Decades of experience in one of the world’s harshest and most demanding offshore environments, 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

BMT International, Clarkson Research Services, Completion Products, Glacier Energy Services, Goodwin International, Mott McDonald, Penspen, Total Waste Management Alliance, Westley Group

Hazardous area and safety equipment

Abacus Lighting, ABTECH Limited, BEKA Associates, BS & B Safety Systems, Carrington Textiles, Crowcon Detection Instruments, E2S, Elmac Technologies, HESCO, Hughes Safety Showers, Knowsley SK, Moflash Signalling, Orga M & C, Raytec, Spectrum Industrial, Wolf Safety

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Instrumentation and control

Advanced Sensors, Delta Controls, EXHEAT, Icenta Controls, IMI Precision Engineering, Oliver Valves, Petrotech, Stewart Buchanan Gauges

Pipelines and piping materials

Garlock Pipeline Technologies, Lokring Northern UK, Online Electronics

Logistics and load handling

OMAN

There have been two significant developments in Oman. First, BP’s completion of the Khazzan gas field, immediately followed by a final investment decision to launch phase II, which has an estimated CAPEX of US$4bn. Second, progress continues to be made at Duqm, where the whole port is being developed along with a new grassroots refinery and associated petrochemical and power complex, carrying an investment of some US$5bn.

QATAR

Qatar remains the world’s number one LNG exporter with a recently announced programme of optimisation and debottlenecking of existing plants. The lifting of the North Field moratorium has attracted renewed international interest. The country recently announced a US$2bn programme to enhance its transmission and distribution network.

ACE Winches, Cargostore Worldwide Trading, Safelift Offshore

Specialist technology providers

BiSN Oil Tools, Churchill Drilling Tools, CMP Products, Cutting & Wear Resistant Developments, Evoqua Water Technology, Flexitallic, HMT, HTL Group, Hughes Pumps, Innospec, Intervention Rentals, James Fisher Subsea Excavation, Norbar Torque Tools, Oxifree, Pharos Marine Automatic Power, Process Vision, Springtech, Transvac Systems, Whitford

www.the-eic.com | energyfocus

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Power Electricity

lectricity is an essential part of the global energy system, and it is poised to play an even larger role in our economies and societies as it becomes the fuel of choice to meet energy demand. Between 1990 and 2016, global electricity demand doubled, growing faster than all other fuels. The increasing role of electricity in our economies has been accompanied by several profound transformations.

IMAGES: GETTY

Electrification to increase Since 2016, global investment in electricity has surpassed that of oil and gas, with variable renewables such as wind and solar increasing within the fuel mix. Renewables accounted for a quarter of global electricity generation in 2017 – second only to coal, and higher than gas for the third successive year. Renewables such as wind and solar PV are becoming the cheapest sources of electricity in many markets, providing new opportunities for cleaner power systems. With a larger share of renewables, however, the key challenge for reliable and affordable power systems becomes ensuring investment in flexibility. Increasing digitalisation and cheaper forms of storage are also redefining traditional electricity systems. In this ongoing transition, power sector stakeholders need to navigate key uncertainties and challenges. What is the role of traditional utility players as new business models are created, particularly as digitalisation blurs the line between supply and demand? How can the grid become more flexible as more renewable generation sources are connected? How can policymakers ensure electricity security? In the main scenario of the IEA’s World Energy Outlook,

60%

Electricity demand is projected to increase by 60% to 2040 electricity demand is projected to increase by 60% to 2040 – an increase larger than any other ‘fuel’1 – and will make up a quarter of final energy demand. Economic growth and a growing middle class, especially in Asia, will continue to drive up electricity demand as the 1.1 billion people currently without electricity progressively gain access to it. New sources of electricity demand growth are emerging, too, such as the electrification of mobility and heating, the growth of connected devices and the pervasive digitalisation of modern economies. Developing economies are expected to contribute around 90% of electricity demand growth to 2040. China and India emerge as giant power systems: China is set to add the equivalent of the US’s power system today during the next two decades, while India is the fastest-growing electricity market as it

aims to achieve universal access to electricity by 2025. The technology choices made within these two power systems will have large implications for global manufacturers, technology costs and local and global emissions.

Supporting the transition As the power system transforms, new challenges arise. Ageing transmission and distribution assets, as well as the nuclear fleet in advanced economies, pose urgent electricity security concerns. Integrating the growing levels of variable renewables raises new issues for electricity grid operators around the world. The use of digital technologies improves efficiency and facilitates the flexible operation of power systems, but creates potential new vulnerabilities that need to be addressed, such as cybersecurity and data privacy. The IEA is providing analysis and expertise to support governments around the world to design more secure, affordable and clean power systems. This is why 2018 is the year of electricity at the IEA, and its flagship publication, the World Energy Outlook2, will feature a special focus on electricity for the first time, looking at electricity in depth. The key message? The future is electrifying.

Fuel of the future

By Laura Cozzi, Head of Energy Demand Outlook Division, IEA References: 1 The New Policies Scenario is the central scenario of the IEA’s World Energy Outlook. It reflects policies that are in place today, as well as the likely effects of announced policy intentions and targets. 2 To be published on 13 November 2018. For more information, please visit www.iea.org/ weo

Electricity will be the fastest growing form of energy in the future, says Laura Cozzi at the International Energy Agency (IEA) www.the-eic.com | energyfocus

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Power UK

Decentralising the UK energy system In the last five years, decentralisation of the UK electricity system has changed from being a future trend talked about in boardrooms and conferences to an accepted reality, says Dr Craig Edgar at SNC-Lavalin

oday, the majority of new electricity-generating sources are connected to the distribution network, not the transmission network. However, energy system decentralisation will extend further than merely the location and size of the generating plant, bringing challenges and opportunities beyond ensuring grid stability. While there is a desire to open the market beyond the big six utility providers, historically (and indeed it is still largely true) there have been few options for the ordinary person other than purchasing their electricity from one of the large utilities, or

from a smaller utility that operates a similar business model.

Real drivers for change However, this is set to change via a range of technologies, including solar panels, heat pumps and batteries. Some of these are already established, others are just starting to be commercially deployed. The real drivers for change, though, will be digitalisation and a change in peopleâ&#x20AC;&#x2122;s behaviour and mindset. The vanguard for this is the roll-out of smart meters and associated smartphone apps that enable people to view their electricity consumption on their phone in real time. Thanks to smart home devices,

they can then manage their usage from their phone â&#x20AC;&#x201C; even if they are not in the house. In the future, there is every reason to expect that the scope of control will increase to include the supply of electricity into the house, as well as how it is being used. It is important to realise that the technologies required for this are already available. A homeowner can buy a solar panel and battery storage system from IKEA and fit smart home devices; their home will look like something that, a decade ago, would only have appeared in a science fiction movie. However, if they want to stay connected to the grid (and most people would, for security of supply) they still have to buy electricity as they have www.the-eic.com | energyfocus

Power: UK

With blockchain-enabled peer-to-peer electricity trading, you could buy power from a neighbour’s solar panel to charge your electric vehicle, drive to the shops and then potentially sell power into the grid while collecting your groceries

for the past 50 years – metered by the kWh from a registered supplier.

Power to the people Here enters another change, with the onset of blockchain technology and its potential to enable peer-to-peer trading of electricity. During the past 12 months we have seen this being trialled on UK distribution systems. This could create a scenario where you could buy power from a neighbour’s solar panel to charge your electric vehicle, drive to the shops and then potentially sell power into the grid while collecting your groceries. This could all be handled through software with preset rules – it wouldn’t require an individual to be sat in front of a virtual electricity trading desk! This is not likely to occur in the next few years, as it would require hugely significant changes in market structure and legislation – but for those of us in the electricity industry it is interesting to consider the challenges it could pose for our businesses. For technology providers it is an exciting prospect, with a potentially huge future market for devices such as heat pumps and batteries. For utility companies that generate revenue from selling electricity, and the supply chain that supports the construction and maintenance of the large scale central generation and transmission assets, it is a more challenging prospect. How do these businesses remain relevant in a decentralised, digital world, where consumers buy their electricity generation devices from retail outlets and sort out their energy needs over their mobiles in a peer-to-peer environment with their neighbours?

generation and transmission of electricity are likely to be required for the foreseeable future. The absolute reliance of consumers on this system is already diminishing, though, and we will continue to see this reliance wane. For the first time, there will be genuine competition in the sector – not just from multiple suppliers selling an equivalent product, but from entirely new business models. The incumbents need to prepare for the impending change. We can already see a shift in focus from large fossil-fuelled generation to distributed, renewable generation, and in the likes of Centrica’s pushing of Hive technology into the home. For the supply chain, one transformation can be seen in that

heavy engineering is becoming less mission critical, while software is becoming ever more important. Decentralisation of energy is much more than just a feature of whether a generating asset is connected to the distribution network or the transmission network. Instead, the opportunities and challenges of decentralisation should be thought of in the context of a paradigm shift in how society uses and buys the electricity that will power our devices, heat our homes and move our cars. By Dr Craig Edgar, Chief Engineer – Project Development, SNC-Lavalin

THE EVOLVING ROLES OF NETWORKS Decentralisation, digitalisation and decarbonisation are transforming the UK electricity system

PAST Generation

Transmission

Consumption Distribution

Distribution

Consumption

Reshaping the energy market Of course, this is an extreme view; the security and predictability provided by centralised

40 energyfocus | www.the-eic.com

FUTURE

Generation

Distributed Generation

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Nuclear Advanced technologies

innovation Advancing nuclear through

How can nuclear move forward? With ongoing innovation, says Andrew Storer at Nuclear Advanced Manufacturing Research Centre (Nuclear AMRC)

he biggest challenge facing the nuclear industry is making nuclear cost competitive against other low-carbon generation. To make nuclear new build affordable, the financing and development cycle needs to improve. There are three main factors behind the cost of new nuclear: the cost of finance, inevitably high for extremely complex multi-billion pound projects; the cost of the long development cycle of 10 years or more; and the cost of the plant itself. For the 3.2GW Hinkley Point C project, that all added up to an agreed strike price of £92.50/MWh to provide a return for EDF Energy and its partners. That price does not look attractive when compared with £57.50 for the latest offshore wind projects, even if you consider the additional grid and back-up costs associated with intermittent renewables.

Push and pull of innovation There is a great deal of attention being given to new advanced reactor designs, which aim to reduce the costs and risks of new nuclear plant by building larger fleets with a faster return on investment from shorter build timescales. However, it is hard to push innovation without a pull from the market. There is a host of exciting technologies from

42 energyfocus | www.the-eic.com

Nuclear sector deal The £200m nuclear sector deal is part of the government’s industrial strategy to boost productivity, employment, innovation and skills across the country. The sector deal includes a £32m boost from government and industry to kick-start a new advanced manufacturing programme, including R&D investment to develop potential worldleading nuclear technologies such as advanced modular reactors. There is also up to £30m for a new national supply chain programme. To support the development of advanced reactors, there is up to £44m for R&D into new designs, up to £12m to help regulators prepare for these new technologies and £40m for a new thermal hydraulic testing facility in north Wales. It also includes £86m to create the National Fusion Technology Platform in Oxfordshire. In return, the nuclear industry is committing to achieve a 30% reduction in the cost of new build projects by 2030, and a 20% reduction in decommissioning costs. The deal also includes a commitment to gender diversity, with a target of increasing the amount of women working in the nuclear sector to 40% by 2030. The deal was developed by the Nuclear Industry Council, an advisory group drawn from industry, government and regulators, including the Nuclear AMRC. Part of the national High Value Manufacturing Catapult, and based at the University of Sheffield, the Nuclear AMRC is dedicated to helping UK manufacturers win work in the sector.

40%

The nuclear sector deal aims to increase the amount of women working in the nuclear sector to 40% by 2030

reactor developers, but little sign of appetite from the utilities that invest in plant and sell electricity. Recent years have seen a lot of talk about small modular reactors (SMRs); these are based on similar Generation III+ technology to that used in current gigawatt-scale reactors, but only produce up to 300MWe. Making individual reactors smaller reduces the upfront capital requirements and helps reduce costs by exploiting proven techniques of highervolume production. Making them modular means you can reduce project risks by doing more in the factory, rather than on-site. There is also an increasing push from developers of Generation IV advanced modular reactors (AMRs), a term that covers a range of technologies, including hightemperature gas-cooled, molten salt, fast-breeder and fast-neutron reactors. As well as reducing the cost of generation, AMRs promise to be more flexible in the way they deliver electricity to the grid (including load following to balance intermittent renewables generation) and could be used in combined heat and power generation for domestic and industrial users. SMRs and AMRs offer an opportunity to reduce the cost of plant through game-changing technologies such as electron beam welding, diode laser cladding, bulk additive manufacturing and advanced machining techniques. In many cases, these technologies are used in other industries but are not yet accepted by the ASME and RCC-M nuclear codes. Again, technology push requires an industry pull. Reactor developers will

2030

Advanced technologies: Nuclear

The Nuclear AMRC is applying a range of advanced machining techniques to the production of representativescale SMR pressure vessel components

need to draw on manufacturing expertise and innovation from a range of industries to reduce manufacturing costs.

Collaboration creates opportunities The challenge for us at the Nuclear AMRC is to ensure that innovations break through into UK industry to help improve cost and efficiency. This is difficult unless the owners of the technology want to implement improvement – and we know that once the design and delivery method is fixed, any change equals risk for the developer. Reactor developers need to work with established nuclear suppliers and companies working in other high-value quality-driven sectors to integrate advanced manufacturing technologies into their designs. That will also mean building the code case for these processes and technologies to get them accepted by the industry regulator. For manufacturers with the right expertise and capabilities, there will be a great opportunity to build relationships with developers at an early stage. If new reactors are developed in the UK, there will be significant potential export opportunities when the developers take their trusted suppliers with them into the global markets.

Boost for UK nuclear The potential for new reactors to provide long-term economic value was highlighted by the nuclear sector deal launched in the summer, which offered early-stage support to bring new designs closer to reality. The sector deal named eight companies, which have been awarded a share of an initial £4m funding for detailed feasibility studies. These studies must show that their Generation IV reactor designs can deliver genuine value in terms of providing reliable and affordable power, while creating economic value for the UK in terms of employment and exports. The Nuclear AMRC is working with most of these developers to support their initial studies on how advanced manufacturing technologies can be used to reduce cost and risk, and how they can draw on the capabilities of the UK supply chain to put their designs into production. Following the initial studies, up to £40m follow-on funding may be made available to projects that can demonstrate clear value for money. The sector deal also confirmed continuing government interest in the potential for SMRs. The deal does not suggest any new money for SMR development, but does outline a new framework to enhance the

SMRs and AMRs offer an opportunity to reduce the cost of plant through game-changing technologies generic design assessment (GDA) process. Operated by the Office for Nuclear Regulation (ONR) and Environment Agency, the GDA is intended to support the construction of a number of new nuclear power stations by approving a standard reactor design that can be built in different locations by different developers. The deal offers up to £12m to the regulator to help it assess new reactor designs. With a more flexible process, and lessons learnt from previous assessments, a mature SMR design could enter GDA by the end of this year. The government also promised to consider potential development sites for SMRs, which are likely to be on established nuclear sites such as Trawsfynydd in north Wales – perhaps significantly, the site chosen for the launch of the sector deal. At the Nuclear AMRC, we have already worked with SMR developers such as Rolls-Royce, Westinghouse and NuScale Power on advanced manufacturing and supply chain development, and eagerly await further developments.

Building our nuclear future Ultimately, the UK nuclear industry needs to show a joined-up approach. The sector deal gives us the framework, and it is very encouraging to see bodies such as National Nuclear Laboratory, United Kingdom Atomic Energy Authority, ONR and the revived Nuclear Innovation and Research Advisory Board working together to enable this. Now is the time to grasp the nettle and seize the opportunity to introduce truly world-leading innovation to put the UK back at the forefront of the nuclear sector. By Andrew Storer, Chief Executive Officer, Nuclear Advanced Manufacturing Research Centre www.the-eic.com | energyfocus

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Renewables Wind energy

Repowering onshore wind Upgrading ageing UK onshore wind farms is a highly cost-effective way to secure a cheap low carbon power boost, writes Richard Vale at the EIC

he UK onshore wind market is one of related contradictions. The technology is widely regarded as one of the cheapest forms of new power generation (some estimates range between £40 and £45/MWh), but there are concerns over whether future projects can be economically viable without subsidies. The UK government has closed the Renewables Obligation, seen by many as crucial in the market’s development, yet financial support for onshore wind farms (excepting remote islands such as the Hebrides) is not available under contracts for difference auctions. And while there was a record 2.6GW installed in 2017, predictions suggest that only 1GW will be added by the end of this year. Though it is easy to paint a bleak picture for the future of the sector, there is hope that the market can recover, endure and even thrive. In this revival, repowering projects or the upgrade of wind farms that have reached the end of their scheduled operation is expected to play a significant role.

IMAGES: ISTOCK

Making the case Repowering offers a spectrum of wind power development: it can, and often does, involve the complete dismantling and replacement of turbine equipment (including the tower and foundation), but equally it may involve simply installing a new drivetrain and rotor and replacing peripheral components. In the next five years, an estimated 750 turbines will come to the end of their initial lifespan (20–25 years), and the Energy and Climate Intelligence Unit argues that repowering these sites could increase

the UK’s generating capacity by more than 1.3GW. Existing infrastructure, such as network connections and cables, can be reused or upgraded at costs lower than for new sites, and advancements in technology mean that newer turbines are more powerful and efficient. A 10-turbine farm comprising 500kW units can be replaced by five turbines of 2.4MW and the output will still more than double from 5MW to 12MW. Technological and design improvements in new turbine designs have led to an enhanced generation of turbines. Studies into the reduction in performance associated with ageing equipment have shown that turbines lose 1.6% of their output per year, with average load factors declining from 28.5% when new to 21% after 19 years. Repowering means less unplanned downtime, lower operation and maintenance costs and higher guaranteed revenues for developers. Recent rule changes published by the government suggest that repowering projects may provide a solution to the onshore wind ‘ban’. A revised National Planning Policy Framework states that local authorities should now approve planning applications to repower existing wind turbines ‘if its impacts are (or can be made) acceptable’. This revised wording could allow a smoother application process for repowering projects since they will naturally be located at a site that is already deemed suitable for renewable energy developments. Not only are these sites suitable, they often have some of the best wind resources in the country. Using EIC analysis, Figure 1 shows all wind farms (over 5MW) which began operating in 2003 or earlier. These developments are almost exclusively located

Figure 1: Map of wind farms with capacities over 5MW which began operating in 2003 or before. Source: EICAssetMap www.the-eic.com/EICAssetMap

on the west coast at sites where full load hours, which can be used as a measure of wind availability, can reach more than 3,000 annually – nearly double that of some more inland locations.

Keeping the turbines turning While they are not a silver bullet for the UK onshore wind industry, repowering projects look set to provide significant opportunities for developers, original equipment manufacturers and independent service providers, as well as the associated supply chain. The combination of strong wind resources and reuse of existing infrastructure will enable development without the need to rely on government subsidies, and could provide a pathway to developing a truly subsidy-free onshore wind market. A fitting symmetry: the repowering of the forerunners of the renewable energy industry could act as a catalyst for the transition to the market’s next paradigm. By Richard Vale, Energy Analyst – Power, Nuclear, Renewables, EIC

www.the-eic.com | energyfocus

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yo Re ur g in iste te r re st

Renewables Hydrogen

hydrogen Making the move to a

economy

Paul Dodds at University College London and Nigel Holmes at the Scottish Hydrogen and Fuel Cell Association ask: could hydrogen hold the key to decarbonising heat and transport?

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he term ‘hydrogen economy’ was coined in the 1970s, when hydrogen was seen as the key to a more secure energy system with less reliance on fossil fuels. It is now often viewed through the climate change lens – other than electricity, hydrogen is the only zero-carbon energy carrier that is under serious consideration for use across low-carbon energy systems.

Hype leads to innovation In the 1990s, hydrogen-powered fuel cell

Green energy carrier of the future? During the past few years, the move towards inflexible wind and solar generation has caused concern about excess electricity generation being wasted. One option is to use this excess to produce hydrogen using an electrolyser. Systems are being tested in Germany and on Orkney, with the hydrogen

electric vehicles (FCEVs) received substantial investment, leading to a ‘hype cycle’ that peaked around 2004. They gradually left the spotlight as commercial vehicles did not appear and battery electric vehicles were commercialised. Yet development of FCEVs has continued in the background, and Hyundai launched the first production-line cars in Korea in 2015. FCEVs today are all hybrids with on-board battery storage, but have the advantage of longer ranges and much shorter refuelling time than battery-only vehicles. www.the-eic.com | energyfocus

Renewables: Hydrogen

Other than electricity, hydrogen is the only zero-carbon energy carrier that is under serious consideration either injected into the local gas network or used to power vehicles. There is also interest in whether hydrogen could replace natural gas for heating UK homes. Heat pumps, the preferred lowcarbon option until 2013, are now considered unsuitable: they are larger and more expensive than boilers, and require a water tank and a well-insulated building. UK householders are accustomed to small, quiet, reliable, responsive, low-cost and highpower natural gas boilers, and hydrogen boilers would have similar characteristics.

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Is hydrogen affordable? A key question is whether low-carbon hydrogen could be produced at an affordable price. Hydrogen can be produced from gas, oil, coal, biomass or electricity. The cheapest option at present for hydrogen production at scale is steam-methane reforming (SMR) of natural gas, which is used by UK industry to generate hydrogen for ammonia production and oil refining. A feasibility study1 on converting Leeds to hydrogen also proposed to use natural gas as a feedstock for SMR, but to capture and sequester most of the CO2. SMR with carbon capture and storage (CCS) produces ‘blue’ hydrogen with a low-carbon footprint. Producing low-carbon ‘green’ hydrogen by electrolysis using renewable electricity is considered to be a more sustainable approach, but in the near-term is more expensive than reforming natural gas. Cost continues to be a key challenge, as hydrogen cannot yet compete commercially with fossil fuels in the absence of a carbon tax. For areas such as heating, where fuel poverty is a key policy concern, all low-

48 energyfocus | www.the-eic.com

Scotland’s ambitions and progress Hydrogen is now recognised in the new Scottish Energy Strategy and Climate Plan as being key to delivering Scotland’s ambitions for reducing greenhouse gas emissions and supporting the growth of local smart energy clusters. The use of hydrogen complements other vectors such as electricity, and the innovative ‘Surf n Turf’ and ‘BIG HIT’ (Building Innovative Green Hydrogen systems in an Isolated Territory) smart energy

demonstrator projects in the Orkney Islands are now recognised as a global exemplar for clean energy islands. These early deployments in Scotland provide valuable insights on quantifying the economic value added from local hydrogen supply in low-carbon energy and transport applications, and can be used to identify the opportunities for scale-up and wider replication.

carbon technologies raise affordability issues. Another challenge is the ‘chicken-andegg’ problem of hydrogen supply infrastructure – investments cannot be justified without demand, but demand is dependent on infrastructure already being in place. There are a number of UK and European initiatives to test and deploy early hydrogen systems, and encourage nascent markets. For example, the UK government is investing £25m to understand the engineering challenges of hydrogen for heating and £20m in technologies to create low-carbon hydrogen, while European projects have subsidised early infrastructure deployment.

HYDROGEN: HYPE OR HOPE?

Hydrogen technologies are key to the development of our future energy systems. Visit our new microsite energyfocus.the-eic.com to read about how project GENCOMM aims to answer the energy sustainability challenges facing remote communities across north-west Europe.

Specific opportunities from local use of hydrogen include the integration of high levels of intermittent renewables such as tidal and wind into the energy system using electrolysis, together with ‘sector coupling’ to make best use of the low-carbon energy in remote areas of Scotland.

Fuelling the future Hydrogen is increasingly seen as an important part of decarbonising ‘hard to treat’ heavy freight such as buses, trucks, trains, and shipping. The use of hydrogen in low-carbon transport fleets and logistics offers some of the most promising business cases for hydrogen supply, which in turn can provide the basis for the development of a local hydrogen supply chain. For example, Aberdeen has one of the largest and most intensively used fleets of hydrogen buses in the world. This investment has underpinned the development of a local hydrogen supply chain, which in Aberdeen has an emphasis on use of ‘green’ hydrogen from renewables, including constrained wind, in order to meet local decarbonisation targets in Aberdeen’s Sustainable Energy Action Plan (SEAP). By Paul Dodds, Associate Professor in Energy Systems, University College London, and member of the EPSRC Hydrogen and Fuel Cell Supergen Hub and Nigel Holmes, Chief Executive, Scottish Hydrogen and Fuel Cell Association. References: 1 Sadler D, Cargill A, Crowther M, Rennie A, et al., 2016. H21 Leeds City Gate: 100% hydrogen conversion feasibility study

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EIC Member Focus atg UV Technology

MY BUSINESS

Paul Hennessey, atg UV Technology

opportunities or requests for collaboration worldwide, but with finite resources, we have to be careful and selective about where we channel our efforts. As engineers with a passion for problem solving, it can be quite tough to make those decisions.

Can you tell us a little bit about atg UV Technology? atg UV Technology is a specialist UK manufacturer of UV disinfection systems and advanced water treatment packages. Specialising in oil, gas and energy applications, we’re often described as a ‘boutique engineering company’ as we excel in new research, bespoke equipment designs and solution engineering. How did atg UV start out? Once part of the larger Automated Technology Group, in 2005 we became an independent company that focused solely on water treatment solutions using UV treatment systems and other complementary technologies such as filtration and membranes. Since then, we’ve grown from six employees to more than 80 full time staff. We place huge emphasis on reinvestment, product development and leading R&D. What are the main services you offer the energy industry? UV systems are used as a final treatment technology in all areas of water treatment, such as boiler feed water in power stations or seawater injection used for oil recovery. We provide chemical-free solutions for disinfection projects to protect equipment such as reverse osmosis membranes, pipelines and oil reservoirs and also photocatalytic applications, using advanced oxidation solutions to break down and remove micropollutants and trace organics. What’s a typical day like? We specialise in providing solutions to problems, often where there are no easy answers and very high specification requirements. Typical days involve managing lots of cross-departmental work, researching water chemistry and microbiology challenges and

50 energyfocus | www.the-eic.com

Oil and Gas Business Manager Paul Hennessey takes Energy Focus behind the scenes at atg UV Technology then working with our engineering disciplines and partners. This ensures we are able to establish the right technology options and electrical and mechanical engineering requirements in order to develop the perfect solution for our clients. What is the best thing about running an independently owned business? We are owned and operated by engineers who all work in the organisation. Great engineering is what really drives the business and, with our flexible and agile business model, we get involved in really exciting and novel projects worldwide. I have been fortunate to work on seven world-first research/product development projects during the past 10 years. And the toughest? With any SME, allocation of resources is key. We have no limit on

If you weren’t working at atg UV, what would you be doing? I’ve been heavily involved in the shale gas industry for a number of years and developed a great understanding of the water treatment challenges facing that industry. If I weren’t at atg UV, I would most likely be continuing that work in some way or another. What’s been the biggest highlight to date? My own personal highlight was during a joint industry partnership with a large oil and gas operator. From the research and pilot trials we undertook, I was subsequently invited to join a parliamentary technical working group, briefing cabinet ministers and secretaries of state regarding best available techniques for water management in the onshore oil and gas industry. What’s next for atg UV? As operators seek to reduce chemical use, UV treatment of seawater used for enhanced oil recovery and produced water re-injection is set to be a major new market for us. We’re currently involved in two joint industry projects trialling our technology with some of the biggest O&G majors in the world. How can energy companies futureproof their businesses? Investment in green technologies and best available techniques are likely to become a requirement in the future, so early investment that delivers a greater ROI is a smart choice that many operators are already making.

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