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SPECIAL REPORT: THE SUBSEA SECTOR

C-STATE OF THE ART New subsea centre could be a game changer STAYING ON TOP How the region is maintaining its edge TRAPPINGS OF WEALTH Dr Tony Trapp gives a frank interview


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CONTENTS

CONTACTS

04 NEWS

ROOM501 LTD Christopher March Managing Director e: chris@room501.co.uk Bryan Hoare Director e: bryan@room501.co.uk

A round up of the latest developments in the sector

10 DEEP SEA SUCCESS

EDITORIAL Peter Jackson e: p.jackson77@btinternet.com

The industry body’s chairman outlines its achievements and challenges

14 C-STATE OF THE ART New facility will help the subsea sector tackle the skills shortage

18 NUMBER ONE PDL Solutions’ boss on the importance of staying on top

24 A QUICK FIX Andrew Essen transformed the fortunes of a firm in three years

28 THE UNKNOWN The oceans still have their secrets, explains Professor Nick Wright

30 WORLD BEATERS How subsea became the jewel in the region’s crown

40 CASH IN THE ASSETS There’s a fortune to be made decommissioning installations

THE TRAPPINGS OF WEALTH CREATION

36 THE SUBSEA SECTOR

SPECIAL REPORT:

THE SUBSEA SECTOR

WELCOME Welcome to this edition of BQ2 in which we take a look at the subsea sector in the North East. It is nearly 40 years since the extraction of oil and gas began in the UK sector of the North Sea, the beginning of a process that was to transform the nation’s economy. The challenges of extracting oil and gas from the often unforgiving environment of the UK Continental Shelf gave rise to whole new skills and industries. As the easier to reach oil and gas have been steadily exploited and the remaining resources have become harder to extract, so those skills have been honed and refined, not least in the subsea. As a result, the sector is thriving and its skills and assets are increasingly in demand from industries such as offshore wind, nuclear, telecommunications and subsea mining. It is in demand, not only in the UK, but around the world. The only clouds to be seen on the horizon for subsea are the threat of a falling oil price – which is hardly likely to be a long term problem – and a shortage of trained engineers. In these pages we spotlight some of the leading players in the sector in the North East. We talk to them about issues facing the industry and feature some of the groundbreaking initiatives taking place. In interviews, profiles, analysis and news items, this issue of BQ2 examines and illustrates a great North East success story.

DESIGN & PRODUCTION room501 e: studio@room501.co.uk PHOTOGRAPHY KG Photography e: info@kgphotography.co.uk SALES Alan Dickinson National Sales Executive e: alan@room501.co.uk or call 07917 733047

room501 Publishing Ltd, Spectrum 6, Spectrum Business Park, Seaham, SR7 7TT www.room501.co.uk room501 was formed from a partnership of directors who, combined, have many years of experience in contract publishing, print, marketing, sales and advertising and distribution. We are a passionate, dedicated company that strives to help you to meet your overall business needs and requirements. All contents copyright © 2014 room501 Ltd. All rights reserved. While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All information is correct at time of going to print, October 2014. room501 Publishing Ltd is part of BE Group, the UK’s market leading business improvement specialists. www.be-group.co.uk

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BQ Magazine is published quarterly by room501 Ltd.

SPECIAL REPORT | AUTUMN 14


NEWS

AUTUMN 14

Firm’s ‘momentous project’ finally completed, engineering specialist invests in cutting edge technology, events will showcase oil and gas industry, OSBIT lands major contract, technical recruitment jobs saved >> Perfect partners NOF Energy, the UK business development organisation for the oil, gas, nuclear and offshore renewables sectors, has announced Korea Offshore & Ship Building Association (KOSHIPA) as its latest global partner. The agreement is designed to increase cooperation between the UK and South Korean offshore supply chains. It follows the signing of a Memorandum of Understanding at an industry event organised by Durham-based NOF Energy in partnership with UK Trade & Investment in Aberdeen to build relationships between UK and Korean companies. Among the delegation joining KOSHIPA in the UK were Samsung Heavy Industries, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering Company (DSME) and supply chain companies Kangrim, TSP, Samkang M&T, and Stauff Korea. KOSHIPA, which represents a cluster of shipyard operators and supply chain businesses, was established as a non-profit organisation in 1977 when the South Korean ship building industry was making its first significant inroads into the market. The South Korean offshore industry has grown dramatically since 2005 and one of its key exports is the supply of large, high specification floaters for drilling and production to the global markets. NOF Energy’s Global Partner Network aims to open up opportunities for almost 500 UK members and support collaboration across international markets. It features more than 22 organisations from countries including Canada, China, Denmark, Russia, Malaysia, Venezuela and the United States. Deputy chief executive of NOF Energy Joanne Leng said: “South East Asia offers real potential for British suppliers and the South Korean oil and gas sector is keen to engage with our supply chain as it looks to enhance its engineering and fabrication services with innovations and technology developed in the UK.”

SPECIAL REPORT | AUTUMN 14

>> Minister praises company’s success story Trade and Investment Minister Lord Livingston has seen at first hand how the region leads the way in the oil and gas industry and he urged businesses to export. He toured BEL Valves, part of the British Engines Group, at its St Peter’s site in Newcastle to see progress on the company’s £15m investment programme. The company, which celebrates its 50th anniversary this year, has seen its turnover almost double in the last three years, while staff numbers have increased from 393 to 551. With growth predicted to continue, the company launched a £15m investment plan at the end of 2013 to develop its Newcastle site over the next four years. It aims to increase production and test facility capacity, and take on more staff. Lord Livingston said: “BEL Valves is a great example of a dynamic company which is growing its business through exporting. Increasing the number of UK businesses that sell overseas is integral to the Government’s long term economic plan to build a stronger, more competitive economy. “Last year companies from the North East contributed to the region’s economic success with almost £12bn in exports. Companies in the North East wanting to export should contact UK Trade & Investment who can give them the support they need to get started.” BEL Valves chief executive Neil Kirkbride said: “Recent figures from HMRC reveal the North East as the fastest growing region in England for export. This, alongside the fact the region has amongst the strongest manufacturing output and order books in the UK, shows that we really know how to make things happen in the North East. “Fundamentally we are specialist engineers and we aim to retain the most talented professionals right here in the North East. I am delighted that these figures show that we are achieving this together as a region – we certainly are at BEL Valves. It is this technical expertise and creativity that enables us to continue designing and manufacturing new products to meet the needs of our clients. “We were delighted to welcome Lord Livingston and look forward to working with UKTI more in the future.”

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THE SUBSEA SECTOR


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AUTUMN 14

>> Amec forecasts modest growth Engineering and project management company Amec says it expects to see “modest” underlying revenue growth in 2014, but has kept its full-year outlook unchanged. The group said less greenfield activity in some oil and gas markets was partially offsetting strong growth from its clean energy and middle eastern oil and gas businesses. In August, it reduced its revenue forecast as customers cut back on oil and gas exploration. In its recent interim management statement Amec said: “The mix of business will result in a slight reduction in group margins compared to last year. As in 2013, profits and cash flow generation will be second-half weighted.’’ It also reported that exchange rates in the year so far and forecast average North American exchange rates for the rest of 2014 continue to be less favourable than 2013. It expects this to have about £250m year-on-year impact on revenues and to affect trading profit by about £25m for the full year.” In August Amec reported that its first-half profit before tax declined 29% to £83m from £118m last year. Adjusted profit before tax was £150m, compared to £155m a year ago. Adjusted earnings per share declined to 39.1p from 40.6p a year ago. Earnings before interest tax and amortisation of £152m declined 4%. The company’s European HQ is in Darlington, where it has more than 400 workers. It also has bases in Newcastle and North Shields and has more than 1,000 staff in the North East.

>> OGN buys cutting edge technology Engineering, procurement and construction specialist OGN Group is continuing its programme of investment in production technology with the installation of a new pipe cutting machine. The technology provides a Computer Numeric Control (CNC) capacity that previously could only be produced by manual cutting. Delivering accurately cut 3D profiles in pipes to provide precise welding fit up connections, the machine improves productivity by reducing preparation and welding times.  An additional productivity gain is achieved

SPECIAL REPORT | AUTUMN 14

>> DeepOcean’s ‘momentous project’ comes to an end Darlington-based DeepOcean UK has completed substantial works in China. The company worked on the Liwan 3-1 Project, part of the Liwan gas project, 300km southeast of the Hong Kong Special Administrative Region. This also includes the Liuhua 34-2 and Liuhua 29-1 fields and all three fields share a subsea production system, subsea pipeline transportation, and onshore gas processing infrastructure. DeepOcean began work on the project for COOEC Subsea in March 2012. Volantis and UT-1, a free-flying jet trencher, conducted trenching and survey operations over 160km of the 30” Liwan Pipeline connecting the Liwan Central Platform (CEP) in 200m water-depth to the shore at China National Offshore Oil Corporation’s (CNOOC) Gaolan gas plant. Prior to trenching, activities included construction works involving crossings along the pipeline route using the WROVs and technicians onboard Volantis to deploy more than 100 mattresses along the pipeline in preparation for the lay campaign. Trenching activities with the UT-1 and crew achieved burial depths along the route deploying the UT-1 jetting swords to 2.5m below the seabed for trenching of the large diameter pipeline. Upon completion of trenching activities in August 2013 in the shallow water section of the project for COOEC Subsea, Volantis was contracted by Saipem to perform subsea field development activities in the deep water section of the Liwan 3-1 field operating ROVs in excess of 1,400m water depth. DeepOcean was responsible for various tasks infield, working closely with clients to deliver safe and efficient subsea operations. Volantis’ sea-keeping capability and launch and recovery systems onboard allowed both contracts with COOEC and Saipem to operate continuously through the harsh monsoon seasons with minimal downtime operating under contract for a continuous period of over 875 days. Tony Stokes, director of Asia Pacific for DeepOcean said: “It was a privilege to be part of such a momentous project in China.”

through the pipe cutting machine’s connection to the internet, enabling programmes to be sent directly from the Production Control and Drawing Office from the original Computer Aided Design (CAD) data. The machine offers flexibility and increased range of use thanks to two cutting methods. It is capable of processing pipes from 50mm OD up to 1200mm OD, with plasma cutting on pipe wall thickness of up to 20-25mm and Oxy-Gas on pipe walls above 25mm thickness. 

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The pipe cutting machine will be used on a variety of fabrication projects for the energy industry. Wallsend-based OGN Group is a recognised EPC contractor serving the onshore and offshore oil and gas and offshore renewables markets. Chief executive David Edwards said: “Investing in new technology is part of our commitment to maintain our position as one of the most respected providers of fabrication services to the energy industry.”

THE SUBSEA SECTOR


A specialist consultancy operating within the dynamic oil and gas market. With offices in Aberdeen, Newcastle, London and Oslo.

www.nigelwright.com


NEWS

AUTUMN 14

An ROV chassis in production at Tharsus Engineering

>> Blyth firm’s ROV success Tharsus Engineering is applying its technical fabrication specialism to support the development and manufacture of Remotely Operated Vehicles (ROVs) for the offshore energy industry. The Blyth-based company, part of The Tharsus Group, is working with remote intervention equipment manufacturer, SMD, to produce aluminium chassis for a range of three Work-Class ROVs. SMD’s WROVs, which are used in the offshore oil and gas, offshore renewables and telecommunications industries, deliver technology-led solutions to meet the requirements of these sectors, which operate in hazardous environments. The companies have worked for around five years with Tharsus Engineering producing fabricated guards for SMD’s subsea trenching vehicles and aluminium and stainless steel ROV components before embarking on the chassis project. Tharsus Engineering is hoping to fabricate around 24 ROV chassis a year for SMD’s Centurion, Quasar and Quantum WROV models at its facility in Spencer Road, Blyth.  To deliver the complex aluminium chassis structures, Tharsus invested in new equipment and processes at its production facility. In addition, it increased the portfolio of qualifications held by its welders. All of Tharsus Engineering’s welders are third-party certified and assessed and hold qualifications to enable them to work

SPECIAL REPORT | AUTUMN 14

on a range of materials, material thickness and configurations. Elements of the chassis complex structure required the welders to achieve additional qualifications due to the thickness of the materials used in the construction. Once completed, the chassis are delivered to SMD’s ROV Centre of Excellence at the Tyne Tunnel Trading Estate in North Shields where the company completes the build, full-system integration and testing. As part of the Tharsus Group’s focus on building collaborative relationships with its customers, its engineering division are also working closely with the team at SMD to further develop the design and production of the chassis to improve the quality of the product while reducing cost. In addition to working with SMD, Tharsus Engineering has delivered projects for other ROV manufacturers and is experienced at delivering high-specification fabrication and welding projects with full supply chain material traceability to multiple sectors including offshore energy. Peter Sayer, sales director at Tharsus Group, said: “SMD is globally-recognised for its technology-led solutions and we are very proud to work alongside them to produce their ROV chassis. It reflects the quality of the advanced technical fabrication services we offer, as well as the success of our collaborative approach to working closely with our customers. “The success of the offshore energy sector very much depends on the creation and application of specialist technologies. In addition to supporting the industry with high quality welding and fabrication services, Tharsus Group’s design engineers work in partnership with customers to enhance their products and reduce cost to strengthen their market position.”

>> Showcasing oil and gas A series of events exploring the diversity of the oil and gas industry are being held to celebrate the sector’s success. Organisations and companies across the UK will stage activities from science, engineering and maths events, specialist workshops and

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careers sessions to debates and interactive challenges during National Oil & Gas Skills Week between 11 and 14 November. With 55% of the 440,000-strong UK workforce based in England, the programme includes a number of events targeted for students, military career-transitioners and established working professionals in North Shields and Newcastle. The event is organised by the oil and gas skills organisation OPITO. Events are being held in Aberdeen, Edinburgh, Glasgow, Norwich, Great Yarmouth, Lowestoft, Newcastle and North Shields. “The oil and gas sector is a huge part of the economies in the North East of England with companies of all different shapes, sizes and disciplines employing tens of thousands of people from all walks of life,” said skills development director Morven Spalding. “While careers range from the technical engineering offshore roles right through to the supporting onshore jobs like accounting, catering, marketing, legal, human resources or business development, many people don’t associate these jobs with the oil and gas industry. The reality is that only 10% of jobs in the sector are based offshore. “National Oil & Gas Skills Week aims to break the stereotype and show people who may never have considered a career in oil and gas before that there are a huge variety of opportunities for the right people with the right skills.” Events in the regional programme currently include: Future Skills for Students – a one-day invitation-only session for school and college groups hosted by AIS Training in North Shields on 12 November Upskilling Military – all day event with AIS Training providing information to military personnel and reservists in North Shields on 14 November Why Military? – special event hosted by NOF Energy for businesses looking to recruit skilled ex-military personnel in Newcastle on 13 November Doors Open Day – AIS Training is throwing the doors open to show off their state-of-theart skills and competency training facilities at Orion Business Park, North Shields, on 13 November. Includes tours and demonstrations.

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>> OSBIT seals major deal OSBIT Power, a North East subsea engineering and technology company, has been awarded a multi-million pound contract by Helix Well Ops for the supply of twin, heavy weather ROV launch and recovery systems (LARS). OSBIT, based in Riding Mill, Northumberland, has to meet challenging space constraints and a need to operate in severe weather conditions to deliver the tailored heavy weather Cursor type ROV Launch and Recovery systems to Helix Well Ops early next year. The LARS will be installed into the Q7000, Helix’s new semi-submersible light well intervention rig being built in Singapore. Among other design drivers, OSBIT Power’s solution has to fit within the below-deck ROV hangars onboard the Q7000 and cope with operations in up to 5m Hs conditions. “We have worked very closely with Helix’s engineers to ensure the systems will provide reliable operation in harsh conditions while meeting the packaging constraints within the hangars,” said OP engineer Steve Binney. “OSBIT’s expertise in developing practical, elegant and reliable solutions within challenging constraints has been invaluable in engineering a system that meets the demanding operational requirements of Helix, within a very limited space.” To cope with the potentially severe weather, each deployment system includes a fastacting Active Heave Compensated umbilical winch to allow for wide weather windows when deploying and retracting the ROV and TMS from the cursor system. Mounted on guidewires, the cursor provides positive down force when deploying the ROVs through the moonpool and down through the splash zone to prevent damage to the ROV and TMS during deployment. “This industry demands the best from its suppliers, due to the critical nature of its subsea operations. Ensuring an ROV can be safely deployed at all times is vital to success of our client’s operations,’’ added

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Binney. OSBIT managing director Tony Trapp, said: “Our engineers have spent many decades supplying highly-complex offshore, subsea and military systems. That experience is invaluable when delivering projects such as these, and with our well established supply chain in the North East, we can make the most high performance and reliable offshore equipment available anywhere in the world.” A recent wave of 23 orders over nine months bringing in more than £10m means OSBIT will soon take its workforce from 35 to around 43.

>> MC2 closes but Leeds office saved Teesside-based recruitment business MC2 Technical Recruitment has closed with the loss of eight jobs, but the Yorkshire arm of the business has been bought out of administration, saving 216 jobs. Based in Stockton on Tees, MC2 Technical Recruitment provided contract, temporary and permanent staff to clients operating in the oil and gas and renewable energy sectors.   It was placed in the hands of administrators Andrew Haslam and Gillian Sayburn of Begbies Traynor Group (“BTG”) in Newcastle in August who, with the advice and support of Ryecroft Glenton Corporate Finance, immediately secured a sale of the majority of the business to national recruitment business, Jark. Haslam said: “The company established itself in the Teesside area recruiting specialist contractors into the oil and gas industry, both at home and abroad. In autumn 2013, it acquired the Leeds-based Network Employment Consultancy, which places temporary staff within and around Yorkshire. Unfortunately, following the loss of a number of contracts, the core MC2 business became unsustainable and the directors had no alternative other than to seek to protect the successful part of the business, NEC, along with its employees and temporary workforce. Working with Carl Swansbury and Abu Ali of Ryecroft Glenton Corporate Finance, BTG was able to market the business and identify a buyer for NEC. Complementary recruitment

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NEWS

company Jark has now acquired the entire Network Employment Consultancy business, securing the operation of NEC’s three offices and all associated staff. Haslam added: “The assistance and support of funders, the management team, Ryecroft Glenton Corporate Finance and the other professional advisers was vital to ensure that at least one division could be rescued in a very short timescale. We wish Jark plc success.”

>> FES International nets offshore contract Ashington-based engineering firm FES International has won a US$1.25m contract to supply four Diverless Bend Stiffener Connectors, DBSCs, to contractor NOV Flexibles. DBSCs are one of the firm’s most successful product lines enabling the efficient and cost effective installation of bend stiffeners on offshore deep sea drilling operations. The FES International DBSCs will be used by NOV Flexibles at the Mariner Field, Statoil’s heavy oil development located 70km west of Heimdal in the UK sector of the North Sea. The DBSCs will connect to pipes operating at water depths ranging between 97m and 112m. FES International has started work on the DBSC contract which will be delivered by 31 October. Rob Anderson, managing director at FES International, said: “We have a great track-record working with NOV and are delighted to be on board for such a significant North Sea project. “Although this is the first time we’ve worked with Statoil as the main end-user, it’s the latest in a long line of DBSC deals – a product for which demand just keeps on growing.” The Statoil development is one of the UK’s largest new offshore oil fields in more than a decade. A further 30 years of production and recoverable oil volumes of 250 million barrels have been predicted at the field. Flexible Engineered Solutions International is a provider of fluid transfer solutions to the offshore industry. Established more than 40 years ago, FES International employs specialists in design, including FEA analysis and modelling, draughting, machining and manufacture and assembly and testing.

SPECIAL REPORT | AUTUMN 14


OVERVIEW

SPECIAL REPORT | AUTUMN 14

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OVERVIEW

EXCELLING IN THE DEPTHS Subsea North East is the industry body for the sector in the region. Its chairman Andrew Hodgson talks to Peter Jackson about its challenges and opportunities Subsea is one of the North East economy’s star performers, an area where the region’s expertise is truly world-beating. Andrew Hodgson is chief executive of Soil Machine Dynamics (SMD), the Wallsend-based engineering business which specialises in the design and manufacture of remotely operated vehicle systems to function on the sea bed. It is, by any standards, a major player and it is, therefore, fitting that Hodgson should also be chairman of Subsea North East. Subsea North East grew out of some work done a few years ago involving Durham University to look at smart sector networks, where there were groups of businesses which could be pulled together to help grow the profile of that sector. In the North East, the subsea sector was chosen for the formation of an informal

THE SUBSEA SECTOR

network made up of the key players. Managing directors and chief executives get together on a quarterly basis to look at key challenges and issues they face, which has tended to be largely the skills agenda. Subsea North East worked with Newcastle College and Newcastle University to develop a foundation degree and a master’s degree in subsea engineering. “Sometimes it’s easier to define Subsea North East by what it isn’t,’’ explains Hodgson. “It’s not a trade body – you cannot become a member because it’s not a membership organisation. Participation from the broader business community is done through events rather than through any kind of formal structure. “We partnered with Subsea UK who were the UK membership organisation for the subsea >>

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OVERVIEW

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industry and NOF Energy who are obviously the more regionally focused energy organisation.’’ How is the industry doing? “The subsea industry is growing, effectively doubling in size every five years, which is a kind of ongoing trend and the UK companies account for about 45% of the world subsea market.’’ But North Sea oil is running out and production is declining, won’t that put a serious brake on growth for the industry? “The North Sea became a proving ground for a lot of technologies and a lot of subsea technologies, and the UK companies have become very good at exporting their knowledge and technologies around the world,’’ Hodgson says. “In reality the North Sea over the past few years has been pretty flat, but it hasn’t really hampered the growth of the companies in the subsea industry because areas such as Brazil and West Africa have more than compensated for the slowing in the North Sea.’’ These will be more challenging environments than the North Sea with water depths of 3,000 metres as opposed to a few hundred. “In, for example, the Gulf of Mexico, they’ve virtually exploited what’s on the shelf, which is at a few hundred metres, and even in the US Gulf of Mexico now they’re going down to a few thousand metres,’’ says Hodgson. “And some of those areas are very challenging in terms of the terrain people are operating in.’’ He points out that the fields off Brazil and West Africa are much bigger than the North Sea. Furthermore, he predicts that, following recent investment, North Sea activity will pick up again over the next two to three years. Even when North Sea oil does run out, there will be considerable opportunities for the subsea sector in decommissioning. Companies which are drilling in the North Sea are legally

bound to remove their assets at the end of the life of a field. Legislation is being drafted to prevent companies keeping fields technically operating, in appearance if not fact, as zombie fields to avoid decommissioning obligations, along with tax incentives to encourage them. Hodgson says: “The decommissioning market is just really starting to kick off, and like a lot of new and emerging markets, it’s very difficult to predict how quickly it will take off. Decommissioning is a huge market and it’s a huge opportunity for North East companies and UK companies. “We’re very much at the start of a journey with decommissioning and we’re starting to see some decommissioning opportunities emerging. But at the moment it’s a very small proportion of the total market space.’’ Despite all the early promise, alternative, renewable offshore energy generation sources – which would also generate opportunities for subsea – remain for the future. The technology for tidal generation has not been developed sufficiently to make it economical and large scale wind turbine farms still await the political will to drive them forward. “Offshore wind has been disappointing because UK Government policy hasn’t really given clarity for the developers in round 3,’’ says Hodgson. “We started to see some movement and some positive signs. Siemens signing up to build a big facility in Humberside shows that we’re getting very close to some major announcements on round 3, but we’ve been delayed for a good couple of years.’’ This created problems for a company such as SMD which had invested heavily in installation products. “You know, 2013/2014 has been incredibly disappointing, having invested a lot in 2011/12 to be ready for that market,’’ says Hodgson.

The subsea industry is growing, effectively doubling in size every five years, which is kind of an ongoing trend and the UK companies account for about 45% of the world subsea market SPECIAL REPORT | AUTUMN 14

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With the growth in the oil and gas markets, it’s difficult to arouse the interest of companies with the relevant experience in offshore wind and they could drive down the cost. “It’s really difficult, because we’re just not seeing wind farms coming on at anything like the pace that even the low case predictions were forecasting.’’ For SMD, an exciting prospect is in the field of subsea mining. He says: “The world of mining is very excited about the prospect of subsea mining and there’s some massive prospecting going on and a lot of material being found. What’s missing is the demonstration that the technology to extract those minerals is not only available, but works.’’ SMD is currently working on the Nautilus minerals project just off Papua New Guinea to extract copper and gold, which will be the world’s first site in production. This was delayed by a legal dispute between Nautilus and the government of Papua New Guinea. “That has delayed that project and we’re expecting the first ore out of that site in 2017. Despite that we have continued to build the machines and they are due to be completed and delivered in the first quarter of 2015.’’ Subsea cable laying for the telecoms market is reviving after collapsing with the bursting of the dot.com bubble. SMD has had steady business in building machines for cable maintenance to repair internet cables that have broken under water. “Japan is almost the home of broadband but they haven’t got enough capacity going in and out of Japan,’’ says Hodgson. “So that’s really where that market’s at. At SMD we produce most of the equipment that laid most of the cable around the world. It puts us in a good position when the market comes back. The only frustrating thing for us is that the market was great until 2000 and then didn’t exist again until 2013. “What we’ve seen lately with the broadband explosion is a significant expansion of broadband. Also, with countries getting heavily reliant on the internet, we’re actually seeing the emergence of new telecommunication installation ships. We’re building equipment for the first cable laying ship, which is being done in Dubai at the moment, that’s the first

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one in 13 years. We’ve got bids to outfit three more telecommunications ships that we expect to be built over the next two or three years, and people who’ve got pre-existing ships are looking to refurbish or replace equipment that they bought over 13 years ago as part of the original telecoms boom. We’re expecting the telecoms market to substantially grow over the next five years.’’ With all these opportunities for subsea, could growth in the sector accelerate and more than double in the next five years? Hodgson believes it’s not as straightforward as that. He says: “There are a number of checks and balances and I think one of the checks is the amount of skilled people there are globally to continue these developments. Is there a capacity for more developments that would drive a higher proportion? Absolutely there is, but, as we’ve seen in Brazil, which has a fantastic subsea industry and it has got a lot of opportunity, but really it cannot develop the fields anywhere near as fast as it would like to because of the lack of skilled resource.’’ He explains that SMD has provided 30 Remotely Operated Vehicles (ROVs) for a client in Brazil. They needed 850 ROV operators, all Brazilian nationals, who had to be trained from scratch as ROV pilots straight out of university. “If you multiply that right across the whole of the various skills, it just demonstrates the size of the challenge of a fast growing industry,’’ says Hodgson. The skills shortage then is a global problem and the North East cannot remain immune. Unlike other offshore areas such as Aberdeen, the North East subsea demands highly specialised skills and high level, highly qualified engineers, or highly qualified project managers. On the other hand, the region has a great heritage to draw upon. “The legacy of the old shipyards still remains and we still get a lot of high quality people,’’ says Hodgson. “Obviously we’ve got people like Nissan who train quite a lot of people. So there’s quite a lot of people at factory and shop floor level.’’ The difficulties arise at the higher level engineering and with some higher level management skills. “You know we haven’t got a lot of other head quartered businesses around here from

THE SUBSEA SECTOR

OVERVIEW

The reality is that manufacturing and engineering wasn’t seen as an attractive place for people who were entering their studies 15 or 20 years ago so that’s where the gap and the opportunities lie which we can just go and pick up some high calibre people. “I’ve got vacancies in design and software but software is a very niche skill. Also people are needed in hydraulics, electrics and control systems and these are all very high level specialisms, we’re talking about first class honours and PhD people, we’re not talking run of the mill guys that have just come through. Not that they don’t have a place in the industry, but it’s not where the real shortage is.’’ A lack of people going into engineering in past decades has created a skills gap in a specific age range. “In order to be able to perform anything like the level we’re talking about, you’re talking about ten plus years’ experience, so by definition you’re talking about people in their 30s. The reality is that manufacturing and engineering wasn’t seen as an attractive place for people who were entering their studies 15 or 20 years ago so that’s where the gap and the opportunities lie. “Obviously, we’ve got a lot of very experienced older people in the industry but some of those are getting to the end of their time and will need to be replaced and that’s the problem. We’ve got an experienced pool going out at the top, and we haven’t got the quantity of people to replace who are in the early to mid-thirties and you can’t just recreate those overnight.’’ Hodgson says Subsea North East identified this problem some five or six years ago and did something to address it. What could be done by government? “That’s a very difficult question to ask the vice chairman of the Local Enterprise Partnership for skills, because basically I’m asking myself to resolve it. I think we’re doing a lot of the right things. We’ve got very good links with the

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universities and we recognise that recruiting and retention of people in the North East would be easier if people are coming through the North East universities. We get very good stats for retaining people who’ve come through the North East universities. “The development of the Neptune Subsea Research centre is a great beacon, because what that’s demonstrating is that we’re fetching people into the industry to work on exciting and future development projects and that’s part of the regional attractiveness. “We’re one of the only regions in the country that’s got an education challenge running at the moment and those things are being addressed so, yes, there are things that need to be done, an incredible amount that needs to be done, but I understand that most of those things are actually in progress.’’ Subsea, he points out, provides great and rewarding careers. “It’s a great life because you get exposed to very exciting challenges and we try to solve problems that exist all across the world. You can travel to some very exciting places. If you just look at SMD, we’ve got an office in Singapore, we’ve got an office in Rio de Janeiro and an office in Texas. “The jobs in our industry pay exceptionally well. I read recently that the average salary in the oil and gas sector was significantly higher than the average salary in the banking sector. Believe me, if you look across the car parks of the oil and gas companies or the subsea technology companies of the North East of England, you don’t see many cheap cars hanging around. “The money’s extremely good and will continue to be extremely good because it’s a rare skill, and the UK leads the way. Subsea is a success story for the region and it’s a success story for the country.’’ n

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NEW CENTRE IS C-STATE OF THE ART SPECIAL REPORT | AUTUMN 14

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THE SUBSEA SECTOR


AUTUMN 14

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Faced with a skills shortage, the subsea industry has taken matters into its own hands, as Jake Tompkins explains to Peter Jackson

THE SUBSEA SECTOR

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A new facility opened in the North East this year to address the growing skills gap in the subsea engineering and service sectors. The Centre for Subsea Technology Awareness, Training and Education, or C-STATE, located at Darlington College, represents a collaboration between industry and education. Maritime Training and Competence Solutions (MTCS) has signed an agreement to market courses and deliver training at C-STATE. C-STATE has been developed by Modus Seabed Intervention in partnership with MTCS, Darlington College, Teesside University, Tees Valley Unlimited and Darlington Borough Council. Darlington Borough Council and Tees Valley Unlimited provided start-up support. It has been created to provide an unrivalled platform for specialist training and education – and is offered to the entire industry. Jake Tompkins, managing director of Modus Seabed Intervention and director of C-STATE, says: “What we really want to create is a recognised centre of excellence for subsea users when it comes to technology and training that is accessed and can be accessed by a vast number of users.’’ Subsea UK, the industry body, which represents the £8.9bn subsea sector, reports that British subsea companies need around 16,000 new recruits to help them grow to £11bn and increase the country’s 45% share of a £20bn global market. Tompkins explains: “C-STATE has come about after two years of analysis into the issues that the industry’s got. Modus is an employer and a business in the subsea sector and one of the biggest barriers that we believe the company’s going to face going forward is people. Onshore and offshore there’s a very profound shortage of technical people, either on the ROV >>

SPECIAL REPORT | AUTUMN 14


INTERVIEW

AUTUMN 14

piloting side or onshore engineering. “We’re an SME, we employ about 50 people and we’ve got people to train. We bring apprentices into the company, but we can’t train a large volume of people and it takes about three years to train people through. Inevitably we will lose some people at the end of that period because either they’ll feel they’re ready to move on to somewhere else, or they’ll be offered jobs elsewhere. We can’t sustain that, and we thought, that’ll be the same for a lot of companies, we’ve got to try and find a way to address the problem. “Certainly we needed to alleviate some of the issues, but how can we do that in a different way? We took a view that if we can set up a facility to train across all levels of industrial training and further and higher education training then we can help to bring more people generally into the industry, of which we’ll be a beneficiary and we’ll be able to access some of the larger volume of people that we can bring in.’’

Course options Industrial courses currently running at C-STATE: Delivered by MTCS (Maritime Training & Competence Solutions): • High Voltage Safety Awareness (ROV) • ROV hydraulics • Fibre-optics (ROV umbilical) • Work class ROV skills • ROV fault finding and diagnostics Delivered by OMA (Offshore Marine Academy) - courses are specific to the offshore renewables industry: • Client representative • Offshore renewable energy induction course • Cable engine driver • Subsea cable laying • Subsea cable fault finding and repairs • Introduction to Subsea Telecoms  Academic / educational courses currently running or planned at C-STATE: Delivered by Teesside University: • Subsea & ROV engineering • Offshore ROV operations management

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The purpose built facility will offer a range of subsea courses from apprenticeships to further and higher education, and industry-recognised and accredited training. C-STATE was officially opened by Prince Andrew in February and since March some 50 students have attended its courses. “In terms of industrial training, we’ve had candidates flying in from Aberdeen and Nigeria and we hope that that will continue,’’ says Tompkins. Trainees will have direct, hands-on access to a dedicated 200hp hydraulic remotely operated vehicle (ROV) in a safe and controlled environment, combined with classroom based training for all courses. “What’s unique about C-STATE is firstly, the size of the technology that we’ve put in,’’ says Tompkins. “This is a large 200 horse power ROV system, which is bigger than any other ROV that’s used for training, certainly in the UK. The approach that we’ve also taken which is hands-on technical training on the vehicle is also unique but the main USP that we’ve got, if you like, is also with education – and the sort of co-operation that we’ve developed with industry and education, which is also unique.’’ MTCS, which runs monthly ROV induction courses at Windermere as well as in Singapore and Houston, has the responsibility for marketing and running C-STATE short courses, which include: work class ROV technical, high-voltage skills, high-pressure hydraulics, umbilical reterm, and subsea client awareness. Bespoke courses can also be developed. In addition to attracting military people and those with engineering skills, the college and university will take a medium-term approach to train apprentices and graduates for the industry. C-STATE will also develop programmes to educate school children about the careers in subsea. Has C-STATE been well received? “We’ve had a good response from industry and we’ve had a very enthusiastic response from education,’’ says Tompkins. “We’re now doing some work with the Crown Estates who are now working with C-State to increase the coverage of ROV nationwide within schools. So the response to bringing more people into the industry has been extremely positive. Going forward,

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Closing the gap Richard Warburton, managing director of MTCS, says: “Not a day goes by when we don’t hear about the acute shortage of skills in oil and gas. The subsea sector is already showing signs of being constrained by this. If we carry on trying to solve the skills issues using the current solutions, the industry will not achieve growth. That’s why our collaborative approach is different. “With many companies it is not simply about finding people, but more about how they recruit, how they keep people and how they equip them with the skills they need to do the job. “We have fully investigated what the industry needs in terms of skills and explored the existing programmes which work well for individual companies. We have shared best practice from industry and designed pan-industry programmes which deliver solutions in the short to medium-term. “C-STATE aims to make a material and sustainable difference by helping companies source and develop the people they need to prosper. Here at MTCS Ltd, we help people from the military such as airframe technicians and weapons engineers, who make good technicians and subsequently ROV pilots. And there are those with trades like electrical engineers and car mechanics who also have a good aptitude for our courses.”

obviously we were extremely lucky to get the royal opening earlier in the year which was tremendous, so yes, the response has been very enthusiastic.’’ And if this early success continues, could the concept be extended? “Yes, absolutely,’’ he says. “We’re now working with the bodies and the various potential users that I’ve just described to expand the facility. We’re looking at bringing in simulators, ROV simulators and potentially smaller electric ROVs that will be held in water tanks to do live piloting from. So yes, we’ve got plans to expand the facility and increase the customer base.’’ n

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COMPANY PROFILE

BEL Valves – Looking good at 50 BEL Valves turns 50 this year. Join us on a journey through time, as we follow the path that took them to where they are today To understand BEL Valves’ beginnings, we need to go back to the 1950s. This was the era that colour TV and seat belts were introduced, saw the Queen’s Coronation, the four minute mile and the first animal in space - and, of course, the birth of BEL Valves. The business was manufacturing valves under licence for ICI for high pressure petrochemical applications, but didn’t start their own designs until 1964 as British Engines Valves. As older readers may recall, 1964 was also the first year that Match of the Day aired on BBC2, the average weekly wage was £16, Prince Edward was born and it was the year that launched Pirate radio. So North East based BEL Valves are celebrating their 50th year anniversary this year, as you would expect the business has achieved some significant milestones of their own in their 50 year history… 1964 – First valve designed and delivered - a 7/8” high pressure valve and actuator for a Polyethylene plant 1966 – The first apprenticeship intake 1970 – First valve export 1982 – First subsea valve installed in the North Sea 1986 – 100 apprentices trained 1990 – First High Integrity Pressure Protection System delivered (HIPPS) 1994 – First order value over £10m destined for Norway 2000 – First of the deep water projects installed in the Gulf of Mexico at 1036m 2002 – Development of the double isolation Eccentric ball valve 2004 – Design of the Subsea Electric Actuator 2007 – First Subsea High Pressure valve installation 2010 – Highest pressure, water depth & bore size combination for the Gulf of Mexico 2013 – Largest high pressure subsea HIPPS valve Neil Kirkbride, CEO at BEL Valves, commented: “We’ve been part of this global industry for 50 years and been involved in some fascinating developments throughout this time, but none

THE SUBSEA SECTOR

We’ve been part of this global industry for 50 years and been involved in some fascinating developments throughout this time, but none more so than now more so than now.” BEL Valves are investing heavily in the future, embarking on significant expansion plans with a five year development that started last year. To facilitate an increasing demand BEL Valves footprint will increase to over 55,000m2, doubling capacity at their manufacturing and R&D facilities. The additional space also makes room for the growing number of personnel at BEL Valves’, as the company anticipates growth to 600 employees in 2015. As a company committed to long term success, BEL Valves are focused on technology development, improvements in efficiency, and developing their employees to support personal and business needs. With increases in demand from their focus markets, BEL Valves is continually

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developing its capabilities to provide enabling technology for onerous service conditions in the upstream oil and gas sector. Challenges include deep and ultra-deep waters, combinations of high pressure and high temperature, and extreme environmental risk associated with high H2S. A focus on export markets where we anticipate growth will provide a path for sustainable success in 2014 and beyond. BEL Valves will celebrate this occasion with their employees, to provide a thank you for all their hard work and dedication over the last 50 years.

CONTACT DETAILS: T: +44 (0) 191 265 9091 E:enquiry@belvalves.com T: twitter.com/belvalves F: www.facebook.com/BEL.Valves L: www.linkedin.com/company/bel-valves-ltd

SPECIAL REPORT | AUTUMN 14


SPECIAL REPORT | AUTUMN 14

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THE SUBSEA SECTOR


AUTUMN 14

INSIGHT

LOOKING AFTER NUMBER ONE PDL Solutions is at the cutting edge of Subsea Technology. Chief executive Paul Charlton talks to Peter Jackson about his company’s role in helping the UK maintain its position as the industry leader PDL Solutions based in Hexham is a thriving company in a thriving subsea sector. Since its foundation, the engineering consultancy has seen 14 years of steady and profitable growth and, apart from Hexham, has established bases in Houston, Texas, and Singapore. Chief executive Paul Charlton is optimistic that this can continue into the future. In fact, he predicts that the business will triple in size over the next three years on three continents, with annual turnover rising from £2m to £6m. It currently employs 40 people and he expects that to grow to 70 people over the next three years in the three regions.

THE SUBSEA SECTOR

PDL provides advanced engineering design and analysis consultancy services to clients operating in predominantly three main energy sectors – oil and gas, nuclear and offshore renewables. The split of the business is approximately 80% oil and gas, 10% nuclear, 10% renewables. Charlton explains: “On the oil and gas base, we are heavily subsea related, and what we do are analytical services – we mitigate risk, we shorten development timescales and we reduce development costs. We do all the upfront analysis work. It’s just simulation. We take a model of whatever it is that’s going to go down there and we apply all the material

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properties to that model. We apply all of the loads that it’s likely to see over a 25 or 30 year period and we crunch some big numbers and we say if it’s up to the job or not. When it isn’t, we then work with the client to change things, repeat the analysis until everything goes green, and then we say yes, it’s fit for use.’’ PDL Solutions works with clients to extend the life of current subsea assets, on the design of new equipment and on decommissioning. It would work, for example, with a manufacturer such as SMD to find the most optimal shape for a Remotely Operated Vehicle, (ROV), to reduce drag and lift. “We’ll then work with them to ensure from >>

SPECIAL REPORT | AUTUMN 14


INSIGHT

AUTUMN 14

a structural point of view, the chassis is up to the job, and then we’ll run the fatigue analysis to ensure that it will withstand so many millions of cycles of operation, in a whole host of different environments,’’ says Charlton. “So we’re very much complementary to the in house engineering team of the likes of SMD. We do not have a product ourselves personally, we work with our clients’ engineers to help them optimise their product and ensure that it’s fit for purpose.’’ Easy to extract oil has been taken around the world. Considerable reserves remain but they are in harsher environments and harder to reach places. For subsea this means that technologies must be developed to operate in deeper waters. Offshore platforms represent huge capital investments and, to make the most of them

got to do that in high sea states, and you only have an operating window of four to six months in any year, because then the weather just comes against you. “So in deep water, you’ve got to deploy big yellow things – as we call them – you’ve got to deploy this big, heavy subsea infrastructure through a thousand metres of water, in high sea states. That requires a big vessel and that requires new technology.’’ These challenges become even more extreme further north into the Arctic Circle. “There you need different kinds of vessels that can operate in that environment. You need to come up with technology to then deploy things on the seabed, through the icecap. You then need to have new technology to enable them to operate for 40 years in extreme temperatures.’’

The subsea industry globally, and especially in the UK – which is a global leader right now – needs to have technology at the top of its agenda if it’s going to maintain its leadership position in the North Sea, companies now seek to sink so-called in-fill wells which feed back to the original platforms to keep their production at a constant level. This requires a huge subsea infrastructure to tie back from the in-fill wells to the original platforms which could be as long as 150km. “It’s in everyone’s interests to leave those aging assets out in the North Sea for as long as possible, because once they’re gone, they’re gone,’’ says Charlton. “So the operators are doing what they can to find these in-fill wells as far away from these assets as possible and then tie them back.’’ In the North Sea, that’s even harder than it sounds. Charlton says: “The challenge is that in the deep water you’ve physically got to deploy something. Now in the UK CS [Continental Shelf] it’s only, say, a thousand metres water depth to the west of Shetland. But, you’ve

SPECIAL REPORT | AUTUMN 14

With longer tie-backs another challenge is to ensure that the fluids flow from the well and to do that over distances of 100km to 150km they need to be boosted, to be kept warm, and within the parameters of an ideal mix to avoid wax deposition that can render a pipeline unusable. “So you’ve got three challenges, but you’ve got one common solution, and that’s new technology,’’ says Charlton. “The subsea industry globally, and especially the subsea industry in the UK, which is the global leader right now, needs to have technology at the top of its agenda, if it’s going to maintain its leadership position.’’ Depending on which report you read there are between 12bn and 24bn barrels of oil and gas left to be extracted from the UK Continental Shelf. The Government commissioned Sir Ian Wood to undertake a review of what was needed to maximise the remainder of the

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reserves. The result was the The Wood Review, one of the key recommendations of which was the development of new technology and the accelerated development of new technology. Charlton argues: “The Wood Review will have a massive impact on the next 30 or 40 years of the UK CS. I’m not a betting man, but from where I sit right now, the only technology that’s going to enable the extraction of that 12-23 billion barrels of oil is subsea.’’ New technology is Charlton’s key interest. Not only is he chief executive of PDL Solutions, he is also chairman of NOF Energy, a board member of the National Subsea Research Initiative and chairman of the research and technology theme group within Subsea North East. Subsea North East has four basic aims: • To get the message out that the North East is a global centre for the supply and development of subsea products and services. • Business development and maximising the capability and capacity of subsea companies in the North East. • Developing skills and ensuring that the local schools, colleges and universities are developing appropriate courses to bring on the next generation of subsea engineers. • Research and technology. Charlton says: “On the research and technology side of things, our remit is to ensure that the operators and the subsea systems suppliers are aware of the expertise that already exists in the North East of England and then to ensure that the region is one of the go-to places to develop this new technology to overcome these challenges in the deep waters, the harsher environments and the longer tie-backs. “How are we going to do that? By ensuring that universities in the region are providing appropriate courses to develop the people, but that they’re also working on appropriate research programmes to develop the appropriate technology. So we at Subsea North East are working with the local universities, to tell them what the industry needs are, to give them the opportunity to address those needs by running appropriate research programmes.’’ He cites, as a classic example of this, Neptune Subsea Research Centre, next to the former >>

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COMPANY PROFILE

Subsea Innovation complete major expansion Subsea Innovation, one of the world’s leading subsea equipment suppliers, has completed work on its new headquarters and manufacturing facilities. The company supplies a wide range of Offshore Equipment Handling Systems, Pipeline Repair and Recovery Systems and Subsea Sealing Solutions to many of the major contractors in the offshore Oil & Gas sector across the world. The completion of the new facility follows on from a prolonged period of growth, which required the company to increase capacity in order meet demand for its products from key players in the oil, gas and renewable industries. The development, which trebles the size of the company’s operating space to 60,000 square feet, has enabled Subsea Innovation to test Launch and Recovery Systems (LARS) to lift up to 100 tonnes and it has installed cranes capable of handling up to 50 tonnes of equipment. Work on the 40,000 sq. ft. facility was carried out by local contractors J and RM Richardson and was designed by Darlington’s Architects Design Group. Subsea Innovation’s annual turnover exceeded £10m for the first time in its history in 2013, up from £7.5m in 2012. The company is expecting to pass the £10m turnover mark again in 2014 as its exiting journey continues. The move has allowed the company to compete for larger contracts and it has already sealed a 7 figure order from Middle-Eastern energy supplier RasGas to supply pipeline clamps and connectors. Further orders are continuing to be received and with an order book as healthy as it has ever been and many more live enquiries looking positive the company looks well placed to be able to fill the new facility and further strengthen its workforce. This growth has seen the business increase its staff numbers from 30 in 2012 to an expected 50 by the end of this year. Martin Moon, Managing Director at Subsea Innovation, said “Our new headquarters

THE SUBSEA SECTOR

Subsea Innovation staff putting the finishing touches to a Tether Management System

The fact that we have had to expand our operation is a great testimony to the work that we are doing here and with large organisations such as RasGas choosing Subsea Innovation we are not short of endorsements demonstrates the progression we have made over the past two years. It was always our aim to double in size to compete for larger contracts and is extremely satisfying now that this has been realised. “The facility can test heavier equipment and with

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more capable cranes and the additional workspace that it brings it will enables us to develop our research and development side further, which will prove to be a key factor in securing future work. “We are currently in the process of transferring projects to the new headquarters and expect to be fully operational by November. We own the previous headquarters and we will continue to utilise this for the refurbishment of our existing clients equipment, which we see as a growing market, and as a dedicated Research & Development centre. “The fact that we have had to expand our operation is a great testimony to the work that we are doing here and with large organisations such as RasGas choosing Subsea Innovation we are not short of endorsements.” With the workload continuing to grow Subsea Innovation have appointed Dave Thompson as Engineering Director to strengthen the management team. Dave comes with a wealth of experience in the sector having spent time with both IHC and Technip in previous roles. Dave will join the company during October and is relishing the challenges that lie ahead. Subsea Innovation will be exhibiting in Aberdeen at the Subsea Expo in February 2015 and again at Offshore Europe in September 2015.

For more information call: +44 (0) 1325 349050 Email: info@subsea.co.uk www.subsea.co.uk

SPECIAL REPORT | AUTUMN 14


INSIGHT

AUTUMN 14

Swan Hunter Yard. Subsea North East worked closely with Newcastle University on this to identify the areas of interest of subsea companies from all over the North East and also a number of the major subsea systems suppliers and the major operators globally. “We need to appeal to a much wider audience. Our customers are not in the North East of England, typically they’re not even in the UK, they’re global companies,’’ says Charlton. “We need to make sure that areas of interest that we as North East companies are working on are applicable to the global market. We’ve done an exercise whereby we create a spreadsheet of all of the areas of interest by all of the Subsea North East group companies plus two major operators, global international oil companies and three subsea systems suppliers. We then worked with Newcastle University to find about 38 areas of interest and from those 38 areas of interest we developed four themes.’’ The themes are:

SPECIAL REPORT | AUTUMN 14

• Materials, the characterisation of the materials and the reliability of those materials. • Reliability predictions of components and for systems. • Power distribution, controls and sensors. Long tie-backs need power to reach them, 100km away from the nearest platform to control equipment in extremely harsh environments with controls that are 100% reliable for a 40-year lifetime. • New sensor technology for high pressure and high temperature environments. Charlton says: “Having done this analysis up front and this engagement with the operators and with the subsea systems suppliers, we’re now signalling to the likes of the National Subsea Research Initiative, to the oil and gas innovation centre, to the industry technology facilitator, and also to the oil and gas technology leadership board, that the Neptune Centre is on the map, that it’s based in the North East of England and it has, or it

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will have, the capability to address these four themes, which ultimately address the three major challenges of the subsea space. “When we get this right, what that’s going to do is it’s going to be a draw for engagement with and investment from the global subsea market. That’s the position that we want to get to for the Neptune Centre.’’ The North East is a world-beater in subsea technology but it cannot afford to rest on its laurels – other countries are challenging its position. As Charlton warns: “The likes of Brazil and Norway invest an incredible amount of money in research in the subsea space. “If the UK is not careful, it’s going to fall behind. Well, it’s already behind Brazil and Norway in terms of investment in research, but we still have a technology advantage based on history. “Unless we develop technology now to address these new needs, the UK is going to lose its position as number one.’’ n

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COMPANY PROFILE

Technip Umbilicals are taking Tyneside further Technip Umbilicals, formerly DUCO, specialise in the manufacture of subsea umbilical systems, providing the critical link between remote subsea wells and fixed or floating production systems Holding an impressive 30-year track record, Technip Umbilicals’ pioneering technologies and unique customer service has meant the company has supplied some of the world’s largest and record breaking umbilical projects. With manufacturing facilities in the UK, USA, Angola and Malaysia, Technip Umbilicals is perfectly located to supply all global regions with their world-class subsea products and services. Utilizing the flexibility of their shared assets and resources results in highly efficient project planning and execution. The company’s global strength ensures exceptional turn-around, standardized practice and project support. Supplying thermoplastic, steel tube and electrical umbilicals with a large range of subsea products and services also available, Technip Umbilicals can successfully deliver pioneering projects in challenging environments. They are the only umbilical supplier committed to manufacturing in West Africa. With headquarters based on the River Tyne, recent years have seen ongoing investments to the facilities and work-force. Employing many industry leaders, Technip Umbilicals’ Newcastle site is also home to the world’s most capable steel tube umbilical assembly plant and dedicated research and development facility. Contributing to the manufacture of highly reliable umbilical systems and services, the state-ofthe-art facilities, deep-water quay location and experienced work force also highlight the North East as a key region for the subsea sector. The on-going investment programme ensures Technip Umbilicals stay at the forefront of the industry and are always ready for new challenges Employing around 600 personnel on Tyneside, they provide structured training for workers to update skills and ensure their knowledge of all equipment and processes leads to exceptional safety, quality and delivery. With the aim of being a reference

THE SUBSEA SECTOR

Vertical Helix Assembly Machine

Investment is a year on year priority, between upgrading machinery, the building of world-leading facilities and the training and development of staff, there is a constant dedication to developing the business further company for safety and quality, Technip’s Pulse and Quartz programs, have not only contributed to changing the behavioural mind set but also to the winning of Investors in People Gold award. Technip Umbilicals is passionate about developing the future, with their exciting Graduate Development Programme they are committed to bringing new talent into the oil and gas industry. Helping to create future subsea experts, the programme provides a vast amount of knowledge on the sector and gives graduates a taste of every option within the global business. The skills of Technip Umbilicals’ employees helps propel the company

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into world leader position every year. From concept to completion – the teams are constantly ensuring clients get the best services and products. The substantial investment in staff helps the seamless process that Technip Umbilicals offers always exceed client expectation. From their dedicated facility in Newcastle, Technip Umbilicals has a strong focus on research and development, helping it to develop technologies and products to ensure they remain the technical leader at the forefront of an evolving subsea market. With most recent advancements including Aluminium cable, which can deliver electrical power beyond a depth of 3,000m and the development of a new patented system which enables umbilicals to be installed in to deeper water with less risk. There is continuous development on product performance, including the enhancement of product capability to allow greater working pressure, higher operating temperatures and creating greater component reliability for all products. This means longer life cycles for harsher conditions with easier and more robust installation methods. Technip Umbilicals have built their global presence on pioneering developments and advanced technologies. Backing the industry’s best people, processes and ideas with modern manufacturing facilities, they safely provide superior umbilical solutions for every project and environment all across the globe.

Technip Umbilicals Ltd, Nelson Road Walker Riverside, Walker, Newcastle upon Tyne NE6 3NL. +44 191 295 0303 www.technip.com

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INTERVIEW

AUTUMN 14

LONG TERM VIEW AFTER A QUICK FIX

SPECIAL REPORT | AUTUMN 14

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THE SUBSEA SECTOR


INTERVIEW Andrew Essen has big ambitions for Quick Hydraulics but he has to have the skilled staff, as he explains to Peter Jackson

THE SUBSEA SECTOR

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Andrew Essen bought Quick Hydraulics a little over three years ago – and has built it up to a £4m turnover company with 34 employees. The North Shields based designer and manufacturer of hydraulic systems had just 14 employees. It achieved annual sales of £3m in 2012, but is aiming for £6m next year and between £7.5m and £10m the year after. The business provides hydraulic components and hydraulic training to its customers’ engineers, from shop floor to project engineer and even design manager level. Between 60% or 70% of its work is for the subsea market. “The original intention was to grow the business in the energy sector,” says Essen. “Since then, the nuclear – after the Fukushima disaster – has been very much on the back burner and, similarly, a few years ago everybody was talking about a big commitment in offshore wind and, again, that’s sort of sliding off into the future. So, for us, the market that has been here and now over the past few years has been subsea. “When I bought Quick Hydraulics, it was technically very good at what it did, but it was quite low profile and the previous owner was happy working with existing customers and didn’t seem to market the business.’’ Now the workforce has more than doubled, the firm has been able to expand its horizons. “When it had 14 employees it wasn’t seen as being a credible supplier in the supply chain for companies like SMD and others,’’ says Essen. “We’ve changed that around. We have >>

SPECIAL REPORT | AUTUMN 14


INTERVIEW

AUTUMN 14

critical mass to do more business in North East England, but also the capability to go to the North East Isles off the North East of Scotland.’’ If the company meets its growth targets over the next two years Essen anticipates that the workforce will be up to about 60. He explains: “We’ve seen a growing demand for our services side of the business and that’s very much about manpower. Just to put things in context, when I bought the business we had five hydraulic technicians – we’re now at 17. In the first two weeks in May, I had four technicians working on a pooling rig doing installation work, and a fifth on an offshore vessel working for one of our customers, so that’s five guys doing offshore work. Three years ago Quick Hydraulics wouldn’t have been able to resource any of that. “But there are some of those jobs where demand is starting to pick up for eight or 10 or 12 technicians. One of the things that I can offer is that there’s a chronic shortage of skills in Aberdeen, so my marketing ploy is to say, ‘I’m not planning on opening a workshop in Aberdeen but what I can offer you is capacity capability out of North Shields’.’’ Does he anticipate any difficulties recruiting in future? “No and yes. We’ve been quite fortunate in that so far we’ve had a steady flow of job applicants from people with a reasonable skill base. So on the technician side, I would envisage we’ll continue doing what we have been doing. We’ve got eight apprentices at the moment and we’ll continue to recruit people from a range of backgrounds. “The challenge will be to get the professional skills that I need to support the design engineers and the project engineers. I’ll probably tackle some of that through graduate recruitment but I’ve done a couple of recruitment campaigns, one successful but one I had to give up on because I couldn’t get anyone with the skills I was looking for.’’ As a Subsea North East member with particular responsibility for skills, he is aware that this is not a problem only Quick Hydraulics faces. He says: “All of the Subsea North East companies have got the same issues with expansion, in that they’re constrained in expansion by a resource capability. Of course it’s made even more challenging for us now

SPECIAL REPORT | AUTUMN 14

because some of the big players in Aberdeen are seeking to set up facilities in the North East, on the basis that they believe there is more resource capability in the North East than there is in Aberdeen. Which is true, but there’s not an overcapacity so when they’re coming in here, they’re seeking engineers from the same pool of people that the local OEMs are seeking them from. We’re almost victims of our own success and it creates challenges for the companies that are already here.’’ To tackle this problem Subsea North East has been working to raise the profile of the subsea sector, which is something Essen feels was slightly neglected in the days of the regional development agency. He says: “We haven’t had the profile we probably should have, partly because when

primary school children to give them a flavour of what engineering is about. Hopefully they will realise that they can get a cracking career in the subsea sector, getting paid good money and travelling to lots of interesting places.’’ Essen is also chairman of the North Tyneside Manufacturing Forum, which is partnering with the North Tyneside Learning Trust to raise awareness among primary and secondary school pupils and among teachers and school governors. He is a governor of Monkseaton Middle School and has arranged visits for teachers and fellow governors to Quick Hydraulics for them to gain an appreciation and understanding of the industry. Subsea North East is also looking at the possibilities of recruiting skilled technical personnel from the armed forces.

In the North East engineering has been a bit of a dirty word in the last 10 or 20 years...so we’ve got a sort of PR thing to deal with One North East was around, and post One North East, there has been a fixation with offshore wind and people have taken subsea for granted.’’ Over the past year Subsea North East has been working with the region’s universities to make students aware of the opportunities in the sector and it has been exploring schemes for work placements for secondary school pupils and also working at primary school level. Essen says: “As well as solving the short term needs, you’ve got to say, what’s the medium and long term? Somebody that you might be recruiting in 10 or 15 years’ time might be eight years old at the moment. “In the North East engineering has been a bit of a dirty word in the last 10 or 20 years. People have conceptions of the old shipyard culture and that it’s a declining industry. So for engineering in general and subsea in particular, we’ve got a sort of PR thing to deal with, hence myself, and some other oil and gas companies and SMD will be working with

26

“I’ve got one in my business,’’ Essen says. “The first technician that I got had just recently left the RAF, and he’s a core member of the team now. What we’re doing is trying to be as imaginative as we can in where to look for more experienced people who are coming in from outside the industry, but also trying to pump-prime the system by looking to get primary school and secondary school kids interested and engaging with students who come to the North East to do their degree.’’ So is he optimistic? “I’m realistic. No one else is going to solve these problems so you’ve got to go out there and solve it yourself. There are businesses in the Subsea North East sector who have constrained their growth because of the resource availability. But, long term, the good news for subsea and engineering in general is the tide of public opinion is turning and people are getting more switched on to engineering as a bright, viable career and in the long term we will get the benefit of that.’’ n

THE SUBSEA SECTOR


AUTUMN 14

COMPANY PROFILE

Leading the way in subsea expertise A global leader in providing specialist subsea services to the offshore Renewable Energy and Oil and Gas industries, Reef Subsea is currently reaping the rewards of strategic planning and dedication as it continues to grow at an accelerated rate Since its formation in 2011, Reef Subsea has grown its workforce to more than 100 employees and, as part of its continued growth plan, has recently purchased a new ploughing asset and signed a service agreement with the Port of Blyth for a new storage, maintenance and mobilisation facility. As a result, Reef Subsea is well prepared to handle forthcoming wind farm and oil & gas developments in the UK, as well as in European and Nordic waters. In addition, Reef Subsea is presently engaged in a number of major projects and has recently secured further contracts which sees its fleet of construction support vessels continue to be fully utilised. This highlights the company’s excellent reputation for project delivery which ensures client satisfaction. Fundamental to the Reef Subsea’s success is the collective purpose of operating a ‘Zero Harm Philosophy’ and belief in the company vision, to be the leading subsea services partner to energy and construction companies worldwide, most recognised for passion, presence and performance. Daryl Lynch, Chief Commercial Officer, Reef Subsea, says, “These are exciting times for Reef Subsea and we are now in the optimum position to continue to realise our ambitions of growth and development. We are looking forward to continuing to increase our efforts and develop the business even further, becoming the subsea partner of choice in our industry.”

Polar King

Our employees are our greatest asset and drive our success

These are exciting times for Reef Subsea and we are now in the optimum position to continue to realise our ambitions of growth and development. We are looking forward to continuing to increase our efforts and develop the business even further, becoming the subsea partner of choice in our industry

THE SUBSEA SECTOR

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Reef Subsea. Gac House, Sabatier Close Stockton On Tees, TS17 6EW T: +44 (0) 1642 704 400 E: Enquiries-Pu@reefsubsea.com W: www.reefsubsea.com

SPECIAL REPORT | AUTUMN 14


INSIGHT

AUTUMN 14

UNLOCKING THE OCEAN’S SECRETS Subsea is a highly technical area and companies benefit from the research work at Newcastle University, as Peter Jackson discovers talking to Professor Nick Wright

Work is set to begin this month on a new centre of innovation and excellence on Tyneside aimed at creating world-leading subsea technologies. The £7m Neptune National Centre for Subsea and Offshore Engineering will be the first of its kind in the UK, bringing together industry and academia to create a world-class engineering research facility. It is being developed on the north bank of the River Tyne on the Shepherd Offshore-owned Neptune Energy Park.  Depending on the weather the facility should be built by next spring, ready to take specialist equipment and be operational by the end of next year. Newcastle University is leading the development and the project lead is Professor Nick Wright, pro-vice-chancellor for research and innovation. He says: “It’s going very well. We’re very pleased with it and it should give us new facilities to hopefully collaborate with companies. We hope they’re going to be some of the best facilities in the UK, and in Europe.’’ The main facility will be a large hyperbaric chamber which will allow the testing of equipment at deep ocean pressures.

SPECIAL REPORT | AUTUMN 14

The building will have capacity for about 25 people, but the majority will be university staff and students using it when necessary. It is hoped that it will play a key role, not only in research, but in helping to address the skills gap. Prof Wright explains: “One of the feedbacks we had from the local companies is that they want more qualified engineers, but they feel that graduates don’t know that much about their industry. From the perspective of a graduate, it’s a bit risky, the idea of working for one of these smaller companies, as opposed to moving to Derby and working for Rolls Royce. So the feeling is that if we can get student projects going, and get the students to work down there in collaboration with the companies, then that will help the students to realise that the local jobs are actually really good jobs and we will retain more of these graduates in the North East. There’s a big shortage of graduate engineers at the moment, and almost every company in Britain wants more engineers.’’ But Neptune will also be at the forefront of some of the major research areas for subsea. “There are actually still a lot of unresolved questions around engineering materials

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at high pressures, particularly when these materials are transported by pipes, particularly when they’re quite hot, and they’re chemically corrosive as well,’’ says Prof Wright. The centre will also look at the development of polymers, new types of steel and new methods of manufacture to find ways of withstanding those levels of temperatures and pressures. On a less practical side, it will be used by researchers on scientific agendas such as ocean exploration. “Because it really is quite true that we don’t know that much about the environment, and scientific understanding of the ocean is quite limited,’’ says Prof Wright. “There’s quite a lot of interest in developing ROVs [Remotely Operated Vehicles] for deep water exploration. We saw when that plane went down in the Indian Ocean how difficult it is to find anything, and how little we know about the ocean globally. So there’s a lot of scientific exploration that will take place over the next few decades, and there’s a lot of our engineers that are involved in research programmes globally, to develop technology for exploration. I think that will also be supportive for those companies like SMD that are developing similar technologies but for the oil and gas industry. There will be some technical interchange, I think, between those.’’ Apart from Neptune, what is the university doing in the subsea sector? “Recruitment into engineering has been really strong and is growing every year,’’ he says. “We’ve got a lot of people now coming into undergraduate degrees so we’re strengthening all of our engineering departments and

THE SUBSEA SECTOR


AUTUMN 14

We saw when that plane went down in the Indian Ocean how difficult it is to find anything, and how little we know about the ocean globally – so there’s a lot of scientific exploration that will take place over the next few decades obviously subsea engineering is an area of priority for us just in terms of recruitment of academic staff. So we’re recruiting new people into our marine engineering areas, specifically into these sort of areas such as electrical and mechanical engineering.’’ The university has decided not to teach subsea at the undergraduate level, finding that students are unwilling to specialise at too early a stage. “What they want is to do a proper sort of engineering degree, that they can then get accreditation for, or become a chartered engineer and so on,’’ he says. “Then, what we really need to is to get these people

THE SUBSEA SECTOR

interested in these kinds of fields, so that as postgraduates, they might take some interest. “We do a master’s degrees in subsea engineering or they might just go straight into the workforce, or do a PhD. We don’t see any demand from the students for special degrees at undergraduate level. I think it’s more important that people get a good general education. “There’s been talk about UTCs [University Technical Colleges]. We can’t really see what the educational sense is in a UTC in subsea engineering, to be honest with you, it’s too specific. You’d want to be doing engineering and specialise later.’’

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INSIGHT

Many other disciplines feed into subsea, apart from mechanical engineering. It is a multi-disciplinary area which also involves a strong element of chemical engineering and electrical engineering. “I think it’s a bit like the aerospace industry,’’ says Prof Wright. “Not many students do undergraduate degrees in aerospace, they mostly do mechanical, electrical, that sort of thing and then go into it afterwards, and subsea is very similar I think. But yes a lot of those areas feed directly in, so a lot of graduates from our electrical engineering courses are working in SMD.’’ Newcastle is generally rated as being in the top 10 in engineering among UK universities and the UK is regarded as being in the top tier globally. Only a handful of UK universities have significant subsea activities. The university is still active in the area of renewables and works closely with Siemens, which is opening a new laboratory in the university in electrical grid technology. Newcastle University works closely with industry and Prof Wright cites the example of Bel Valves. He says: “They’re predominantly a mechanical engineering company doing very high quality specialised mechanical engineering. They came to us and said, could we collaborate on electrical control of their mechanical valves. So we’ve designed some circuits for them which we’ve now handed over to them and they’re testing them. “It’s helping them to develop new products. Being local to each other helps. They can pop into us and we can pop into them. They can use that to talk to customers and say they’re active in R&D and using new technology. “In return they can be helpful to us, advising our mechanical engineering department about ways to agree mechanical training for our undergraduates. Bel’s a really high quality engineering company, and they’re able to help the students. The students go down to Bel to get some experience in their facility, so that’s great for the students too. The relationship works both ways, it’s not about the university telling the company, it’s about how we can help each other. We’ve got complementary expertise I suppose. It’s just mutually beneficial really. n

SPECIAL REPORT | AUTUMN 14


INTERVIEW

AUTUMN 14

HOW WE BECAME WORLD BEATERS Subsea is a jewel in the crown driven by technology and innovation for the North East George Rafferty tells Peter Jackson George Rafferty, NOF Energy’s chief executive, is bullish about the North’s oil and gas industry. He argues that not only has the region played a pivotal role in the UK and global oil and gas industry for more than half a century, but, thanks to a cluster of technology-led, innovation driven companies, its role in the market will remain key for years to come. He says: “This region built 70% of the platforms in the UK North Sea and while the North East still has some of the best fabricating contractors in the world delivering projects for internationally renowned customers, the industry has evolved as operators push for new ways to extract hydrocarbon resources and maintain below the surface offshore operations, which requires the expertise of another group of world-class companies. “Within the industry is the subsea sector, which I often describe as the jewel in the crown of the North East’s energy supply chain. In fact, the subsea sector is more than that, it is a jewel in the crown of the region’s economy.’’ He points out that the North East subsea sector produces annual revenues of £1.5bn and has grown by 50% in just three years. “These figures are all the more striking when you consider the sector is made up of a cluster of just 50 companies,’’ he says. “The UK subsea industry is worth in the region of £8.9bn – 45% of the global market. The North East generates 7% of that global revenue.’’ He says that the companies making up the sector are world-leaders, exporting their skills and technology across the globe as the oil and gas industry seeks to recover resources from deeper and harder to reach locations. At the

SPECIAL REPORT | AUTUMN 14

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THE SUBSEA SECTOR


AUTUMN 14

same time, oil and gas production is starting to shift away from platform-based operations to seabed-based recovery systems, which, again, provide opportunities for subsea companies and their advanced technological solutions. In particular, three of the region’s greatest exports, Remotely Operated Vehicles (ROVs) and flexible hoses and umbilicals, have ensured it is one of the premier ports of calls for Tier 1 and 2 contractors building their supply chains. These technological advances, led by companies such as SMD and IHC Engineering Business, supported by the region’s other subsea vehicle specialists such as DeepOcean, Reef Subsea and Modus Seabed Intervention have cemented the North East’s position in a truly global market. Wallsend-based SMD has developed more than 125 work-class ROV systems and recently delivered its 1000hp QTrencher ROV to its long-standing customer, DeepOcean. “The QT1000 embraces the latest technology in jet trenching. It can trench pipelines, umbilicals and cables up to three metres in the seabed,’’ says Rafferty. “It has been mobilised on board the DeepOcean vessel the Havila Phoenix, which has been deployed in the Southern Norwegian Sea on three projects.  “SMD’s technologies have not only been used in the oil & gas sector, but also in industries such as defence, telecommunications and salvage markets. Its ROVs have also been applied to the offshore renewables market helping the subsea sector become supply chain pioneers in this emerging market.’’ He points out that Stocksfield-based IHC Engineering Business, which is owned by Dutch company Royal IHC, has also successfully expanded its operations to apply technology solutions to the offshore wind sector. “In particular, its trenching technology is another great example of the continuing development of new innovations coming out of the North East,’’ he adds. “Its Hi-Traq, the world’s first four-tracked subsea trencher, which has specifically been designed for the burial of inter-array cables at offshore wind farms, was launched earlier this year and has generated a positive industry-wide response. “It is also worth mentioning a common denominator between SMD and the Engineering Business, Dr Tony Trapp. Tony

THE SUBSEA SECTOR

helped to launch SMD 30 years ago before going on to set up the Engineering Business, which he sold two years ago to Royal IHC.   “He has continued his subsea legacy with the establishment of OSBIT Power, which is another excellent example of the intense cluster of technology-focused offshore industry companies that exist in this region.  “These companies, which also include, among others, umbilical and riser specialists Technip, flexible hose manufacturer GE Oil & Gas’ Wellstream Flexibles and valve, actuator and controls producer BEL Valves, have helped to create a vibrant and driven subsea sector that is helping to attract and retain skilled people.”’ However, he warns that the sector cannot rest

INTERVIEW

education supported by industry-recognised and accredited training. Subsea North East, the advocacy group for the region’s subsea industry, has been working with Newcastle University to identify research programmes to be undertaken by Neptune. Subsea North East, which is administered by NOF Energy, features an executive board made up of some of the leading figures in the region’s industry. It promotes the region’s innovation and excellence in the development of subsea technologies and solutions.  It is also a driving force behind promoting the skills agenda for the region’s subsea sector and works closely with different tiers of the education system to promote engagement

The North East subsea sector is rightly regarded as an exemplar of technology and innovation – and the global industry will continue to look to this part of the world for subsea expertise on its laurels, facing as it does a continuing, and in some areas growing, skills shortage, coupled with increased competition from countries such as Norway and Brazil. To maximise on the region’s skills and experience, the industry has formed an alliance with government and academics to create a new research facility that will not only help create the next generation of technologies, but support the development of subsea-focused engineering expertise. He says the £7m Neptune National Centre for Subsea and Offshore Engineering on the North Bank of the Tyne at the Neptune Energy Park, owned by Shepherd Offshore, will again help the region be a global leader in this industry. In the south of the region, collaboration between Modus, MTCS, Darlington College, Teesside University and Darlington Borough Council is helping to address the front line skills issues with C-STATE. A purpose-built training centre in the Tees Valley, C-STATE provides an extensive range of subsea training programmes from apprenticeships to further and higher

31

and career aspiration. The group also hosts an annual conference and exhibition in the region, supported by NOF Energy, which attracts speakers from across the offshore sector. In 2014 the speakers included representatives from Apache North Sea, Bibby Offshore, Chevron North Sea, GE Oil & Gas Infield Systems and Wood Group Kenny. Rafferty says: “These companies more than appreciate the role the North East subsea supply chain has to play in their operations and are always keen to be part of these events as it provides them with direct dialogue between existing and potential suppliers. Subsea North East’s conference in 2015, which will take place in June, is set to attract an equal calibre of speakers and the group will be announcing further details in the New Year. “The North East subsea sector is rightly regarded as an exemplar of technology and innovation and there is no doubt, based on the quality of the companies we have, that the global industry will continue to look to this part of the world for subsea expertise.’’ n

SPECIAL REPORT | AUTUMN 14


INTERVIEW

AUTUMN 14

INDUSTRY LINKS IN UNIVERSITY’S DNA

Subsea is now benefiting from the engagement of the region’s higher and further education sectors

SPECIAL REPORT | AUTUMN 14

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THE SUBSEA SECTOR


AUTUMN 14

Teesside University has always had a close relationship with the region’s industry. That engagement is, after all, part of the university’s history – it’s in its DNA, according to Dr Paul Shelton, assistant dean of employability and business partnership. He says: “The university was founded as Constantine College in 1930 by the Constantine family who were into shipbuilding at the time, and so it always had that link with maritime activity, they being our founders. It eventually became the polytechnic and then Teesside University. So that element of our mission of supporting business has always been there, and we’ll continue to fulfil that path and ambition.’’ In the last 10 years the university has developed a close relationship with the offshore industry through its distance learning, which has provided training for people working not only in the North Sea, but increasingly in offshore all over the world. Dr Shelton says: “We provide that support for people who can’t attend conventional face to face delivery, but they can do an HNC or an HND in a mechanical control room process engineering. We actually have several hundred students who are studying in that way, many involved in subsea activities, increasingly.’’ He adds: “The university is committed to supporting local businesses, of course, a cluster of which are involved with subsea activities, remotely operated vehicles or robot underwater vehicles.’’ So when the university was approached by Darlington firm Modus Seabed Intervention to help in tackling a skills gap facing the subsea industry, the university was receptive. Dr Shelton explains: “There is a shortage of trained vehicle operators – the reason is because there is a shortage of berths on ships as these things run on very tight lines.’’ So Teesside University worked with Modus, Maritime Training and Competence Solutions (MTCS), Darlington College, Tees Valley Unlimited and Darlington Borough Council to set up The Centre for Subsea Technology Awareness, Training and Education, or C-STATE. Located at Darlington College and jointly owned by Modus and the university, C-STATE

THE SUBSEA SECTOR

INTERVIEW

The market for subsea operation in the UK is likely to increase significantly as offshore wind farms are developed as well as potential deep water mining

has been set up to provide a platform for specialist training and education for the entire industry. C-STATE is there to serve an industry that operates at the cutting edge and so it has to have cutting edge kit. It boasts a £4m ROV with full maintenance and support workshop facilities. Dr Shelton says: “To support the training programmes the college is offering apprenticeships in this area, for local entrants. The university will offer degree options for students to work on robotic vehicles as part of project activities and also as case studies for electrical and mechanical applications. “The C-STATE facility will also be made available for HNC programmes and it can be delivered by a blended approach, such that on a flying basis, employees from overseas can buy a block delivery to study critical aspects of ROV operation, in conjunction with underpinning vocational units in electrical and mechanical engineering, by distance to a full HNC. “For those operators seeking short courses, both Darlington College and the university will be providing relevant short course

33

programmes, either for technician level in the university or for managers who need to understand the potential application of these types of vehicle in subsea operations.’’ The university offers an MSc in petroleum engineering, which gives students the option to study subsea units, again working with an ROV and on the use and application of an ROV. The course has up to 60 students on it from all over the world, often from regions with an offshore sector, such as Ghana, the Far East and, increasingly Libya. The students, according to Dr Shelton, tend to be production engineers from places such as Nigeria, Ghana, East Africa, Egypt, Saudi Arabia, the Gulf States and oil producing areas in general. Is subsea and area which is likely to grow? “Absolutely,’’ says Dr Shelton. “The market for subsea operation in the UK is likely to increase significantly as offshore wind farms are developed as well as potential deep water mining. I think there’s a lot of nervousness about that, about what you might do to the bottom of the sea by digging it up but it’s certainly something that people are thinking about.’’ n

SPECIAL REPORT | AUTUMN 14


SALARY SURVEY

AUTUMN 14

WHAT ARE YOU WORTH? >> The outlook is bright in the offshore sector but wages won’t rise forever, according to a new report Optimism continues to rule in the oil and gas sector with most businesses expecting to take on staff in the next 12 months. This is the finding of the 2014 edition of the Nigel Wright Energy UK Oil and Gas Salary Survey. As a result of this buoyant market demand for permanent and contract staff, average salaries and overall benefits packages have continued to rise. The report’s authors, however, don’t believe that these inflated labour market conditions are sustainable and they argue that many companies in the sector are becoming wise to the fact that this has been driven by industry stakeholders, such as recruiters, encouraging prospective candidates to demand more. Companies are beginning to combat this by being creative around the benefits packages they offer, in the knowledge that money perhaps isn’t always the best way to attract talent. “Certainly, the results of our survey highlight that although financial rewards remain important, there are in fact a range of other benefits that are attractive to candidates in today’s market,’’ says Anthony Broadhead, country manager – energy. “We fully support creative approaches to incentivising prospective candidates and always make a point of advising clients on what the options are in this area.’’ The information was gathered from more than 1,000 respondents who completed an online survey in the first quarter of 2014, as well as

SPECIAL REPORT | AUTUMN 14

data from Nigel Wright’s own networks. “This provides us with a large data-set allowing us to understand in more depth the average salaries and the types of benefits people working within the oil and gas industry receive,’’ added Broadhead. Other areas looked at in the survey include what benefits people see as an important part of their remuneration package and the reasons why people move jobs, as well as the methods that they use to search for a new job. The average salary, excluding benefits and bonuses, received by respondents was £80,000, with salaries ranging from between £30,000 at non-management level up to £250,000 at C-Level. The majority of respondents were either satisfied (28%) or moderately satisfied (32%) with their current remuneration. 17% claimed to be very satisfied. As part of their last salary review respondents received, on average, a 4.1% increase. Overall, respondents were expecting slightly more in their next salary review, with the average increase expected, rising to 4.2%. Of those responding to the survey: • 46% were employed by companies with more than 500 employees • 39% worked for companies with more than 1,000 employees • 33% were employed by companies with a turnover greater than £500m • 45% worked for companies with a turnover in excess of £100m. Respondents were involved in all of the major oil and gas sub-sectors covering reservoirs,

34

wells, facilities, subsea and marine and support services. Half the respondents have worked for their current employer less than two years, 31% have been with the same company for more than five years. On average, respondents work 44 hours per week. The majority of respondents were either satisfied (35%) or moderately satisfied (40%) with their current job. Only 12% described themselves as very satisfied. Two thirds (66%) of respondents would approach a recruitment company when searching for a new job. This was followed by directly approaching employers (57%). Social networking sites (38%) and job boards (28%) were also popular. Increased remuneration, new challenges and promotion were the most important factors for respondents when looking to change jobs. Some form of company benefit or bonus was received by 89% of respondents as part of their remuneration package. Respondents felt that the three most important employer benefits as part of a remuneration package were a personal bonus (48%), employer contributory pension (45%), and flexible working (44%). On average, employers contribute 7.5% to employees’ pensions via employer contributory pension schemes. Four out of ten respondents received both a company and personal bonus, with three quarters of respondents receiving a company performance related bonus as part of their remuneration package, the average being 11%. This ranged from an average of 6% at non-management level to 23% at C-Level. A personal performance related bonus was given to 46% of respondents as part of their remuneration package, the average being 13%. This ranged from an average of 5% at non-management level to 30% at C-Level. n

THE SUBSEA SECTOR


AVERAGE AGE: 45 (RANGE: 21-70)

5

BONUSES

40%

OF RESPONDENTS RECEIVE BOTH A COMPANY AND PERSONAL BONUS

66%

OF RESPONDENTS WOULD APPROACH A RECRUITMENT COMPANY WHEN SEARCHING FOR A NEW JOB

SOCIAL NETWORKING SITES (38%) AND JOB BOARDS (28%) WERE ALSO POPULAR

35

BENEFITS

7.5%

89%

OF RESPONDENTS RECEIVE SOME FORM OF COMPANY BENEFIT OR BONUS AS PART OF THEIR REMUNERATION PACKAGE

THE SUBSEA SECTOR

46%

OF RESPONDENTS RECEIVE A PERSONAL PERFORMANCE RELATED BONUS AS PART OF THEIR REMUNERATION PACKAGE

SPONDENTS WOR

JOB SEEKING & JOB CHANGING

ON AVERAGE, EMPLOYERS CONTRIBUTE 7.5% TO EMPLOYEES’ PENSIONS VIA EMPLOYER CONTRIBUTORY PENSION SCHEMES

75%

OF RESPONDENTS RECEIVE A COMPANY PERFORMANCE RELATED BONUS AS PART OF THEIR REMUNERATION PACKAGE

THE MAJORITY OF RESPONDENTS WERE EITHER SATISFIED (35%) OR MODERATELY SATISFIED (40%) WITH THEIR CURRENT JOB. ONLY 12% DESCRIBED THEMSELVES AS VERY SATISFIED

, RE

44 HOURS PER WE

ABOVE EL OR LEV

7%

EDUCATED TO DEG ARE REE

AS PART OF THEIR LAST SALARY REVIEW RESPONDENTS RECEIVED, ON AVERAGE, A 4.1% INCREASE

K

RESPONDENT’S PROFILE

THE AVERAGE SALARY, EXCLUDING BENEFITS AND BONUSES, RECEIVED BY RESPONDENTS WAS £80,000, WITH SALARIES RANGING FROM BETWEEN £30,000 AT NONMANAGEMENT LEVEL UP TO £250,000 AT C-LEVEL

AGE

1000+

12%

ON AVER

FEMALE

WORK HISTORY & JOB SATISFACTION

88%

BASE:

EK

MALE

BASIC SALARY, EXCLUDING BENEFITS & BONUSES

SPECIAL REPORT | AUTUMN 14


INTERVIEW

AUTUMN 14

Tony Trapp is not a man to rest on his laurels. He helped set up SMD and was one of four Newcastle engineering graduates who founded the Engineering Business in 1997 which grew to be a world market leader in the construction of specialist dredging equipment and complex custom-built offshore vessels. He is widely recognised as a leading figure in the offshore sector. He was named the Entrepreneurs’ Forum Entrepreneur of the Year in 2008, North East Business Executive of the Year in the same year and was made Newcastle University’s David Goldsmith Visiting Professor of Business Innovation. Now he has a new venture, OSBIT, which stands for On Specification Budget and In Time. He is the major shareholder of the subsea engineering and technology company, which he set up with three former colleagues from IHC Engineering Business in July 2010. It currently has 35 employees, mainly engineers, and operates out of the same building in Riding Mill – which he leases from his pension fund - that used to house IHC Engineering Business. The terms of Trapp’s departure from IHC Engineering Business meant restrictions on the areas he could work in, so in the early days OSBIT concentrated on offshore wind, working on schemes for Siemens, Statoil and Marubeni. He says: “We continued with that, but basically

offshore wind and dealing with utilities isn’t really compatible with us trying to grow an engineering business quickly. So over this last year or more, we’ve veered much more back to oil and gas.’’ As a start-up, OSBIT also had the problem that its accounts were not impressive enough to enable it to win the bigger contracts. “How do you persuade anyone to give you a decent contract? That’s quite hard,’’ says Trapp. However, they did a number of contracts and then, about a year ago, landed a sizeable piece of work from Technip for a 150 tonne shock absorber, which it delivered in January. That was worth about £1m, Technip was happy and this was followed by another contract, from a different part of Technip, for a similar size piece of work. “In January we got an order for a couple of million from Subsea 7 and since then we’ve been producing a lot of contracts as well,’’ he says. Last year’s turnover was £1.4m but in the year to 30 September, 2014, it will be about £8.5m. “I’m hoping by the end of this year we will have paid off all our start-up debts,’’ he says. He also believes the balance sheet will have moved from about minus £330,000 to between £500,000 and £1m in the black. “So we’ve really picked up and we’re going to be properly audited, and I think our accounts will look wonderful. Our target is to get them

out at the latest by early November. We’re in a good position to spring off now,’’ Trapp says. Next year OSBIT’s target is to double this year’s turnover and Trapp reports that it already has a lot of enquiries about work. There are, of course, events outside OSBIT’s control which could knock his company off course, but he remains philosophical. He says: “One of the things that is starting to worry me is the price of oil. Brent Crude has dropped below US$100 a barrel and I heard on the radio this morning someone talking about it going down to US$80 or US$85. That’s not good for our customers and it’ll put a dampener on our whole development, but this is a bigger geopolitical thing, it’s totally outside our scope. I’m pretty sure we’ll continue to find interesting things to do.’’ What are the kind of interesting things that OSBIT likes to do? “What we like to do is design and build stuff,’’ he says. “Our ideal contract is to design and build stuff that requires a bit of blue sky thinking, off the wall stuff, on a tight delivery for a reasonably tight price. “We know exactly what we’re doing and we’ve got a limited time to do it in, and we are really, really good at doing that. We’ve got a lot of clever people, the four directors are a very good team, we get on very well, and we’re usually all here, so we can make decisions very quickly, >>

THE TRAPPINGS OF WEALTH CREATION Tony Trapp has done more than most to develop the offshore and subsea sectors in the region. Here he talks to Peter Jackson about his latest venture

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Where the money is, is in the customer’s pocket, and you’ve got to extract it from the customer’s pocket. You’ve got to find the customers, you’ve got to be competitive and innovative and world leading we’ve got a very coherent team. “Below us there are another six people, who, any of them, you could give a major project to and you know that they’d handle it properly. Below that, we’ve got a lot more competent engineers.’’ He places great emphasis on training. “We’ve always been a big training organisation in SMD, in the Engineering Business and here. We’ve had six student placements this year, we’ve got four fresh graduates from Newcastle University mechanical engineering who joined us in the last month or so, three of them got firsts. We had two excellent students from Edinburgh for six months in the first half of this year and both of them have signed up to join us in a year’s time. We’ve also had quite a few experienced people come and join us who I’ve worked with before in one of the other companies. OSBIT does not do nuts and bolts, it owns no means of production and it does no fabrication. It sub-contracts work or hires it in. He says: “Our supply chain is very important to us, we’re multipliers. We bring the big work in, and then we spread it down. If we bring in a £1m project, I should think at least £600,000 of that we pass onto the supply chain.’’ He is convinced that the region’s economic future is with companies such as OSBIT. “I’m clear what the region needs is to be a specialist in a niche technology. SMD is the world’s leader in dredging, EB ended up, just before we sold it, as one of leading contenders to make big pipe lay systems.’’ And OSBIT? “I don’t know what we’re going to end up being. There’s no doubt we’ve done a lot of access, and we’re now into big access systems which cost a couple of million pounds. We’ve now designed and built one and it’s just about to be commissioned in Angola. That appears to be quite a big market. There are a couple of entrenched players in at the moment, and

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we’re going to jostle that market up a bit. “At the moment we’re operating extremely efficiently and effectively as a small company with 35 clever people. One of my challenges is when you get to 60 or 70 people, it’s very difficult to stop it deteriorating.’’ Would he build it up and sell it on like EB? “Last time we had a 10-year programme, we sold it and it was our plan to do that. My ambition was to get at least a £1m net into the pockets of the four owners, in actual fact we got far more than that and ticked that box.’’ He has a similar programme for OBSIT and the nature of the business makes that inevitable. He explains: “At the last year at EB, we ended up with a £60m order book. When you get big offshore contracts, you normally have to put up a bond before you’ll get staged payments. Typically, it’s 10% and we needed £5m of assets that we could put up against the bank offering us £5m of bonds. Well we managed to wangle our way out of that and reduce it to about £3m. But what the bank said was you can’t have any more contracts for another two years. Hopeless. So not doing something like selling was not an option. I think people like UKTI might have been able to help now, but when you get to that size, it’s very difficult to go on as a small organically grown company, privately owned. “My colleagues are quite clear, what we want to do is create value, have some fun along the way, make a difference to some little bits of technology and enjoy it.’’ He says he is determined that creating value should mean creating value for everybody in the company that helps to build it. At the Engineering Business, when it was sold, the staff got £5m under an Enterprise Management Incentive scheme, meaning 70 people received an average of £75,000 each. “The tax system is very favourable towards the sort of thing we do and one of the things I

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wonder, is why more people don’t do what I’m doing,’’ says Trapp. “I got my finance manager to do a spreadsheet, looking back over the last 17 years of my career and projecting forward another six. When you look at the key businesses in this industry, which are typically a £100m turnover businesses with 200 employees, in terms of net wealth creation for the individual, I think I can get five times what they get, by doing what I’ve done.’’ He is evangelical about this. He says: “What the UK needs – what North East England needs – is more companies like SMD, like Pearson’s, like EB, hopefully like OSBIT. The other way you can do it is by having a family company. And I think in Germany, a lot of their wealth comes out of relatively small, family owned companies. Instinctively, I’m not quite so keen. Having seen it at SMD, I’m not so keen on that and I don’t think that’s so much the UK model. I’m absolutely clear that for the future of the North East we need more companies that do innovative things that are world leading. It doesn’t have to be in engineering, it could be in anything. “The Government desperately wants to make regions like the North East better, but it doesn’t know what to do. It’s happy to put some money in and then all it does is it creates centres of excellence and then people go on about dualing the A1 and building faster railways and faster internet. That doesn’t create new industry. It might help at the margins, but where the money is, is in the customer’s pocket, and you’ve got to extract it from the customer’s pocket. You’ve got to find the customers, you’ve got to be competitive and innovative and world leading. “That’s where it is and that’s what we need, I’m convinced of it. I only know the tiny bit that I’m involved in. But we’ve demonstrated that you can do that. In fact you can do that over and over again.” n

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CASH IN THE ASSETS Decommissioning North Sea installations is likely to be a major field of activity for subsea – and there’s some serious money to be made, Nigel Jenkins tells Peter Jackson

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There are more than 600 offshore installations in the North Sea, 470 of which are in UK waters. Many of these assets are now well past their intended life span. UK, European and International laws, regulations and fiscal policy stipulate that these installations must be decommissioned when they reach the end of their useful life. It is estimated that the North Sea decommissioning market will be worth £35bn over the next 20 years. However, Sir Ian Wood’s assessment of the oil and gas industry, the UKCS Maximising Recovery Review, suggested that – based on recent well abandonment performance – those costs could escalate significantly and easily be more than £50bn. Decom North Sea is a not-for-profit organisation with a membership drawn from operators, tier one contractors, specialist supply chain organisations and various stakeholders from across Europe. Its role is to work with members and partners to develop solutions that will reduce the cost of decommissioning offshore installations in the North Sea and to ensure the supply chain is ready and able to work in this growing market. Decom North Sea chief executive Nigel Jenkins says: “North Sea assets have not been, until very recently, designed from the standpoint of how they were going to be decommissioned, but everything has a finite life. Decommissioning is an essential part of full lifecycle management. It should not be seen in a negative way because it will undoubtedly create a huge number of opportunities. “As with any asset, be it a building or a pharmaceutical laboratory, a chemical plant or an offshore platform, we have to take it from late-life management to decommissioning. “The Wood Review has concentrated people’s focus on both extending life and maximising output, but also there is a very important

section on decommissioning and how those activities can complement on-going operations. We want to keep sweating the assets, but we also want to prepare for the time when decommissioning needs to occur and the technical and commercial challenges of doing that are significant. “Decom North Sea plays a vital role in the decommissioning of oil and gas assets. We facilitate, co-ordinate, promote and drive collaboration, removing barriers and encouraging the most efficient end of asset life solution development and delivery. “We nurture the skills that are the lifeblood of innovation and decommissioning. At our core is a drive to safely reduce decommissioning costs and reduce the liability for tax payers and future generations.’’ He adds: “The Wood Review and Scottish Government Total Value Add reports highlighted the strategic importance of decommissioning to the UK and European economy and stressed the need for solutions to reduce decommissioning costs. “DNS plays a leading role because we are the

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only organisation bringing all members and stakeholders together.” Jenkins wants the UK and DNS to become the centre of excellence for decommissioning. DNS is part of a collaborative network including the new O&GUK decommissioning forum, the INSITE programme and MASTS, NOF Energy, EEEGR, Subsea UK, OCA, DECC, Scottish Enterprise, Highlands and Islands Enterprise, Energy North and the Nuclear Industry Association. “If there is a game changer out there, it will emerge from this network,’’ says Jenkins. He was a board member of DNS from 20112013, before he stood down to become an industry consultant. A mechanical engineering graduate, his previous roles have included board leadership positions with AMEC and AECOM and he was a board director with KDC Contractors which has worked on decommissioning projects. He replaced Brian Nixon who was chief executive until he retired after leading Decom North Sea since its establishment in 2009. Jenkins says: “My motivations are firstly born from a personal commitment to full life cycle management. By this I mean every asset has a finite life and we as asset owners have a duty of care, not only to excellence in design, construction and operations but also to late life management and eventual decommissioning. “Secondly the challenge of building on the excellent work of DNS through its formative years, responding to new market and regulatory drivers and helping all stakeholders navigate a successful route through a local, national and global landscape is immensely interesting and enjoyable. My background in engineering, decommissioning across related sectors and stakeholder management will be very useful.’’ DNS doesn’t argue for the immediate or >>

Decommissioning is an essential part of full lifecycle management. It should not be seen in a negative way because it will undoubtedly create a huge number of opportunities

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even early decommissioning of assets and Jenkins points out that in some cases partial decommissioning could be more appropriate rather than full asset removal. It is possible to undertake some recycling. “If you can remove an asset and use it somewhere else by refurbishing it, that would seem to be a great thing to do,” he says. “The future of Decom North Sea is based around a very clear strategy and that is built on fundamental elements: informing all our stakeholders, learning, collaborating and improving. Within those four themes we have a number of well-resourced activities focusing on subjects such as early contractor involvement, improving market information/ knowledge, reducing the cost of P&A and lessons learned from past projects. “The role for Decom North Sea is to continue acting as the focal point for collaboration, early supply chain engagement and innovation across the industry, thus helping the operators minimise the cost of decommissioning. By doing this Decom North Sea is delivering value for its members and stakeholders.’’ Jenkins is keen to point out the career opportunities presented by the decommissioning agenda. He says: “If you are an engineer or a project manager, this is a fascinating place to be because every project is different and there is a huge drive to bring innovative solutions to decommissioning. “There is a 40-year horizon ahead of us of with challenging, exciting and interesting things that must be done.” One of the greatest of the decommissioning challenges is in well plugging and abandonment (P&A). Jenkins calls for collaboration to help meet that challenge. He says: “P&A is absolutely the high cost area so, where feasible, joining together to do that is absolutely correct. We’ve had an initiative over the past year or so to bring operators and suppliers together to review and develop P&A techniques. That is a fascinating area. “Operators and regulators need a supply chain that is proactive, innovative and will drive out cost through collaborative working. Decommissioning is a positive activity of reuse, removal and renewal.’’ Jenkins says operators’ plans for Murchison,

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Operators know they need to act ... the Wood Review has crystallised some key aspects, decom plans are formulated and the market is increasingly active Brent Alpha and Bravo are firming up. He says: “Operators know they need to act and are doing so, the Wood Review has crystallised some key aspects, decom plans are formulated and the market is becoming increasingly active. The UK and wider European supply chain is now becoming more aware of the market drivers and opportunities.’’ Jenkins believes the UK supply chain is well positioned to benefit. He says: “They have been aware of the market and the key regulatory, legislative and related drivers. The key now is active and informed engagement with operators and key stakeholders to deliver cost effective decommissioning solutions. And we should remember we have membership from across Europe and therefore our focus is North Sea wide. Although decom is a relatively immature industry in the UK currently, it is likely that the UK will become a centre of excellence and that these key skills will become exportable.’’ These skills could, for example, be used in the

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Gulf of Mexico and DNS is actively engaged with Gulf of Mexico operators. Jenkins says: “These organisations often have an international footprint with some shared challenges. DNS can help with the cross fertilisation of ideas. It may be worth noting that the Idle Iron Regulations in Gulf of Mexico – where abandoned wells must be fully P&A after five years – is driving P&A competence in Gulf of Mexico, so there is clear learning here, especially as it is estimated 40% of decom costs over here will be in P&A.’’ What are his immediate plans for DNS? “I will be firming up a refreshed DNS strategy with the existing board and membership over the coming months. This is built upon the fundamental elements of inform, learn, collaborate and improve. And, of course, we have just had our annual conference jointly organised with Oil and Gas UK where 300 delegates enjoyed informative forward thinking presentations, panel sessions and networking opportunities over two days at St Andrews.’’ n

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