ISSUE 31 SPRING 2018
F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L
75 SPECIAL ISSUE
CELEBRATING 75 YEARS OF ENABLING OUR MEMBERS TO WIN WORK IN THE GLOBAL ENERGY INDUSTRIES
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Contents ISSUE 31 SPRING 2018
FROM THE EIC 5 Foreword
From the Chief Executive
6 View from the top
Ian Funnell, Managing Director, ABB, and Carl Ennis, Managing Director, Siemens Energy Management
10 75 years in energy
Celebrating 75 years of energy
19 A blast from the past CEOs Dai Somerville-Jones and Mike Major share their memories
OIL AND GAS
39 Cutting costs offshore How JIP33 is implementing standardisation
40 Gulf of Mexico: Poised for growth
26 Special report: A changing energy landscape
30 A share in the future
42 UK technology helps buoy US offshore action
Updates from the EIC
24 The big question
What are the big issues on the horizon for the UK energy supply chain?
Jeremy Bowden looks back at 75 years of change in the UK industry Nicholas Newman on energy business start-ups
62 Back to the future
Energy leaders share their thoughts on what lies ahead
66 My business
Should you wish to send your views, please email: email@example.com
NUCLEAR 54 Going nuclear in China Catriona Knox, Head of Energy, Department for International Trade, British Embassy, Beijing
Paul Gallagher, Director for Field Development and Consulting, SNC-Lavalin
44 OTC 2018
50 years of shaping the global oil and gas industry
Gulf of Mexico
55 Japan’s decommissioning challenges
Dr Keith Franklin, Nuclear Specialist, Department for International Trade, British Embassy, Tokyo
UIhil esto eate cus
Chief executive: Stuart Broadley
Oliver Metcalfe, Power, Nuclear and Renewables Energy Analyst, the EIC
89 Albert Embankment, London SE1 7TP Tel +44 (0)20 7091 8600 Email firstname.lastname@example.org
51 Recharging the UK’s energy sector
75 years in energy
The Energy Industries Council
Jeremy Bowden says clear policy direction is needed
Vendm eati bea dolor
Grspe ratqui aborporis
48 UK reignites plans for carbon capture and storage
Carl Ennis and Ian Funnell
Rachel and Jonathan Wormald, YPS Valves Ltd
Chris Stones, Sales Director at Servelec Controls, talks to Energy Focus
Vance Scott, Americas Oil and Gas Transaction Advisory Services Leader, Ernst & Young
20 News and events
35 Remote operations
58 Turning waste into a resource Richard Vale, Power, Nuclear and Renewables Energy Analyst, the EIC
60 Q&A: Floating wind comes of age Roberts Proskovics, Engineer, ORE Catapult
Editors Sairah Fawcitt +44(0)20 7880 6200 email@example.com Edward White +44(0)20 7091 8638 firstname.lastname@example.org Publishing director Aaron Nicholls Production Rachel Young Senior designer Gary Hill Design studio manager Claire Echavarry
For sales and advertising please contact Tim Cariss +44(0)7759 463456 email@example.com Energy Focus is online at the-eic.com ISSN 0957 4883 © 2018 The Energy Industries Council
Energy Focus is the official magazine of the Energy Industries Council (EIC). Views expressed by contributors or advertisers are not necessarily those of the EIC or the editorial team. The EIC will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.
Publisher Redactive Media Group, Level 5, 78 Chamber Street, London E1 8BL Tel: +44(0)20 7880 6200 www.redactive.co.uk
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Foreword Stuart Broadley CEO
From the Chief Executive: In this 75th anniversary special edition, we look back at the key industry events over the last seven and a half decades as well as look forward to what the future holds On 25 February 1943 the EIC was born when 13 supply chain companies met in war-torn London. While the Second World War was still ongoing, the tide did seem to be turning and an end at last seemed in sight. Sensing brighter days ahead, our founding members felt it was time to start looking to the future and the opportunities it might hold. As forward-thinking and optimistic as they were, little could they have known just how much the UK and global energy industry would change over the next 75 years. Or the EIC for that matter. When the EIC was launched, the UK was reliant on coal for power. The 1950s and 60s saw a huge expansion of refineries in the UK, most of which used imported oil. That soon changed with the UK Continental Shelf Act coming into force in 1964, and the first UK offshore well being drilled the following year. The UK North Sea really ramping up from the mid-70s onwards. The UK’s first nuclear power station, Calder Hall, now known as Sellafield, was opened in 1965, followed by a programme of ‘first generation’ reactors, very much establishing us as a world leader in this sector. Of course, latterly Hinckley Point C got the green light in 2016 and UK suppliers to this sector will be in great demand as a wave of nuclear new build gets underway around the world. Likewise, the UK took an early lead in the development of renewable energy, with our first commercial onshore wind farm coming online in Cornwall just over 25 years ago, followed by its offshore counterpart, the
Blyth wind farm, in 2000. We’ve proven to the world that this technology is economically feasible, with last year’s CfD auction prices coming in as low as £57.50/MWh and way ahead of schedule. With new innovations taking place and battery storage options addressing intermittency issues this sector is going to continue to grow at a rapid rate, and developers across the globe are looking to the UK for our expertise and experience. As the landscape of the energy industry has evolved, so too have we. From membership originally comprising just over a dozen power equipment suppliers that wanted to diversify and export into the fast-growing oil and gas markets abroad, we now include more than 600 companies covering every energy sector: oil and gas, power, nuclear, and renewables. And as the challenges and opportunities that face our members have changed, we’ve also updated our offering to make sure they’re in the best position possible whatever the markets have in store. From starting out meeting once a year to discuss opportunities and share leads and contacts, we now hold over 130 events every year, and boast a whole suite of bespoke business development tools such as our flagship CAPEX and OPEX databases, EICDataStream and EICAssetMap. Advances in technology are making the world smaller, and overseas markets are closer than they’ve ever been before. To make sure our members are able to make the most of the world of opportunity that’s out there, we’ve expanded our EIC Connect format to new locations worldwide, run export showcases with UK Export Finance, host the UK pavilion in partnership with the Department for International Trade at all
major energy events, lead trade delegations across the globe and offer a low-cost, low-risk route to new markets through our EICLaunchPad service. While we’ve come a long way since we started 75 years ago, some things haven’t changed. I’m incredibly proud to say that four companies – three now incorporated into ABB, Cape and Siemens, and Motherwell Bridge still with its original name – have been with us since the very beginning. I’d like to take this opportunity to thank them for all their support over nearly eight decades. Another thing that hasn’t changed since day one is our core objective, noted in the minutes of that very first meeting in London in 1943: ‘To primarily promote and develop the interests of all those engaged in, or concerned with, the supply of goods, services and finance to the oil and gas industry.’ And while our membership has grown to include organisations working in all energy sectors, we’ve stayed true to that original ambition, and whatever the future holds we’ll continue to put our members and their needs at the heart of everything we do. Here’s to another incredible 75 years.
Stuart Broadley EIC CEO email@example.com
www.the-eic.com | energyfocus
From the EIC Q&A
View from the top To celebrate our 75th year, Energy Focus talks with Ian Funnell, Managing Director at ABB, and Carl Ennis, Managing Director at Siemens – two of our founding member companies – about some of the issues facing the energy industry
Ian Funnell UK Managing Director at ABB About ABB ABB is a pioneering technology leader that works closely with utility, industry, transport and infrastructure customers worldwide. With a heritage spanning more than 130 years, ABB operates in more than 100 countries and employs around 135,000 people.
How do you see the energy sector developing in the UK over coming years? I don’t think the energy market in the UK, or indeed globally, has ever been such an exciting place to work. We stand on the point of a true revolution in energy, with a wide variety of concurrent changes happening. These include the rapid growth and connection of distributed renewable generation and storage; demand side response technologies and services; ultra HVDC transmission for greater efficiency over long distances; hydrogen for transport and heating; and the electrification of transport. And in upstream oil and gas, there’s subsea production, and digitalisation right along the energy chain. Even carbon capture and storage is back on the agenda. I am also convinced that some of these changes will support and enable commercial innovation in the energy sector that will be truly disruptive. ABB is involved in all aspects of the energy train, from power generation to plug, so I am looking forward to ABB playing a big role over the next few years in helping drive the energy transformation.
6 energyfocus | www.the-eic.com
What does the UK’s future energy mix look like? There has been a rapid rise in renewable electricity generation over recent years, mostly from wind, but also with contributions from solar and even tidal – I’m proud to have been involved in the MeyGen tidal project in Scotland. The rise in renewable electricity has been matched by a continued fall in fossil fuel generation – helping drive UK CO2 emissions down to 1890 levels. The shift of generation within the electrical system will continue, with battery storage and increasingly sophisticated network management systems making this commercially feasible. But the biggest challenge will come from decarbonising transport and heating, which are still very much dominated by fossil fuels. Although the UK lags behind many other parts of the world in the electrification of rail and road transport, the numbers of electric vehicles (EVs) and buses are set to rise sharply, which would cause another significant shift in the energy mix and decline in CO2 emissions – providing the power comes from low-carbon sources. The speed of adoption of EVs is highly dependent on the roll-out of power and data infrastructure, and while the market may deliver this, it is my view that the government needs to be more active. Similarly, limited
Q&A: From the EIC
About Ian Funnell Ian Funnell joined ABB originally in 1999. After a spell in UK utilities, Ian rejoined ABB in November 2012 as Group Vice President of the global utility sector, and then as CEO and President of ABB SA (France). He was appointed Managing Director of ABB UK in January 2015. Ian Funnell is a graduate of Aberdeen University in Engineering Science. He is a Fellow of the Institution of Engineering and Technology, a Fellow of the Institute of Directors and a member of the World Economic Forum Taskforce for Infrastructure Investment.
government support has led the pace of rail electrification to slow. We will work with the industry to try and get the electrification process back on track. One other key change in the energy mix will be the degree to which systems are localised – power demand and supply will increasingly be balanced locally.
CO2, and adapting the existing pipeline distribution network to take hydrogen. However, if these challenges can be overcome, hydrogen will be a useful new element in the overall energy mix.
How will oil and gas fit in with a lowcarbon economy? Oil and gas will continue to play a major role in transport, heating and flexible generation for many decades to come. The internal challenge for the sector remains to maximise the production efficiency of existing assets and to open up new commercial opportunities through further cost reduction. Subsea processing, in particular, offers a potentially significant cost reduction, and carbon capture and storage can be used to reduce the impact of carbon emissions. At the same time, energy efficiency measures for buildings and transport will cut demand and environmental costs.
Carl Ennis Managing Director for Siemens Energy Management, UK and Ireland
What is the case for hydrogen energy? Hydrogen potentially offers an attractive alternative for heating, electricity generation and transport applications. Major challenges remain in producing the hydrogen without CO2 or in capturing the
What does the UK’s future energy mix look like? Firstly, we’re very supportive of the work the system operator, National Grid, does annually to assess the Future Energy Scenarios, but looking at how much the report has changed over the past few years tells us no-one really knows what the future will look like! At Siemens, we have an advantage – as a founding member of the EIC some 75 years ago, we’ve experienced quite a lot of change ourselves. But what remains important is to continually question what you’re doing today and look at what might be required tomorrow.
About Carl Ennis Carl joined Siemens in 1997. After leaving to become Managing Director of Weir Valves and Controls, he returned to Siemens in 2004 to manage Siemens Transmission and Distribution’s service business. Having held other senior management roles, Carl moved to Shanghai, China, where he was responsible for Power Generation Services in Asia Pacific, returning to the UK in January 2015 to take up his latest role. Carl graduated from Manchester Metropolitan University with an honours degree in Integrated Engineering Systems.
www.the-eic.com | energyfocus
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Q&A: From the EIC
ENERGY INDUSTRY AT A GLANCE
One of the biggest challenges in the energy sector is policy stability… policymakers are normally more short-term, and we spend a lot of time helping them look a little further out
Low-carbon electricity (including nuclear) exceeded
of total generation for the second quarter running in Q3 2017
I’d suggest that as part of the decarbonised power sector, we will have a large-scale chemical energy storage capability (hydrogen or ammonia) and a small number of large-scale, fast-acting power generating facilities. Renewable generation will continue to grow, with smaller-scale embedded generating facilities becoming an increasingly large contributor to this growth, alongside small or medium storage facilities to support and stabilise systems. There will also need to be a significant change in how the system is managed – from a uni-directional hierarchical system, to a true network, allowing intelligent load control, two-way power flows, and demand flexibility. This will be driven by the industry’s increasing focus on the energy consumer who, I believe, will ultimately demand changes to ensure sustainability.
Offshore wind schemes won contracts at record-lows of
What is the case for new gas storage? Historically the case has been strong for new gas storage, but the absence of new large combined cycle power station winners in recent capacity auctions, tends to suggest that gas demand for power generation is unlikely to grow further. However, there is an energy crunch coming in the mid-2020s as coal is phased out and all but one of the old nuclear plants closes. This means the power market needs active management to ensure demand is met, and we still see a role for large combined cycle gas turbines in this. In addition, gas for heating remains highly seasonal, and this demand is unlikely to fall for some time to come.
to become the UK’s number one source of electricity generation
What is the case for 3D printing in civil nuclear energy? How will digitalisation affect the future of the energy industries? There are interesting developments in the civil nuclear sector for small modular reactors, which are smaller, standardised units, shipped and installed where needed to support the local system. It remains to be seen whether the government will go ahead with a programme and whether the regulator’s technology approval process would allow 3D printing. At Siemens we are already using 3D technology and have recently announced a £27m investment in our materials
76% In 2016, oil and gas provided 76% of the UK’s primary energy
in autumn 2017
In February 2018 the government said it expected renewables would overtake gas by
Oil and gas will still provide two-thirds of total primary energy by 2035, according to the Department for Business, Energy and Industrial Strategy
solutions facility in Worcester. While many organisations use 3D printing to validate parts before they are produced, we have produced actual gas turbine blades, which opens up a whole new way of manufacturing. What are the biggest challenges being faced by energy? One of the biggest challenges in the energy sector is policy stability. In most instances, solutions require heavy capital investment, and need clarity of policy over 10 or 20 years. Policymakers are normally more short-term, and we spend a lot of time helping them look a little further out. Another common challenge is customers’ desire to extract enhanced value from their investments. Now this is not a new challenge, but we do have a new tool... digitalisation. Data alone is not the answer, but combined with our extensive experience, customer knowledge and our new cloud-based Internet of Things platform, MindSphere, we’re able to unlock significant additional value.
About Siemens With more than 170 years of innovation, Siemens is a global powerhouse positioned along the electrification value chain as well as in the areas of medical imaging and laboratory diagnostics. Today, Siemens has around 377,000 employees in more than 200 countries/regions.
www.the-eic.com | energyfocus
From the EIC 75 years in energy
years in energy
It’s been an incredible journey for the EIC and its members, starting way back in London in 1943 with 13 power equipment suppliers. Over the years we’ve expanded our range of products and services, opened offices around the world, and now support over 600 member companies across all energy sectors
10 energyfocus | www.the-eic.com
First overseas trade mission to the Caribbean
IMAGES: GETTY/ALAMY/REUTERS/ SASKPOWER VIA FLICKR/OPEC
The EIC is founded. 13 power equipment suppliers aiming to diversify into the oil and gas sector meet in London to form the Council of British Manufacturers of Petroleum Equipment (CBMPE), as the EIC would be known for 38 years. In 12 months, membership grows to 100
75 years in energy: From the EIC
The EIC launches its first publications, British Petroleum Equipment News and the EIC Procurement Guide. Both are still in print, with the former being renamed EIC Inside Energy
The UK’s first nuclear reactor is built at Atomic Energy Research Establishment (AERE) Harwell to demonstrate the viability of commercial power reactors
1954 The Soviet Union opens the 5MW Obninsk nuclear power plant in 1954, the first to generate electricity for a power grid. Two years later, the UK opens the first commercial nuclear power station for civil use – Calder Hall, now known as Sellafield – with an initial capacity of 50MW (later 200MW). France’s nuclear programme generates its first electricity with the opening of a reactor at Marcoule in 1956
Photovoltaic technology is born. The world’s first solar panel capable of converting energy from the sun into power was developed at Bell Labs, New Jersey. The panel had an efficiency of 4%. Today's panels have efficiencies of around 20%
www.the-eic.com | energyfocus
From the EIC: 75 years in energy
Organisation of the Petroleum Exporting Countries (OPEC) is founded in Baghdad, Iraq, to secure fair and stable prices for petroleum producers and provide member states with technical and economic aid. Currently, there are 14 OPEC member states, controlling 61% of the worldâ€™s oil exports and 80% of the world's proven oil reserves
1961 The first combined cycle gas turbine plant in the world begins operation. The Brown Boveri plant in Korneuburg, Austria, had a capacity of 75MW. In the same year, the first cross-channel transmission line was built between France and the UK
12 energyfocus | www.the-eic.com
1964 UK Continental Shelf Act comes into force in May 1964 and the UKâ€™s first offshore well is drilled later that year. The first British discovery of gas in the West Sole field follows in 1965
1967 The UK reaches 50,000MW of installed generating capacity. Records show this figure at just 44MW in 1892 and peaking at just over 80,000MW in 2010
75 years in energy: From the EIC
The UK’s (and Western Europe’s) largest onshore oil field Wytch Farm goes into production. The field has produced almost 500MMbbls of oil to date and is currently producing approximately 18,000boe/d
To reflect its broadening member base and activities, the CBMPE changes its name to the Energy Industries Council (EIC) in 1981 and opens its new London office in Notting Hill Gate
Taichung Power Plant, the largest coal-fired power plant, in the world becomes operational in Taiwan. When commissioned, the plant had a capacity of 5,500MW
Delabole wind farm in Cornwall, the UK’s first commercial onshore wind farm, comes online. Marking its 25th anniversary in 2016, the wind farm had produced enough power to boil 3.4bn kettles since the blades began spinning
1991 www.the-eic.com | energyfocus
From the EIC: 75 years in energy The EIC opens its first office outside the UK, in Houston, the US
Tokyo Electric Power Co Inc (TEPCO) starts commercial operation of the world’s first advanced boiling water reactor at the Kashiwazaki-Kariba nuclear power complex, with a capacity of 1,350MW. A seventh reactor enters commercial operation in July 1997, raising the plant’s total power generation capacity to 8,212MW, making it the world’s largest nuclear power plant
The first ever EIC Connect event takes place in London. EIC Global Energy magazine is launched, later to be renamed and rebranded as Energy Focus
14 energyfocus | www.the-eic.com
1999 EIC offices open in Aberdeen and Brazil
EICDataStream is launched, quickly becoming one of the world’s leading CAPEX project-tracking databases
2003 Npower commissions the 60MW North Hoyle, the UK's first commercial-scale offshore wind farm, off the north coast of Wales. The UK now has over 5.3GW of installed offshore wind, with a further 4.5GW under construction
75 years in energy: From the EIC
The EIC registers its 500th member
Opening of the EIC’s Dubai office
Isle of Grain LNG regasification terminal starts-up with a throughput capacity of 3.3Mtpa. By 2010 the site has the capacity to process 15Mtpa, equivalent to 20% of the UK’s gas demand
2007 EIC Teesside office is opened
2008 The EIC sets up its Training department
The EIC’s head office moves to a new location on the South Bank of the River Thames in Vauxhall
2010 The first shale gas exploration well, Preese Hall-1, was spud and successfully encountered 800 metres of organic rich shale. The well hydraulically fractured in 2011 and triggered two seismic events which register on the Richter scale. New wells are to be drilled in 2018 www.the-eic.com | energyfocus
From the EIC: 75 years in energy
Global installed capacity of solar photovoltaic panels passes 100GW. The global solar market begins to shift eastwards as China surpasses Germany’s capacity, becoming the world leader three years later
2014 The EIC’s Kuala Lumpur office opens
The world’s first commercial carbon capture power plant is switched on at Boundary Dam in Canada. To date, more than 1.9m tonnes of CO2 have been captured at the facility
16 energyfocus | www.the-eic.com
Though its reactors successfully withstood shaking from the 2011 Tohoku earthquake, flooding from the ensuing tsunami caused the failure of cooling systems at the Fukushima I Nuclear Power Plant. The UK says there is no risk of a similar disaster and confirms the list of eight new sites for the next generation of nuclear power stations. It’s another five years before Hinkley Point C in Somerset, the first new nuclear power station for 20 years, gets the green light in 2016
The Oil & Gas Authority (OGA) is established following the Wood Review that was conducted in 2013. The OGA is incorporated as a government company in October 2016. More electricity is generated from renewable sources in the UK than from coal over the course of the year. By 2017, renewables and nuclear produce the majority of UK power for the first time
EICAssetMap launched, the only operations and maintenance database to map all major UK facilities across all energy sectors. EIC Connect events are held in Indonesia and the US for the first time
2018 The EIC celebrates its 75th birthday, making us one of the oldest trade associations in the world. Surpassing the 600member mark, this year also sees us take our EIC Connect model to Malaysia, Mexico and Vietnam
And beyond… From the very beginning our mission has been to support our companies, large and small, to maximise business opportunities, at home and abroad. Looking ahead, we’ll continue to adapt to the changing markets, doing everything we can to ensure a bright future for all our members. Some key
developments to look out for in the near future are: • Work is underway to extend EICAssetMap to cover the Middle East region • EIC Fit4ScaleUp business development course to be launched in partnership with Robert Gordon University • EIC Matchmaking service – an innovative database matching operators and contractors’ requirements with the solutions and services provided by the UK supply chain • EIC Supply Chain Map, a new database detailing the full capability of UK suppliers across all energy sectors
From the EIC Celebrating 75 years
7 5 Y E A R S : T H E E N E RGY I N D U S T R I E S C O U N C I L
1943: The EIC is formed by 13 member companies working in the power industry
1943: One office in London 2018: Global network of 7 offices: London, Aberdeen, Teesside, Dubai, Houston, Kuala Lumpur and Rio de Janeiro
2018: Over 600 member companies covering the full range of energy sectors â€“ oil and gas, power, nuclear, renewables
2017: EICAssetMap launched. The only O&M database to map all major UK facilities across all energy sectors
2002: First EIC Connect event in London By 2018: EIC Connect events have spread around the globe to Abu Dhabi, Bahrain, Ho Chi Minh City, Houston, Jakarta, Kuala Lumpur, Liverpool, Manchester and Mexico City
Celebrating 75 years of enabling our members to win work in the global energy industries
1943: 1 UK event
2018: 130 global events
2018: 12 UK pavilions managed by the EIC including ADIPEC and OTC
2000: EICDataStream launched. 1,100 projects tracked 2018: Over 21,000 projects worth a cumulative
US$10tn www.the-eic.com | energyfocus
Oil & Gas USA 2018 Innovative solutions and market opportunities 6 September â€˘ Norris Conference Centers, Houston
Join our flagship event to:
Find out how major operators and contractors see future market conditions
Discover the regionâ€™s new technologies and emerging sectors
Understand the goods and services required on oil, gas and offshore wind projects
Identify where the key projects are located and the easiest routes to market
Learn how to pre-qualify as a vendor
Meet potential local partners from the North & Central America region
Exhibit Open exhibition stands are available for companies to showcase innovative solutions, and include: > Two full delegate places > 8'h solid color panel wall, furniture package, and company name displayed on header
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> First sight of one-to-one appointments
> Multiple networking opportunities with industry peers
> First sight of one-to-one appointments
> Web and print promotion
> Copies of the presentations after the event
> Web and print promotion 2017 Speakers Included:
For more information: www.the-eic.com/eicconnect
OW N K O O B
From the EIC Past CEOs
A blast from the past CEOs In preparing for this special 75th anniversary edition of Energy Focus, we asked two past CEOs – Dai Somerville-Jones and Mike Major – to share memories of their tenures at the EIC Dai Somerville-Jones EIC CEO 1991 – 2004
Mike Major EIC CEO 2007 – 2012
From my appointment as Secretary of the EIC in 1988, I was I joined the EIC as CEO in 2007 to help stabilise the organisation aware that the organisation needed to gain a global presence and after a period of internal change, bring a sense of direction and influence to become a sought-after source of information and develop our portfolio of products and services. Better services provide UK industry with access to vast worldwide opportunities. would attract more members, permitting more services – the aim When I became CEO in 1991, I was able to set about was to create an upward spiral. At that time, the energy industry accomplishing this by modernising the organisation and its was buoyant, but the financial crisis was a backcloth to our work. systems. We formed a subsidiary in Houston to provide a simple, I rewrote the Articles of Association to reflect how the EIC inexpensive base for members to operate in while feeding EIC should operate, and strengthened our democratic credentials by headquarters with global information. Houston also flowed into ensuring that the directors were elected by the members. another part of my plan – to construct a computerised global The role of Honorary President was created – the first was the database of accessible filterable information providing marketing Rt Hon the Lord Patrick Jenkin who linked us to the political opportunities for members. After the success of this strategy, establishment and raised our profile. subsequent EIC subsidiaries were opened over the following four The EIC was never a lobbying organisation: its main activities years in Singapore (now Kuala Lumpur), Rio de Janeiro and Dubai. were centred round helping members identify and pursue During this period, we increased our overseas ventures with business opportunities. We were very supportive of British exhibitions, trade missions and seminars; by the time I retired, we business, and were the first choice of the Department of Trade were visiting some 50 countries on a cyclical basis. We were able and Industry to promote UK industry. to gain the confidence of the Department of Trade and Industry As the membership swelled, we moved to vastly improved new enough to receive funding for the events. offices on the bank of the Thames in Vauxhall, opened a While this expansion was taking place, I was invited new office in Beijing and took up new premises in Stuart Broadley, Mike Major, to be permanent deputy director of First Point Aberdeen, Teesside, Rio de Janeiro, Dubai and Lord Popat of Harrow and Dai Assessment in Aberdeen and Eurogif in Brussels, Singapore. A new computer system streamlined Somerville-Jones celebrate the EIC’s which boosted the EIC’s profile across the our data bank of projects, and we started 75th anniversary at the House of Lords industry both nationally and internationally. developing training for members and briefing I also introduced the EIC’s own magazine sessions from government on issues that – Global Energy, now Energy Focus. Clearly members needed to be aware of – such as this has proved its worth, as I am now able restrictions on doing business with Iran. to supply this short history of my EIC Under my tenure, the EIC’s external career in the 75th anniversary edition. relationships were greatly strengthened, I believed throughout my time in the EIC and its network of contacts significantly that the Council had much to give to the UK expanded. It was undoubtedly the pinnacle of supply base both nationally and globally. As I my interesting career. I’m proud of the benefits enjoy my retirement, I watch the EIC continue its that the EIC has brought to British industry, and mission with enormous interest – and pride that I I’d like to believe I helped lay the foundations for its was allowed to be a part of its growth. continuing success. www.the-eic.com | energyfocus
U P DAT E S F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L
news&events members to regional energy markets and their major players.
Worldwide business support
About the EIC Established in 1943, the EIC is the leading trade association for companies working in the global energy industries. Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require. As a not-for-profit organisation with offices in key international locations, the EICâ€™s role is to help members maximise commercial opportunities worldwide. We do this in a variety of ways: 20 energyfocus | www.the-eic.com
Enabling members to expand into markets across the globe
Helping members to track global energy projects and UK assets Our projects database, EICDataStream, provides extensive information on over 7,500 active and future projects in all energy sectors. By tracking full project lifecycles from feasibility to construction and then completion, it helps members to identify opportunities and plan their business development strategies. Our newly launched operations and maintenance database, EICAssetMap, puts the details of every major UK energy asset at your fingertips.
High-profile international events Connecting members with buyers and partners
The EIC hosts flagship industry events that bring together UK supply chain companies with global energy contractors and operators, and bespoke events that keep members informed about projects, sector developments and markets. Our overseas trade delegations and EIC-run pavilions at international exhibitions introduce
Member companies who want to do business outside the UK can rely on our global network of offices to provide regional market knowledge, one-to-one advice and practical support. We also provide virtual and rental offices, and facilities for hotdesking, meetings, conferences and corporate events.
Business intelligence Keeping members informed and raising their profile
We help our members to stay connected with the world of energy through informative online news, e-bulletins, market reports and industry publications. Our comprehensive directory of member supplier services is also a useful resource for operators and contractors.
Enhancing membersâ€™ skills and knowledge Our quality courses, which can be delivered off-site or in-house, are led by highly experienced trainers with industry backgrounds. We tailor our training to suit a variety of levels and also work with member companies to run programmes, some of which include tours to manufacturing companies.
From the EIC News and events
EIC 75th anniversary celebrations As you may have already noticed, the EIC turned 75 this year. To celebrate this remarkable milestone, we’re holding a series of activities and events throughout the year House of Lords afternoon tea
A global celebration
We started our year of celebrations in style with an exclusive EIC members’ afternoon tea at the House of Lords in March. Hosted by Lord Popat of Harrow, the Prime Minister's Trade Envoy to Rwanda and Uganda, with special guest of honour Baroness Rona Fairhead, Minister of State for Trade and Export Promotion, in attendance (both pictured below), the afternoon was a chance to say thank you to our members, reflect on the history of the EIC and UK energy industry, as well as look ahead to what the future holds for us and our members.
The EIC’s network of offices in the UK and around the world are all keen to be involved in the 75th anniversary celebrations. In Rio, the EIC team held a special evening reception at the British Embassy for local members on 19 March, while all our other offices are busy planning lots of fun, inclusive activities for the rest of the year – please check www.the-eic. com for updates from your nearest EIC office.
Proceeds from all EIC 75th anniversary events will go to the two charities selected by EIC staff: Cancer Research UK and The Ocean Cleanup. For more information, please visit www.the-eic.com/Donate.aspx
Founding members We're incredibly proud to say that four member companies have been with us from the very start: ABB, Cape, Motherwell Bridge and Siemens
Charity cycle ride from Aberdeen to London Perhaps the most notable event we have planned is the EIC charity bike ride. Starting out from our Aberdeen office, Team EIC will cycle via our Wynyard office down to the London HQ. They'll be covering about 580 miles in five days (8–12 June) – an impressive feat and one very worthy of support.
We'd like to use this space to thank them for nearly eight decades of support. We will be working with them to support their own 75th anniversary events. We’ll add the details to our website (www.the-eic.com/ AboutUs/History.aspx) as soon as they’re confirmed.
Our in-house expert analysts continue their impressive output of reports and have recently published EIC Country Reports covering two massive markets – Brazil and the United States – as well as EIC Insight Reports focusing on the rapidly growing energy from waste and energy storage sectors
EIC Reports are available free of charge to EIC members and for purchase (£195+VAT) by non-EIC members. Please contact firstname.lastname@example.org for more information and to buy your copy.
www.the-eic.com | energyfocus
From the EIC News and events
EVENTS COMING UP
Upcoming EIC-managed UK pavilions The EIC hosts the UK pavilion at every major energy event around the world. We’ll be at OTC from 30 April to 3 May (see our pre-event North America regional round-up on page 44) as well as these other upcoming shows: • Iran Oil Show, 6–9 May 2018, Tehran • World Nuclear Exhibition (WNE), 26–28 June 2018, Paris To book your place, as well as find out how the EIC team can support you with pre-event logistics, setting up your stand
and TAP funding on offer, please visit: www.the-eic.com/Events/ OverseasEventsataGlance/ OverseasEventsDiary.aspx Those of you who want to do a bit of background reading before attending any of the above events should check out our EIC Country Reports on the USA (detailed on page 21) and Iran, as well as our EIC Insight Report on Nuclear Decommissioning. www.the-eic.com/Publications/ MarketIntelligenceReports.aspx
EIC Connect Energy Vietnam
When: 17 May 2018 Where: Ho Chi Minh City Why attend? The EIC Connect event model continues to expand around the globe with Vietnam becoming our latest host country. This event, which benefits greatly from the support of Vietnam’s national oil and gas company, PetroVietnam, and national power company, Electricity of Vietnam, will bring together the country and regions’ major players with supply chain companies through a day of conferences, vendor briefings, energy project updates, one-to-one meetings and an exhibition. Invited speakers include representatives from PetroVietnam, Electricity of Vietnam, ExxonMobil, GE and Siemens. Vietnam is committed to increasing its oil and gas reserves and is spending heavily on offshore exploration, while also taking huge strides in the renewables sector, with a particular focus on solar power, where the government has recently signed off on legislation encouraging project development. To book your delegate place, stand or find out about sponsorship opportunities, please visit: www.the-eic.com/ EICConnect/EnergyVietnam.aspx
EIC Connect Oil & Gas USA
When: 6 September 2018 Where: Norris Conference Centers, Houston Why attend? This event is a must for those companies looking to establish or strengthen their position in the North American market. Conference sessions will take place throughout the day, with a special focus on
how the US industry has adapted to the ‘lower for longer’ oil price environment through the use of subsea tie-backs and increased standardisation, and what this means for the supply chain. We’ll also explore how oil and gas companies can diversify into the rapidly expanding US offshore wind market. Many of the region’s major operators and contractors will be at the event, providing updates on their upcoming project requirements as well as being available to meet privately with delegates for one-to-one appointments, while the exhibition will attract procurement specialists from across the country. To find out more, please visit: www.the-eic. com/EICConnect/OilGasUSA.aspx www.the-eic.com | energyfocus
From the EIC Members’ comment
What are the big issues on the horizon for the UK energy supply chain?
Energy transitions play an important role in shaping the supply chains that are in place. As the UK transitions from its current energy system to a more low-carbon one amid downturn, diversification and Brexit, Energy Focus asks four members what lies ahead
this, the UK supply chain needs to reinvest and continually develop the workforce.
Mark Colebrook CEO at Alderley The recent downturn, changing procurement models and a drive for reduced costs have all impacted the UK supply chain in recent years, and will remain a significant challenge for years to come. However, by embracing the change and investing in new talent, UK companies can not only survive, they can thrive. We have seen international oil companies outsource purchasing responsibilities to engineering, procurement and construction companies – many of which are located outside of the UK. This purchasing route is driven far more significantly by price, rather than technological leadership or even system quality. Traditionally at the cutting edge of technology, with high quality but typically higher associated costs, the UK supply chain is now competing in a diminishing accessible segment. In reaction to this shift, some UK capacity has been reduced. However, a more sustainable way to remain competitive is to invest in recruiting new talent and
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Innovations that can add value and reduce costs, coupled with the technical ability to bring a concept to fruition, can be UK engineering’s new differential providing routes to fast-track future leaders. At Alderley, we provide engaging graduate and apprentice programmes to attract and develop the next generation of engineering leaders. Some of our recent graduates are responsible for innovations such as Alderley’s virtual reality training simulator – providing operators with a superior training experience while improving safety and efficiency, as well as helping to reduce overall training costs. Innovations that can add value and reduce costs, coupled with the technical ability to bring a concept to fruition, can be UK engineering’s new differential. But to achieve
Alderley is the leading independent system integrators and technical service experts for modular packages in the energy industry. Whether integrated onto a single skid, or structured across multiple skids, it has no barriers to system integration and will find the right solution for its customers: the right product, the right service, at the right time, and at the right price.
Graham Bennett Vice President, Business Development, at DNV GL UK and West Africa Oil companies have entered 2018 with a more positive outlook than in recent years. Our annual survey, Confidence and Control: The Outlook for the Oil and Gas Industry in 2018, reveals that although confidence is returning to the industry, in the short-term, cost control will remain a priority for them.
Members’ comment: From the EIC
Even though the oil price is showing a recovery, companies want to make sure that they are profitable at lower prices and so continued cost controls need to be in place to ensure that happens. However, this needs to be achieved in a way that does not compromise safety. The stage is set for gas to become the largest primary energy source in 2034 according to our Energy Transition Outlook, published last year. Gas will continue to play a key role alongside renewables in helping to meet future, lower-carbon, energy requirements. Major oil companies intend to increase the share of gas in their reserves, as they decarbonise their business portfolios. As the UK examines alternatives to decarbonise heating, opportunities also exist for UK companies to support the transition to lower carbon fuel options, such as the use of hydrogen for domestic heating. A transition to greater use of gases as a transport fuel is also underway and we anticipate substantial growth in demand for biogas, hydrogen, compressed natural gas and liquefied natural gas for vehicle fuels in the next five years. However, specifically in the UK, energy storage remains a challenge and prices will continue to be volatile to cold weather spikes.
DNV GL is a global quality assurance and risk management company. Driven by its purpose of safeguarding life, property and the environment, the company enables its customers to advance the safety and sustainability of their business. Operating in more than 100 countries, DNV GL’s professionals are dedicated to helping customers in the maritime, oil and gas, power and renewables and other industries to make the world safer, smarter and greener.
We anticipate substantial growth in demand for biogas, hydrogen, compressed natural gas and liquefied natural gas for vehicle fuels in the next five years Over the coming months we will learn the impact of the trading arrangements which are currently being negotiated, and in the meantime many may be asking how we can respond when we don’t know what the future will bring. At Elfab, we believe that positioning our business to tackle the challenges and capitalise on the opportunities of Brexit will be the key to our success, both in the short and long-term. We are doing this by focusing on retaining and improving our competitiveness in the global marketplace. Our performance is underpinned by the key drivers of innovation and investment. Innovation to ensure we meet the current and future needs of our customers and investment in our people and manufacturing capabilities to drive the innovation and efficiencies that ultimately make us competitive. Agility in this changing market will also be a key contributing factor to being able to respond to the challenges in the energy sector and, as a supplier to this sector for many years, we are ready to respond and face future challenges head on and embrace the wealth of opportunities open to us.
Anika Ephraim Managing Director at Elfab Operating in a constantly changing environment such as the energy sector brings with it a level of uncertainty that businesses need to manage in order to survive and prosper. Today, the uncertainty at the forefront of the majority of British suppliers is Brexit.
Elfab Limited is a manufacturer of pressure relief products which provide protection for people, plant, processes and the environment. The
product portfolio includes rupture discs, explosion vents and detection systems for use in a wide range of applications and industries from oil and gas to chemical and pharmaceutical, as well as for original equipment manufacturers in industries including energy, aerospace and cryogenics.
Rob Green Director of Operations at Severn Glocon Group The oil and gas industry has developed and matured over the last 50 years along with the pioneers and business drivers who helped the industry grow. As the demands of the industry has grown, one of the major challenges facing our business has been to maintain and grow the necessary workforce required for the future. Over the last 20 years, the engineering skills gap has widened, and today the UK's engineering industry faces a skills shortage of unprecedented levels. Recognising the need to raise the sector’s profile and help inspire the next generation of engineers, the UK government recently launched the Year of Engineering 2018 initiative. During the last few years, Severn Glocon Group has put strategies in place by offering apprenticeship schemes at various levels in order to bridge this skills gap. However, catching up to fill this ever-increasing shortfall has been difficult and the next few years will be a challenge for our industry when trying to satisfy the skills gap in the short-term.
The Severn Glocon Group is an industry leader in delivering high-integrity products with advanced engineering to the oil and gas industry. At the forefront of valve innovation its products have played an integral role maximising the safety and profitability of oil and gas production for more than 50 years.
Over the last 20 years, the engineering skills gap has widened, and today the UK's engineering industry faces a skills shortage of unprecedented levels www.the-eic.com | energyfocus
Special report UK energy
A changing energy landscape
75 years in the UK industry First coal, then oil, the shift to a low-carbon future marks the third transition for UK energy systems since the EIC was formed in 1943. Jeremy Bowden looks at the effectiveness of the new power generation mix and how the country can become more self-sufficient
s the EIC commemorates its 75th anniversary, the UK energy sector is embarking on perhaps its greatest challenge so far by moving towards decarbonisation. However, the end goal remains to ensure that energy demand efficiently meets the standards of the day. Over the past 75 years, this has involved various challenges and ongoing transformation, particularly from the late 1970s onwards. When the EIC was established in 1943, the UK relied heavily on domestic coal for power generation and heating, importing all its oil and using almost no natural gas at all – gas for heating came from city gas, normally produced from coal. As domestic coal production began to fall in the 1950s and 1960s, energy supply from abroad climbed steadily, making the country ever more dependent on imports – far more so than at any other point in the UK’s history, including today. Then came the first major transformational event, which proved to be of huge benefit for
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UK plc and British companies alike: in May 1964 the Continental Shelf Act came into force in the UK and the first offshore gas discovery, West Sole, followed shortly after in September 1965. The fields that were subsequently discovered have provided large quantities of both oil and gas for the UK and continue to do so today – improving the UK’s energy independence, balance of trade and growth levels in the process. At the same time, an ambitious programme of nuclear plant construction began, building capacity that would meet 20% to 30% of the country’s electricity demand from the early 1970s up to the present day. While that power has been reliable, and the sector largely accident-free, the cost has been inflated by the clean-up required from a period when health and safety rules – along with risk awareness – were less rigorous than today. Since then, coal has been cleaned up and now all but phased out, with gas largely taking its place in heating and power generation. State energy assets have been sold off, markets opened and deregulated. After rapid
UK energy: Special report
of the UK’s energy is being produced by renewable sources. This technology is driving change and in the next 10 years our next revolution will take place
expansion in the 1960s and 1970s, refinery and fuel retail networks contracted sharply, especially with greater competition from supermarkets in the 1990s. For North Sea oil and gas, sharp growth levelled off in the late 1980s and over recent years the area has reached maturity. Declining output now means imports once again make up a significant portion of oil and gas supply, while subsidies have encouraged the growth of renewable power – which should eventually make the country self-sufficient again.
Focus on efficiency Looking at where the industry is today, the focus among those active in the North Sea is firmly on cost and efficiency – squeezing the most out of the remaining reserves at the lowest possible cost – with the sector leading the world in technological innovation: ‘North Sea oil and gas technology innovation has advanced in leaps and bounds in recent years. The next step will be the implementation of real-time technologies that offer operators the chance to access data at the touch of a button. One example of this will be wireless reservoir monitoring, providing companies with reliable, consistent wellbore information. Not only will this enable safer operations, it will also allow operators to make faster and betterinformed decisions,’ says Mark Tolley, CEO of Acoustic Data. To coordinate efforts in the North Sea and lead the drive to improve efficiency – which has seen CAPEX and OPEX costs fall by 30% to 40% in the last three years – the Oil and Gas Authority (OGA) was established in 2015, following the conclusion of the Wood Review. The OGA was incorporated as a government company in October 2016. Spencer Linsell, Sales Director at PJ Valves, says, ‘The UK North Sea has had its fair share of tough times but remains progressive. As projects become more challenging, operators will have to work in ever-harsher conditions and manage ever-more complex project specifications. This presents a huge opportunity for the UK supply chain to offer its expertise and innovation to support the next phase of growth in this famously challenging basin.’ In the power sector, it is wind, and especially offshore wind, that looks set to dominate the future, with larger, more productive turbines helping the costs of the www.the-eic.com | energyfocus
Special report: UK energy
UK indigenous production 1948 – 2008
COAL CRUDE OIL
Million tonnes of oil equivalent
150 140 130 120 110 100 90 80 70 60 50 40 30 20 10
– – – – – – – – – – – – – – –
NATURAL GAS RENEWABLE AND WASTE* PRIMARY ELECTRICITY**
*2016: Now bioenergy and waste **Mainly nuclear
Electricity generation by fuel type Coal
5% 8% 14% 2%
Wind and solar
Oil and other fuels
Source: Digest of UK Energy Statistics, Department of Business, Energy and Industrial Strategy
latest proposed projects reach comparable levels to new gas plants – meaning subsidies may soon no longer be needed. Wind is already capable of generating up to a third of the UK’s power needs, but only when the wind blows. When it fluctuates, careful balancing with gas and other flexible sources is required – a key challenge for the future. ‘The new millennium is bringing a revolution in the electrical generation and transmission market. A growing movement to renewable energy sources has changed the dynamic of the grid and the drive to reduce our reliance on electricity generated using carbon-based fuel brings with it challenges in capacity and meeting demand. We have seen, in the UK, a growing reliance on short-term operating reserves to help support the grid and keep the lights on,’ says Keith Robertshaw, Business Development Director at N-ERGY.
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‘Up to 50% of the UK’s energy is being produced by renewable sources. This technology is driving change and in the next 10 years our next revolution will take place – we could see more reliance on microgeneration schemes, islanded power sources and less reliance on large infrastructure.’
Shale and CCS The need to balance renewables means gas will be needed for some time to come, so shale drilling remains on the table. In 2010, the first shale gas exploration well to be hydraulically fractured, Preese Hall-1, triggered two seismic events that led to the temporary suspension of activity while Cuadrilla Resources carried out investigations. However, new wells are planned for 2018 and the first UK shale gas could be supplied to customers in the next year or two (US shale gas has already arrived
in the form of liquefied natural gas). Carbon capture and storage (CCS) from hydrogen production to replace gas in heating, as well as from burning gas for power generation, now also appears to be back on the table. Looking further ahead, new nuclear, notably the Hinkley Point C project, should help replace baseload coal completely beyond 2025, along with more wind power, biomass and biogas. Batteries – possibly in the form of electric vehicles – will increasingly supplement gas and stored hydro as peak backup, as well as for grid balancing. The transition to a low-carbon economy, if successful, will not only lead to lower greenhouse gas emissions, it will also bring energy independence and self-sufficiency. It will also mean a greater self-reliance – the future lies very much in the hands of UK companies.
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Feature Business start-ups
30 energyfocus | www.the-eic.com
Business start-ups: Feature
A share in the future
As the EIC marks 75 years of helping members bolster business, Nicholas Newman looks ahead to the future. With the potential to disrupt the energy industry with their innovative technologies, it is start-ups that are helping power the energy revolution. But moving an idea from concept to reality has never been easy US. Basically, the marketing fundamentals apply: we don’t pay for energy, we pay for the benefits that energy provides. Energy is only one ingredient in the value chain.
Capital gain Raising up-front capital is the first challenge. Start-ups have to answer a series of fundamental questions to the satisfaction of potential investors: Who is the customer? What is the problem? What is the solution and can it be monetised? However, Nelson Phillips, Professor of Strategy and Innovation at Imperial College Business School in London, explains that ‘if the start-up is trying to do something truly innovative then good information on customer wants and needs will be very difficult to come by.’ Valto Loikkanen, CEO of London-based Grow Venture Capital, notes, ‘The more ‘‘deep tech’’ things go, the harder it is to prove the thing works as explained or can be made to work.’ Unfortunately, new ideas or disruptive solutions find it hard to attract investors. Thermal storage is a case in point. Equally important, investors are not only investing in the product or service, but also in the leadership and the personnel of the start-up. One thing is clear – having leaders with the qualities and media presence of Elon Musk, Tesla’s CEO, can help attract investors, www.the-eic.com | energyfocus
he opportunities for new approaches to the energy business have never been greater, yet energy start-ups – like most new businesses – often find raising up-front capital problematic. Many need little in terms of money or supplies at their inception since their ideas have gone no further than their computer hard drives. But the next stage, moving on from concept to prototype and on to the market, requires serious money to buy in expertise, equipment and premises. ‘Bridging the gap between the idea and the prototype, that’s the hard part,’ says Nicholas Flanders, CEO of California-based Opus 12, which developed a technology for turning CO2 into industrial chemicals. In recent years, a specialised energyinvestment community has sprung up that, like the innovators, faces increasing difficulty in identifying the areas that offer a profitable return in a market that is in flux. The only certainty in this approaching low-carbon world is that demand for electricity will increase. ‘Success stems from being able to envision an energy innovation’s benefits or contribution, to accomplish higher productivity or provide other products and comforts that can be monetised,’ states W Ross Williams, CEO of Alfresco Group in Denver,
Feature: Business start-ups
Growing new businesses UK v US
Fewer than 1 in 10 companies that receive seed funding in the UK go on to reach the fourth round of investment. This figure is 1 in 4 in the US
Top US firms are also younger than UK firms, again suggesting the US is more effectively growing new businesses into large-scale firms. 10 of the UK’s largest 100 listed firms were created after 1975, compared to 19 in the US but only 2 in Europe
The UK currently leads Europe in the creation of unicorns but trails behind other international players. 54% of all unicorns are based in the US, with 23% in China. The UK accounts for just 4%
Source: HM Treasury, Financing Growth in Innovative Firms: consultation, August 2017
but to get buy-in, the skills and experience of the team members matter just as much. Currently, many start-ups rely on financial backing from the European Investment Fund (EIF), and can continue to do so if partially located in an EU member state. In order to replace the EIF, after Brexit, a national investment fund has been proposed to help fledgling UK businesses compete worldwide. A Treasury spokesman said that it was hoped the new fund would ‘help cutting-edge British start-ups become world-leading unicorns’ – a term denoting recently launched companies that are valued at more than US$1bn. The US accounts for 54% of all unicorns globally, China for 23%, but the UK is home to just 4% – although it is the European leader in unicorns. The other challenge is attracting interest in a potentially risky venture from a risk-averse investor. Lucius Cary, Founder and Managing Director of venture capital firm Oxford Technology Management, suggests, ‘It is important to remind such an investor that the gains could be large and the current tax relief is very generous at the moment for start-ups, with a new one created every hour in the UK.’
Where angels tread An energy start-up can do much to improve its chances of success. Preparation is crucial. For instance, Quatre Ltd, a company offering innovative funding and insurance solutions for
32 energyfocus | www.the-eic.com
decommissioning of oil and gas fields, spent three years building a multi-skilled team able to deliver an investment and insurance solution that meets regulatory requirements. ‘Moving quickly and being willing and able to adapt and evolve is the foundation for success,’ states Professor Phillips. Obtaining the right business angel – an affluent individual who provides capital for a start-up – helps. ‘Many angel investors provide critical access to networks, connections to potential customers and business experience that the entrepreneur may lack,’ the professor adds. For example, Shell Technology Ventures supplied capital and knowledge of customers in the Persian Gulf to California-based GlassPoint, manufacturer of solar steam generators for oil and gas companies.
Dynamic disruption The pressures on companies to innovate have never been greater. Therefore, for many
Moving quickly and being willing and able to adapt and evolve is the foundation for success
companies outsourcing is necessary since, as Valto Loikkanen observes, ‘it’s harder to come up with disruptive innovations in-house so most internal innovation is iterative.’ Therefore, an increasing number of large energy investors choose to make a stake in fledgling entrepreneurial energy businesses. For instance, some of Europe’s largest energy companies, including Germany’s Innogy and France’s EDF have created venture capital funds totalling some €1bn to be invested in or buying into often-disruptive innovations from start-ups. For their part, large organisations also have many complementary assets such as market knowledge and distribution channels that are crucial for marketing innovatory products and services. French-owned energy company Total brings its distribution and sales expertise to its interests in solar PV maker SunPower and battery company Sunverge. Outsourcing helps large energy companies to keep ahead in a turbulent marketplace characterised by sustainability, costs and productivity concerns. ‘To succeed, start-ups need imagination, luck and business skills. Fortunately, starting up an energy company is becoming cheaper for both software and hardware-based entrepreneurs,’ says British-born, US-based Venture Capitalist Paul Graham. What is clear is that innovation can mutually benefit not only the start-up, but also potential stakeholders including energy giants, institutional and individual investors.
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Oil and Gas Remote operations
Automation offers alternative to decommissioning Innovation is crucial for maximising economic recovery in UK offshore oil and gas. But just how do you reduce costs without compromising safety? Go remote, says Chris Stones at Servelec Controls
he combined fields in the East Irish Sea off Morecambe Bay are a cornerstone of the UK’s natural gas production and have been since the first gas, extracted from deep beneath the waters 25 miles off the coast of Lancashire, entered the National Grid on 9 January 1985.
The case for gas The fields produced enough gas at their peak to satisfy 20% of the UK’s domestic demand. Today, the fields continue beyond their predicted life to provide enough gas to heat 1.5m homes thanks to continued investment in technology, skills and infrastructure. As we celebrate more than 30 years of pioneering gas production at Morecambe Bay, the debate continues regarding the future role of natural gas in the UK energy mix and the ongoing need for increased investment in innovation. According to National Grid, gas demand rose in 2015 and in 2016, but the current lack of certainty surrounding the resource’s future is making it difficult for the energy industry to commit much needed investment towards innovation.
‘Undoubtedly, gas still has a critical role to play in a secure energy supply for the UK now, and as the country transitions to a low-carbon future,’ comments Chris Stones, Sales Director at Servelec Controls, the EIC’s current Company of the Year and holders of the EIC’s Innovation Award 2017. ‘All stakeholders in the supply chain have a responsibility to ensure that the country has a secure supply of energy, and this is a responsibility we take seriously.’
A new revolution in maximising recovery With the UK Continental Shelf (UKCS) entering a phase of maturity and everyone involved in the industry adjusting to a ‘lower for longer’ environment, maximising value from the basin poses an increasingly critical challenge. Pricing volatility has made the industry acutely aware of the challenges faced now and in this lower for longer environment. As natural resources become more difficult and costly to extract, new approaches are required to maximise the economic benefits for both the UK and the industry. ‘The challenge facing many operators today is to identify ways to extend the life of their ageing
As we celebrate more than 30 years of pioneering gas production at Morecambe Bay, the debate continues regarding the future role of natural gas in the UK energy mix and the ongoing need for increased investment in innovation
www.the-eic.com | energyfocus
Oil and Gas: Remote operations
assets and defer the cost of decommissioning, a challenge that can only be overcome by adopting a radical approach,’ says Stones. One radical approach being applied is to shift to remote operations of manned and normally unmanned platforms. Servelec Controls has first-hand experience of this, having assisted one major gas operator switch one of their producing assets from normally unmanned to remotely operated. To enable this transition, firstly the existing control, safety and electrical systems of the platform had to be replaced with a new, state-of-the-art remote operations solution that enables monitoring and control to be performed in real-time from a control room based onshore. The new integrated control and safety system (ICSS) and electrical control system designed, built and installed by Servelec Controls, includes alarm management, asset monitoring, fire and gas detection and control, emergency shutdown, electrical system monitoring and remote control. Converting to be entirely remotely operable meant that the operator could remove several hundred tonnes of redundant accommodation and topsides equipment, including 70% of ATEX hardware – this in turn led to a significant reduction in the need for maintenance and manned operations. Ultimately, the project has led to a 60% reduction in helicopter-based interventions on the platform. Routine maintenance on the platform is planned remotely via distributed control systems, which monitor and enable remote restart of the facility’s systems, supported by CCTV cameras and other monitoring technologies. The ICSS, uprated electrical system and upgraded UPS now means that the platform can support black starts and at least 36
hours of UPS-based power before intervention is necessary. Previously, any outage longer than an hour required an engineer to be sent to the platform to re-start it. ‘Remote operations are a viable alternative to costly and permanent decommissioning where our approach can extend the life of a viable producing asset. In this example, the forecasted end-of-life for the platform has been extended by at least 15 years,’ adds Stones. ‘Successful commissioning is now complete on time and in budget; now the blueprint is proven, other assets are being considered for similar projects. We are also in advanced talks with other UKCS operators about taking a similar approach.’
Dash for smart gas While pathways towards a low-carbon future remain uncertain, a secure gas supply will continue to be critical, and operators will need to find ways to maintain flexible, reliable and cost-effective production. As an industry, this will only be achieved through innovative and disruptive practices enabled by remote operation and maintenance technology. The rewards are there for operators willing to consider this approach. With operators willing to invest in innovative approaches in mature and established operations on the UKCS, and with the continued support of a committed supply chain, the future of gas production in the area is positive. With nearly 4tn cubic feet of tight gas locked in existing fields, undeveloped discoveries and prospects in the southern North Sea and a further 300bn cubic feet still in place under the East Irish Sea, major projects that extend the life of existing assets will help ensure a continued gas supply for UK homes and businesses is secured.
UK GAS: IN FIGURES
Putting NEW TECHNOLOGY to work The driving forces behind remote operations are improving the safety of support staff by reducing the dependency upon helicopterbased manned interventions, reducing operating expenditure and extending the operating life of assets. In addition to safety improvements and efficiency gains, the Remote Operations solution reduces downtime and minimises insurance and logistics costs. The overall cost reduction improves field viability and provides an opportunity for operators to delay abandonment, an activity which requires significant expenditure. The potential benefits to operators, as proven by Servelec Controls’ UKCS-based clients are: At least a 60% reduction in manned helicopter intervention, bringing both safety and commercial benefits Delayed asset end of life by a minimum of 15 years Return on investment inside of two years due to remote operation capability Demonstrable improvement in safety of support staff by way of minimised intervention Significant reduction in OPEX
Gas consumption grew
Last year, natural gas production increased by
the third consecutive increase after 13 consecutive declines Source: BP Statistical Review 2017; Oil & Gas UK
36 energyfocus | www.the-eic.com
By 2035, it is forecast that natural gas will comprise
of the UK energy mix
Reduced risk profile and therefore reduced insurance costs State of the art ICSS and instrument technologies ensuring lifetime supportability
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Oil and Gas Standardisation
Cutting costs offshore
etween 2010 and 2014, 75% of large exploration and production projects exceeded budget by 50% on average; 50% of projects exceeded schedule by almost 40%. Even when oil prices were high, rising project costs were putting companies under pressure. Simply put, it was unsustainable. That’s why, in 2015, a group of oil and gas operators launched the Joint industry Project for Standardisation of Equipment Specifications for Procurement (JIP33).
Creating value Its objective was simple: to drive a structural reduction in upstream project costs and schedule improvement with a focus on industry-wide, non-competitive collaboration and standardisation. This would allow for a ‘win-win’ outcome for operators, engineering contractors and suppliers through improved cost, schedule, quality, safety and reliability. Richard Mortimer, Vice President, Engineering, Global Projects Organisation at BP, and one of JIP33’s leaders, says, ‘By creating bespoke components in each of our projects, the industry erodes value and in doing so, misses the opportunity to leverage industry-level standardisation. It is a key lever we can pull as an industry to structurally reduce large capital project lifecycle costs.’ ‘It creates benefits in any price environment and is critical for the economic viability of major projects,’ adds Gerry Gabriel, Vice President,
Energy Focus spotlights a novel approach to upstream procurement that is saving millions of dollars on major projects
Upstream Engineering, ExxonMobil. The concept is not unique to the oil and gas industry. Other sectors have successfully launched standardisation initiatives in challenging times. An initiative in the semiconductor industry generated over 60 standard specifications, resulting in 50% cost reductions in certain components. Five automakers responded to rising costs from bespoke electronics solutions and declining profitability by creating standardised software testing and interoperability methods. It resulted in an industry-wide reduction in testing costs per vehicle. And the data server industry shared specifications to reduce rising CAPEX and OPEX on server facilities. Between 2011 and 2014, Facebook alone saved US$2bn.
Driving efficiency JIP33 estimates that the oil and gas industry could see improvements in many areas. Safety will benefit as well, through familiarity with designs over time and safety transfers between projects. Millions of dollars in savings can be captured by minimising or eliminating time spent rewriting specifications for major projects. This reduces costs associated with preferential engineering. Other benefits include fewer fabrication defects, reduced risk, improved and predictable schedules and greater capital efficiency. The improvements in quality enable projects to start-up on time and stay up, thereby increasing operating efficiency and operating cash flow. Suppliers also gain from the ability to deliver more efficiently thanks to time saved
interpreting specifications, simpler bid processes and greater standardisation in production lines for fabrication, testing and documentation.
Making it happen Initially, JIP33 focused on proving the concept by publishing specifications on ball valves, subsea xmas trees and low voltage switchgear. In 2016, it published specification S-560, the first of its proposed specifications. It covered equipment related to low voltage switchgear. Now in Phase 2, it is working to embed the specifications within operator companies, raise awareness of the project within the industry, facilitate culture change and continue to publish additional equipment and package procurement specifications. These may include an air compressor package, centrifugal pumps, gate/check valves, heat exchangers, HV switchgear, linepipe for critical services, offshore cranes, pressure vessels and subsea tree ‘top downs’. Facilitated by the International Association of Oil & Gas Producers (IOGP), the JIP33 has nine funding members and is supported by the World Economic Forum Capital Project Complexity workstream. Aker Solutions Ltd is providing project management and lead subject matter expert services. For further information: Search ‘Jip33’ or visit www.iogp.org/jip33 for more information www.the-eic.com | energyfocus
Oil and Gas Gulf of Mexico
growth As shale continues to drive the headlines, a shift in strategy is spurring the resurgence of US offshore, writes Vance Scott at Ernst & Young
n recent years, many oil companies turned to cost reduction and portfolio rationalisation to survive the price downturn. Some even optimised to the point of a single basin or purely unconventional focus. While divesting costlier and higher-risk assets was smart and often necessary for companies’ stability, it led many producers to focus on short-cycle projects. As prices stabilise and producers restock their prospect backlog and growth portfolios to tackle long-term baseline production and balanced crude needs, companies will increasingly turn to offshore. Shale will continue to be a dominant play but offshore development will regain significance in the global supply stack. However, future offshore value chains will be markedly different than the traditional construct.
A keen eye for cost transformation Offshore resurgence will be driven by two factors: first, demand outpacing supply, and second, cost reductions to increase offshore project attractiveness. Cost curve declines have not only made offshore more attractive, they are also revolutionising the space. With a keen eye on costs, both offshore producers and oilfield service companies are operating differently than they were before the downturn. Producers are creating and implementing innovative technology developments using operating method advancements from onshore and a strategic focus on leaner
40 energyfocus | www.the-eic.com
operations to yield greater discipline and substantial results. Similarly, oilfield service companies are evolving to capitalise on technology advances and continued improvement in service company design and implementation. Some are creating larger, more focused service firms, as well as offering fully integrated service packages.
Digital technology is paramount Digital technology, ranging from data analytics to robotics and automation, will continue to rise in the offshore market and drive significant increases to profitability and operational excellence. While many companies have leveraged digital to optimise a specific process during the downturn, companies will see the most benefit through a comprehensive, enterprise-wide strategy. Through intelligent automation, companies can automate many routine tasks, cut costs and free employees to focus on other value-added activities. Although automation was historically used in back-office functions, it is increasingly being deployed in engineering and other technical departments to speed up workflows and reduce errors. Leveraging sophisticated data algorithms and predictive analytics, companies can use machine learning and insights to increase operational efficiency – changing how they maintain and upgrade assets, identify the best prospects, create
Gulf of Mexico: Oil and Gas
MAJOR PROJECTS TO WATCH 5 DELFIN DEEPWATER PORT FLOATING LNG LIQUEFACTION AND EXPORT PROJECT
Houston New Orleans
1 MAIN PASS ENERGY HUB LNG EXPORT TERMINAL LOCATION: 16 MILES OFFSHORE LOUISIANA, MAIN PASS BLOCK 299 OPERATOR: GLOBAL LNG SERVICES AS VALUE: US$15BN START-UP: 2023
LOCATION: WEST CAMERON BLOCK 167 OPERATOR: DELFIN LNG VALUE: US$6.8BN START-UP: 2020
3 2 TIBER DEEPWATER OIL FIELD
Offshore resurgence will be driven by two factors: first, demand outpacing supply, and second, cost reductions to increase offshore project attractiveness new ways to drill and complete wells at lower costs, decrease unplanned downtime and optimise production. Companies can also connect their offshore assets and equipment through smart sensors. Building on Industrial Internet of Things (IIoT) technologies and integrating these sensors into existing infrastructure, companies can build real-time insights into their asset operations and entire business delivery processes resulting in further optimisation. Rapid technology adoptions in IIoT and more will enable companies as they drive toward continued capital and operational efficiency offshore.
LOCATION: KEATHLEY CANYON, BLOCK 102 OPERATOR: CHEVRON VALUE: US$10BN START-UP: 2020
Success in offshore Offshore has strong potential to deliver significant returns over a long time frame, which makes it an attractive option for companies seeking future horizon, highervalue opportunities. Tremendous change, coupled with firming and stable commodity prices, is moving many marginal projects back into the drill and develop queue. Those innovative oil companies that accelerate new technology adoption and integration to improve value chain delivery processes and reduce costs will have leading profitability. Leading profitability will open more portfolio options and
MAD DOG II SOUTH OIL AND GAS FIELD LOCATION: GREEN CANYON BLOCKS 780 (HOST), 781, 824, 825, 826, 869 AND 870 OPERATOR: BP AMERICA INC VALUE: US$9BN START-UP: 2021
APPOMATTOX DEEPWATER OIL FIELD (NORPHLET PLAY) LOCATION: MISSISSIPPI CANYON, BLOCK 391 AND 392 OPERATOR: SHELL EXPLORATION & PRODUCTION COMPANY VALUE: US$8BN START-UP: 2019
reward both leadership and investors. A comprehensive digital strategy, a focus on operational excellence, and keen project and cost management will be paramount to success. By Vance Scott, Americas Oil and Gas Transaction Advisory Services Leader, Ernst & Young LLP
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms. www.the-eic.com | energyfocus
Oil and Gas Gulf of Mexico
UK technology helps buoy US offshore action Paul Gallagher at SNC-Lavalin looks at how UK expertise is helping the US unlock its marginal fields
re-2014, the term ‘marginal field’ had become synonymous on the UK Continental Shelf (UKCS) with often low exploitable reserves (typically less than 25m barrels) and an estimated field life of 5–10 years. For such fields, investment in permanent facilities is not justified without taking risk on future tie-backs or potential hub developments.
Driving North Sea innovation Looking back to 2010–14, Atkins, a member of the SNC-Lavalin Group, worked for a number of clients for whom conventional production facilities were found to be uneconomic when applied to marginal fields. With oil at US$65 per barrel, a common pre-2014 benchmark, marginal fields might only generate net present value of up to US$1.5bn, which put significant limitations on OPEX and CAPEX. Indeed, after exploration, drilling and well completion (D&C) costs were accounted for, CAPEX for the remaining production facilities might be squeezed to as little as US$300m if breakeven were to be achieved in three years. These constraints provided a drive for innovation in areas such as: Increasing relevance of tie-back – to minimise both CAPEX and OPEX, tie-backs to a nearby host are often the first option for marginal fields if they can be negotiated. Use of remotely operated normally unmanned facilities – this has continued to gain momentum since the oil price crash of 2014–15, but remains a subject for ongoing development. Simplifying topsides process to reduce CAPEX – for example, with a single stage of
42 energyfocus | www.the-eic.com
Figure 1. The DDPSO – a marginal field solution that provides benefits in harsh metocean conditions despite its small size
separation combined with gas engines for power. Such simplifications, however, have implications for production efficiency and gas management. Managing gas – for stranded fields, gas re-injection attracts additional CAPEX and OPEX, and gas-limited oil production can result in a significant fall in the net present value of the field reserves. Shifting CAPEX to OPEX by use of leased facilities – reliance on leased floating production storage and offloading vessels (FPSOs) have grown significantly over the last decade, not least as it provides potential for risk sharing for smaller producers. Novel floating production facilities – new concepts featuring elements of the above innovations within an inherently re-usable form, such as unmanned production buoys and compact FPSOs, both ship-shaped and more novel solutions (Figure 1), have all been developed. Currently the ‘small pools’ (discoveries of less than 50m barrels of P50 reserves) identified by the UK Oil and Gas Authority, with a potential 2.4bn barrels of recoverable resources across the UKCS, are again driving similar calls for innovative solutions.
For deepwater Gulf of Mexico (GoM) developments, exploration, and D&C costs are significantly higher than for the majority of the UKCS. With D&C costs ranging between US$100–200m per well, expectations on size of reserves and individual well productivity are of course greater. Nevertheless, economically marginal discoveries are just as likely as on the UKCS, as is the need for work to address technical and commercial challenges such as above if they are to be exploited. Again, proximity to existing hubs and infrastructure can enable tie-back solutions, even if deepwater well completion and pipelay costs are high in comparison to tie-backs in the UKCS. But where stand-alone facilities are required perhaps the most transferable technology is the wider adoption of re-usable floating production facilities to match short field lives, with similar types of risk sharing, lease-based, commercial models appropriate to the region. The additional technical challenge, that of addressing hurricane events with smallerscale facilities while maintaining low CAPEX in construction, can certainly be met given the experience of the industry and ingenuity of its offshore engineers. But the key lessons that can be transferred are a mind-set that recognises the need to set a tough production facility CAPEX and five-year OPEX budget constraint in concept selection, along with the ability to manage the technical risks inherent in the innovations that make that possible. By Paul Gallagher, Director for Field Development and Consulting in Engineering and Consulting, Oil and Gas, SNC-Lavalin
LEADING COMPRESSOR TECHNOLOGY AND SERVICES www.burckhardtcompression.com
Oil and Gas North America
Celebrating 50 years of shaping the global oil and gas industry With US Gulf of Mexico production levels at an all-time high and growth looking likely to continue, this OTC looks set to be one of the busiest in years
t's a landmark year for both the EIC and OTC. In February, we reached the grand old age of 75, making us one of the world’s oldest trade associations, while this year OTC celebrates 50 years, making it one of the most well-established oil and gas conference and exhibitions globally. Although our involvement with OTC doesn’t stretch right back to the inaugural event, we have hosted the UK pavilion since 1990. As OTC has grown with every edition so has the UK pavilion, and this year we’re hosting almost 50 companies, all showcasing the latest cutting-edge oil and gas products and services.
A positive outlook The outlook for the US region is bright. We’re seeing a return to growth, and just as importantly it seems sustainable: at the time of writing we’re looking forward to the largestever US offshore lease sale set for 21 March, where almost 15,000 blocks will be put out to tender, adding some real long-term momentum and much-needed stability to the industry. The Gulf of Mexico (GoM) has long been one of the key contributors to US oil and gas output, and here too all the data shows that the country’s offshore industry has turned a corner. Current production levels in the GoM are exceptionally high – in 2016 alone eight projects came online, including Shell’s massive 60,000bbl/d Stones FPSO project and BP’s 42,000bbl/d Thunder Horse expansion. This increase in production has come
44 energyfocus | www.the-eic.com
about as a result of major developers in the region adapting to the ‘lower for longer’ oil price environment by slashing project costs through redesign, standardisation and maximising results from established wells with BP’s Mad Dog II, which saw a flurry of contracting activity in mid-2017, and Shell’s Appomattox, where construction is well under way, providing a blueprint on how to make projects profitable. Another significant factor contributing to this growth has been a willingness to move into previously unexplored areas and then having the technological expertise to unlock the significant reserves found in these ultra-deepwater zones. Shell’s complex network of subsea tie-backs at its Stones field being a prime example.
Major Canadian offshore developments include the West White Rose Extension project and a planned subsea tie-back at Hebron Pool 3, phase 1. There is also some potential for production from the Flemish Pass Basin discovery where major players like ExxonMobil, Statoil and Suncor Energy are active. In February 2018, ExxonMobil announced that an appraisal campaign will commence in 2019 requiring a harsh-environment drilling rig. Onshore Canadian developments, however, make up the bulk of planned CAPEX – EICDataStream is currently tracking US$113bn of planned projects that will be located in the Alberta Oil Sands region. In March 2018, Suncor Energy filed an application to build the 160,000bbl/d, US$6.2bn Lewis project, located north of Fort McMurray, that will be constructed in four phases.
Continued growth This upswing looks set to continue. In 2018, production from Hess’ Stampede field began while LLOG Exploration’s Son of Bluto 2 and Otis fields are both expected to come onstream by Q1 2019. More good news came from BP’s Mad Dog II project, with the supermajor once again increasing its oil reserves estimate for the development: it now believes that it may be sitting on top of a massive 5bn barrels. In fact, GoM production levels are forecast to rise above 2MMbbl/d in 2019, breaking all previous records. Without a doubt the US offshore market is full of opportunities, and with over 64,000 industry leaders and buyers coming from over 130 countries OTC 2018 is the place to make the most of them.
The rate of oil and gas production is providing the foundation for a second wave of downstream project investment, the majority of which is focused along the Gulf Coast. In February 2018, Total confirmed a joint venture with Borealis and NOVA Chemicals to construct the Port Arthur ethane cracker and a Borstar polyethylene plant in Bayport, Texas. Additionally, ExxonMobil is expected to reach final investment decisions (FIDs) on the San Patricio petrochemical facility and the Beaumont refinery expansion – where a third crude distillation unit is planned – in 2018. Activity has also been reported at IGP Methanol’s Gulf Coast methanol complex where CB&I has been awarded the front-end engineering design contract. Once online in 2020, it will become one of the world’s largest methanol production facilities.
North America: Oil and Gas
ACTIVITY TO WATCH ACROSS THE REGION
Visit the EIC-hosted UK pavilion Looking to expand into North America? The EIC can help For those of you thinking about making the move to the United States, please get in touch with the EIC Houston team (firstname.lastname@example.org) about its EICLaunchPad service, which provides a low-cost, low-risk entry into this bullish market. Located in the heart of Houston’s Energy Corridor, we can provide you with serviced office facilities, meeting rooms and hot desks, as well as a virtual office service: everything you need to start building your business in the US.
Please take the time to visit the exhibitors on the UK pavilion in Hall D to find out how their innovative products and services can add real value to your projects and programmes.
Design, engineering and consultancy
Atlas Professionals Balmoral Offshore Engineering BMT International Ltd Castrol Offshore Ltd Clarkson Research Services Limited CRC-Evans Pipeline International Derrick Services (UK) Ltd Fluorocarbon Company Ltd FoundOcean Limited GWEC HTL Group Ltd J Murphy & Sons Orga M & C Ltd OSBIT Power Ltd Petrofac Facilities Management Ltd Rota Engineering Limited
Hazardous area and safety equipment
Oil production in Mexico is stagnating as Pemex is struggling to replace production from several ageing shallow water fields. The state oil company reported production rates under 2MMbbl/d in Q4 2017 – the lowest since 1990. Alongside this, Mexico has become increasingly reliant on the US for natural gas. As the decade closes, Mexico’s production is expected to be boosted as waves of exploration and production companies have been attracted to the country following the energy reforms of 2014. Appraisal work at BHP Billiton’s Trion discovery is ongoing and Eni is planning on taking an FID at its wholly-owned Area 1 as soon as development plans are approved by Mexican regulators.
TRINIDAD AND TOBAGO
BP is the most active major in Trinidad and Tobago. In late 2017, the operator completed the Juniper project and is now focused on developing the Angelin and Cassia C offshore gas projects, both of which are located in the Columbus Basin. Two new gas discoveries were also confirmed in 2017: Macadamia and Savannah. In addition to projects already under construction, production from both discoveries will be needed to ensure a consistent gas supply to the multi-billion dollar 15Mmtpa Atlantic LNG facility.
ABTECH Limited BEKA Associates Ltd E2S Warning Systems HMI Elements Raytec Ltd Signum Technology Ltd
Instrumentation and control Advanced Sensors Limited Koso Kent Introl Limited IMI Precision Engineering
Logistics and load handling ALE Ducab UK Ltd Bridon-Bekaert | The Ropes Group LEEA UTC UK Ltd William Hackett
Specialist technology providers
Barton Firtop BiSN Oil Tools Bodycote Surface Technology Ltd Evoqua Water Technologies Heatric Hydratron Ltd Dow Hyperlast Noralis Ltd Offspring International Ltd Oxifree Metal Protection PEI Genesis UK Ltd PJ Valves The Monobuoy Company Veolia Water Solutions & Technologies Whitford Ltd
www.the-eic.com | energyfocus
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UK reignites plans for carbon capture and storage As the government warms to CCUS for clean growth, clear policy direction is needed to support innovation and investment in this vital technology, writes Jeremy Bowden
arbon capture, utilisation and storage (CCUS) is back on the government’s agenda as part of its Clean Growth Strategy – just two years after a competition to build the UK’s first commercialscale CCS plant was cancelled. The decision came after the Committee on Climate Change (CCC), National Audit Office and others reported on how much cheaper using CCS would be than simply relying on renewable power to meet the UK’s 2050 emissions reduction target. The CCC now says it could almost halve the cost, and the Energy Technology Institute estimates use of CCS could add 1% per year to GDP. The National Grid has also recently called for CCS to be developed, because it claims electrification of heating (to cut emissions) is far too expensive. In its report, The Future of Gas: How Gas Can Support a Low Carbon Future, released in
March 2018, it said filling the gap required to meet peak heating demand during the winter with electricity (instead of the natural gas currently used) would require a seven-fold increase in generation capacity, with peak demand rising from less than 60GW up to 350GW. It is impossible to collect the emissions from millions of domestic gas boilers, so the National Grid and others propose converting the natural gas to hydrogen at central locations and piping that into people’s houses as heating fuel. The waste CO2 could be collected from these conversion plants and piped to storage.
48 energyfocus | www.the-eic.com
CCUS enables gas to have a long-term future in a lowcarbon economy
Dr Luke Warren, Chief Executive of the Carbon Capture Storage Association, said ‘The UK relies on gas to heat homes, and to support industry. By removing emissions, CCUS enables gas to have a long-term future in a low carbon economy. This will provide value to consumers against more costly alternatives… industry and government must now work together to deliver a CCUS deployment pathway that enables the UK to benefit from this critical technology.’ The report also says the first carbon capture and storage projects need to be up and running by the 2020s to ensure that the technology can be deployed at scale in the following decade. Organisations such as the Oil and Gas Climate Initiative, where major oil and gas companies are working together on CCS and other low-carbon technologies, should help this process, provided the government can provide a clear plan and incentives.
Putting the ‘U’ back into CCUS Utilisation can help CCS project economics by attaching a value to the CO2. Currently, the vast majority of utilisation is in enhanced oil and gas recovery applications. There are many other potential uses, but so far most of these are not yet fully commercial, and CO2 quantities required are small. In the US and elsewhere there are projects ranging from the use of flue gas from aluminium smelters and cement plants to make carbonates, to plastics and algal biofuels from coal-fired or chemical plant sources, with other technologies being tested. Among emission reduction options, there is little doubt that CCS makes economic sense on paper, even without utilisation. If it were to be excluded as a green option in the electricity sector globally, the International Energy Agency says green investment costs to 2050 would increase by 40%. What’s more, CCUS is the only known way of dealing with emissions from unavoidable sources such as steel and cement production – making it an essential element in the energy transition.
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Power Energy storage
Recharging the UK’s energy sector As the UK sets course for a batterybased energy future, Oliver Metcalfe, energy analyst at the EIC, looks at the meteoric rise of battery storage and the opportunities on offer for an innovative supply chain
he UK’s battery storage industry saw a boom in 2017. Installed capacity in the UK increased from 60MW in January to around 200MW by the end of the year, while 100MW was commissioned in November and December alone. This strong growth is set to continue and recent research by Solar Media predicts that 9,000MW of battery storage could be installed by 2022.
What’s behind the rise? Batteries can help smooth out the variable power provided by the increasing proportion of renewables in the UK energy mix. National Grid’s Enhanced Frequency Response (EFR) product was designed specifically for
batteries, which can respond to system needs within milliseconds. The first EFR auction in August 2016 secured 200MW of capacity. The Blackburn Meadows, Cleator and Glassenbury projects have already come online, with the remaining few due to be operational in early 2018. The transition to electric vehicles has started to take hold. Each vehicle requires a significant battery pack and this manufacturing experience has led lithiumion battery costs to fall rapidly. It is now profitable for developers to install energy storage systems on the same site as renewables. For example, Anesco claimed that the addition of storage was key to the business case of their subsidy-free solar farm, a UK first – the 10MW Clayhill project
was commissioned in September 2017. With over 30GW of wind and solar installed in the UK, we can expect to see many more existing and new build renewable projects co-located with storage.
Government support and supply chain innovation The government’s Smart Systems and Flexibility Plan was published in July 2017. It made clear the objective to remove commercial and regulatory barriers to greater deployment of batteries. The document also unveiled the Faraday Battery Challenge, a commitment to provide £246m for smart systems and battery technology research over the next four years. The purpose of the research and www.the-eic.com | energyfocus
Power: Energy storage
ELECTRIC VEHICLES KEY TO DRIVING BATTERY STORAGE innovation programme is to make the UK a world leader in next-generation battery development, and the funding represents a big opportunity for the UK supply chain. £80m will be spent on a new automotive battery development centre in the West Midlands. The facility will take early and mid-stage battery research and development activities and attempt to turn them into commercially-viable business propositions. Innovate UK has emphasised the importance of developing materials and manufacturing capabilities across different sectors. This could create a new supply chain to support battery production at scale. Companies that can deliver improvements on current cell components and battery packs will be well placed to win funding and receive support from the Faraday Challenge to scale up their business.
Worldwide sales grew by
45% in 2016
Lessons from abroad The UK is a very attractive market for investors, but there is still plenty to learn from abroad. The US has established itself as the world leader in utility-scale battery storage. Consumers and utilities in the country are beginning to build battery facilities for innovative applications. For example, in November 2017, National Grid announced the construction of a 6MW/48MWh system coupled with a diesel generator that will defer the need to build an expensive undersea cable to the island of Nantucket, Massachusetts, by 22 years. Further investment could be unlocked in the UK if companies could access financial rewards for building similar innovative facilities. French developer Neoen has built a reputation in Australia having delivered the world’s largest lithium-ion battery project with Tesla. The 100MW/129MWh system has helped South Australia increase the resiliency of its grid following state-wide blackouts in 2016. The project now works to serve peak demand in the state every day. Following this success, Neoen has started to build a pipeline of further projects in the country. Identifying markets with political momentum behind battery storage could be a good way to begin exporting products and services.
Being visible is key A project’s selected engineering, procurement and construction (EPC) contractor is usually responsible for buying
52 energyfocus | www.the-eic.com
Companies that can deliver improvements on current cell components and battery packs will be well placed to win funding and receive support from the Faraday Challenge to scale up their business
Investment in car batteries is a massive opportunity for Britain, and one estimated to be worth £5bn by
200,000 electric vehicles set to be on UK roads by the end of 2018
the batteries and balance of plant equipment, pre-front-end engineering and design activities, along with engineering and construction services. Often the same company also operates the asset on behalf of the owner throughout its lifetime. It is common for developers to request fully warranty-wrapped contracts. This means that all warranties (the batteries, control system and balance of plant) are covered under one deal. Most of the utility-scale projects operating in the UK, so far, have been constructed by large multinational companies with experience across several industries. These include UK-based RES, along with NEC Energy Solutions, Younicos, AES, GE and Siemens. Smaller UK-based energy storage integrators have also had some success. Project developers rarely tender for EPC services but rather select companies with which they already have a relationship. This means making your organisation visible in the sector is key to win work. Networking and attending events is vital to break into this fast-growing industry. By Oliver Metcalfe, Power, Nuclear and Renewables Energy Analyst at the EIC For further information: The EIC Energy Storage Insight Report is now available. EIC Reports are available free of charge to EIC members and for purchase (£195+VAT) by non-members. Please contact email@example.com for more information or to buy your copy.
CONGRATULATIONS to the EIC on 75 years of success!
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Nuclear Asia Pacific
While China is embracing nuclear new build to reduce air pollution and meet rising demand for electricity, Japan continues to build up its nuclear decommissioning industry. With huge opportunities across the full nuclear cycle, Asia Pacific offers great prospects for the UK’s nuclear supply chain
Going nuclear in China China’s push into nuclear power offers concrete opportunities for British SMEs, writes Catriona Knox at the Department for International Trade in Beijing
hina is set to more than triple its nuclear energy capacity over the next 20 years, overtaking the US to become the world’s largest nuclear-power producer, according to the International Energy Agency. With 38 operating reactors (34.6GW) and 18 units (21GW) under construction, the country boasts the largest nuclear new build programme in the world. Nuclear energy is high on the government’s agenda, with ambitious targets laid out in the Energy Development Strategy Action Plan 2014–20
54 energyfocus | www.the-eic.com
and reinforced in the 13th Five-Year Plan announced in 2016. Alongside plans to install 58GW of nuclear capacity by 2020, China has undertaken an intense localisation process leading to more than 90% Chinese local content today against 30% in 2008. Consequently, direct opportunities for exporting to China’s new build sector are limited and suppliers are pursuing joint ventures with local partners to secure their place in the domestic supply chain. In line with China’s ‘Belt and Road Initiative’, there is a significant drive in
China is keen to tap into UK expertise Opportunities are available to companies operating at all levels in the nuclear supply chain, specifically nuclear waste management, operation of a closed fuel cycle and in the longer-term decommissioning. To date, there has been interest in the following areas: Geological disposal facilities Nuclear safety monitoring and simulation technology Safety case design Fuel transportation Valve manufacturing Filtration systems Nuclear material supply Plant life extension Vitrification Sludge retrieval and treating Graphite nuclear reactor decommissioning Radioactive waste gas chimney decommissioning Combustible waste treatment technology Generic design assessment support
Asia Pacific: Nuclear
CGN supply chain partnerships with UK As Chinese indigenous nuclear technology develops a global footprint, Chinese and British supply chain companies have abundant opportunities to collaborate in the UK and other markets. CGN’s supply chain is looking to enter the UK nuclear market and companies seeking UK partners in priority areas include: Donfang Electric (main equipment) Shanghai Apollo Machinery (pumps) Jiangsu Shentong Valve (valves) CTEC (instrumentation and control) HYMCO (piping) CN123 and Sepam joint venture (mechanical) Huaxing/Efinor (mechanical) China Nuclear Power Engineering (ventilation) Shenyang Xintoing (valves) Source: Nuclear AMRC
exporting reactor technology and expertise abroad, including China General Nuclear Corporation’s (CGN’s) investment into the Hinkley Point C development and the entry of China’s HPR1000 technology into the UK’s generic design assessment (GDA) process. This presents a unique opening for the UK supply chain to support a successful GDA process and participate in the HPR1000 supply chain thereafter for projects deployed around the world.
Opportunities across the fuel cycle The UK is well known for experienced and developed waste management and decommissioning expertise, and China is extremely keen to acquire, use and implement this experience and capability to support its ambitions in becoming a fully independent nuclear nation. China has yet to decommission an industrial scale reactor and although fast-developing domestic capability in treating and transporting nuclear waste, there will be a need for foreign experience for the most difficult technical areas and in the knowledge around safe and efficient operation of major projects. China's strategy is to build reprocessing plants as part of a closed fuel cycle approach, requiring technology which only a small number of nations, including the UK, have previously developed. Components of this process (such as vitrification technology, waste transport) likewise present an export opportunity for UK design services,
equipment supply and knowledge transfer. Furthermore, Qinshan phase I, which was the first nuclear power plant in China, will reach the end of its lifecycle by 2021 and this and other projects following it will be seeking to develop plant life extension and decommissioning strategies. For these reasons, CGN predicts the decommissioning market alone to be worth tens of billions of dollars in the future. And the arising challenges create significant opportunity in the areas of waste storage, minimisation, containment, and transport to name a few.
Relationships are key The key to being successful in this market is developing relationships and reciprocal working in the early stages. A UK partner can support access for Chinese firms to developed markets for instance, a reciprocal benefit which will make partnership more attractive to the Chinese. When there are higher value opportunities, this is especially prevalent, and bids are stronger when supported alongside a developed relationship. The challenge to UK industry is that it can cost significant time and resource for little commercial gain in the early stages. Effort will be required to choose the right partner, understand their true objectives and invest early effort in showing commitment to a relationship which delivers on those. The British Embassy in Beijing is keen to work with UK companies looking to develop these partnerships and to boost their presence in the market. By Catriona Knox, Head of Energy, Department for International Trade, British Embassy Beijing
First steps checklist Highlighting case studies and real examples is important; try to avoid generic statements about being a ‘world class supplier of nuclear services’, which don’t really explain what you have to offer Do your research. There is a large amount of information available online in English. Offer something the country needs but doesn’t yet have Understand that a large proportion of the work will go to local companies, so emphasise your unique experience. However, you will likely need to have a local partner for any work you do
Japan’s decommissioning challenges open door to UK expertise Dr Keith Franklin at the Department for International Trade in Tokyo on Japan’s nuclear phase-out plans
ince the Great Tohoku earthquake in 2011, a series of dramatic changes and reforms have reshaped the Japanese nuclear industry, the relationships between its key stakeholders and has resulted in Japan entering a phase of decommissioning. The decommissioning industry in Japan has not yet fully developed, and there is a keenness to learn from overseas experience. There is a particular interest in UK capability, where the decommissioning and waste management challenges of sites such as Sellafield and Dounreay have similarities to the work to be done at Fukushima Dai-ichi. Lessons learnt from the ongoing decommissioning of the Magnox fleet will also be of great interest to Japan, as power generators start to take the step towards changing into decommissioning organisations.
Differentiate but don’t criticise competitors. Price isn’t always a factor – working with overseas companies is difficult, as communication, contracting, etc takes longer due to the language differences. A domestic supplier may win out even if you feel you are cheaper Make it clear you are in the country for the long run. Long-term relationships are important, and it may take time before you reach a commercial arrangement. Be prepared to take on small contracts first to build confidence in your company
www.the-eic.com | energyfocus
Nuclear: Asia Pacific
Current situation Not all reactors in Japan were shut down automatically following the Great Tohoku earthquake. Reactors unaffected by the quake and subsequent tsunami kept operating until their scheduled outage dates. Thereafter, reactors have been allowed to restart once they passed new safety tests imposed by the new Japanese regulator. There are currently only a handful of PWR reactors that have been successfully restarted, with most of the remaining fleet actively pursuing restarts. In some cases, utilities have earmarked certain reactors for decommissioning. Although the main focus for Japanese utilities is fixed on restarting their remaining fleet, decommissioning and waste management plans are beginning to take shape.
USEFUL RESOURCES Organisation
Ministry of Economy, Trade and Industry (METI)
Latest on the situation at Fukushima Dai-ichi and recovery of the surrounding area
Tokyo Electric Power Company (TEPCO)
Daily updates on Fukushima Dai-ichi and progress on the decommissioning and clean-up operation
Nuclear Damage Compensation and Decommissioning Facilitation Cooperation (NDF)
English copy of the strategic plan for Fukushima Dai-ichi
International Research Institute for Nuclear Decommissioning (IRID)
Latest research by the IRID consortium
Export to Japan
Specific advice on the nuclear market in Japan
Who is responsible for decommissioning?
Before the Great Tohoku earthquake in March 2011, 50+ reactors were in operation
Decommissioning in Japan should be considered in two distinct categories: the ongoing progress at Fukushima Dai-ichi and the planned decommissioning of older reactors across the country. Unlike the UK, the decommissioning liabilities of the fleet
At least 15 commercial reactors are planned to be decommissioned in 20 years
Get help from: UK Department for International Trade
Celina Cao, Head of Nuclear in China (celina. email@example.com) Chris Hay, Sector Manager for China in London (firstname.lastname@example.org)
Dr Keith Franklin, Nuclear Specialist in Tokyo (email@example.com)
UK Export Finance
For trade finance and insurance cover, please visit www.gov.uk/government/organisations/ uk-exportfinance
EIC Asia Pacific
The EICâ€™s team is on hand to support you in doing business in Asia Pacific. For services including market intelligence, project data, industry connections and export assistance, email firstname.lastname@example.org
56 energyfocus | www.the-eic.com
are not held by one central entity but by the utility, who is responsible for funding and executing the work. On the other hand, Fukushima Dai-ichi presents many first-of-akind challenges for the industry and remains a government priority and will be paid for through a funding scheme involving Tokyo Electric Power Company (TEPCO), the Japanese government and the Nuclear Damage Compensation and Decommissioning Facilitation Cooperation, which came into force on 1 April 2018. Main contractors supporting the utilities include Hitachi, Mitsubishi Heavy Industries and Toshiba.
Entering the market
desire to ensure that the impressive progress is upheld. UK experience across this field could be invaluable as leaders in decommissioning with experience in building and maintaining a healthy supply chain around the challenges faced at sites such as Sellafield. Waste characterisation, retrievals, packaging and management are examples of areas in which UK support would be welcomed especially if proposals can be backed up with demonstrable success. Japan is a good place to do business, but it does take time. If you are thinking of entering the Japanese market, the Department for International Trade can help you to understand the first steps to take.
One of the most valued selling-points is reliability, confidence and proven capability. The ongoing work at Fukushima Dai-ichi is closely monitored and there is a global
By Dr Keith Franklin, Nuclear Specialist, Department for International Trade, British Embassy Tokyo
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Renewables Energy from waste
The EIC’s Richard Vale asks, where does energy from waste stand in the circular economy?
The UK’s rapidly evolving sector
nergy generation and waste management are two of the most critical issues faced by modern societies. Energy, in the form of electricity or heat, is a crucial input, while waste can be seen as an inevitable output. Traditional, linear economic models put waste at the end of the chain, designating it to have no worth. However, the concept of the circular economy argues that waste does have value and recovering energy from waste (EfW) can assist in meeting the growing energy demand while limiting the amount destined for the landfill. In the circular economy, waste can be the fuel and energy the result.
Turning waste into low-carbon fuel
targeting 55% of waste for reuse and recycling. This implies that up to 35% of all EU municipal waste could be used for energy recovery.
The EfW sector is currently in a period of transition as it moves away from traditional incinerators to advanced conversion techniques such as gasification and pyrolysis. These methods burn the waste with little or no oxygen and produce pollutants in a reduced form. In addition, EfW facilities are increasingly combining heat and power, meaning they are highly efficient and competitive with traditional plants. Biochemical techniques, such as anaerobic digestion (AD), offer an opportunity to produce biogas and fertilisers while cutting
carbon and studies show diverting one tonne of waste from landfill towards AD can prevent up to two tonnes of CO2 emissions.
Moving up the waste hierarchy Working to accelerate the transition to the circular economy, the Ellen MacArthur Foundation states that ‘a circular economy aims to keep products, components, and materials at their highest utility and value at all times.’ The Foundation advocates zero waste and, unsurprisingly, the concept has been paired with EfW at various levels of governance.
Driving energy recovery in Europe In January 2017, the European Economic and Social Committee laid out its vision for turning waste into energy as part of its wider overview of the state of play in the 2015 Circular Economy Action Plan. The guidance emphasised that generating energy from waste that cannot be recycled or reused can contribute to a circular economy and energy diversification, although it must not be seen as a replacement to recycling. Doubling down on its waste management efforts, in February 2018, members of the European Parliament officially backed a legislative proposal that member states send less than 10% of the total municipal waste generated to the landfill by 2035 while also
In the Clean Growth Strategy, the UK government targets zero avoidable waste by 2050. It also aims to maximise the value extracted from resources while minimising the negative environmental and carbon impacts associated with their extraction, use and disposal. Further, the report looks to maximise energy recovery by ensuring that different waste materials are treated in the best viable way. According to government figures, the UK currently deposits an estimated 48.2m tonnes of waste to landfills per year (DEFRA:UK Statistics on Waste, 2018) and this figure is increasing year-on-year. While a proportion of that will be recyclable materials, a significant amount will have no other use and therefore must either be burned (or biochemically altered) and transformed to energy, or buried in landfills which can leak landfill gas – a mixture of methane and CO2. The UK already has a EfW sector with a generating capacity totalling around 1,205MW or 5.57TWh of electricity per year, and this looks set to double with the next decade. The EfW sector could become increasingly important for the UK in light of changing global policies. Brexit will play a role as the UK currently exports over 3m tonnes of refuse-derived fuel to Europe. This costs around £280m per year and this figure is expected to increase after May 2019. China
resource Turning waste into a
58 energyfocus | www.the-eic.com
Energy from waste: Renewables
has recently imposed stringent import restrictions on low-grade waste, and UK companies alone have shipped more than 2.7m tonnes of plastic waste to China since 2012, two-thirds of the UK’s total waste exports. These changes offer opportunities for the UK to take back control of its waste management while producing domestic, low-carbon energy.
Capital concern The London Assembly’s Environmental Committee has recently published the twin reports Waste: The Circular Economy (2017) and Waste: Energy from Waste (2018). The latter report states that over half of London’s waste, around 2m tonnes, was sent to EfW facilities in 2017, indicating the importance of EfW in both the waste management sector and the circular economy paradigm. There is a potential decentralised, smart grid element for energy from waste. To avoid reductions in value, resources are best utilised locally and EfW facilities offer an opportunity to locally manage waste while also using the energy and heat produced in local grids and networks. Industrial parks and commercial centres of high waste production and energy use can particularly benefit from this, and the possibility of merchant EfW facilities is even more likely based on estimates suggesting only 2% of commercial and industrial waste is currently used for energy recovery.
A perfect match? It is important to note that in the circular economy, energy recovery should be one of the final stages, with reduce, reuse and recycle essential precursors. While in practice some
Energy from waste supply chain opportunities in the UK As the UK market is set to grow substantially in the short to medium term, it offers substantial supply chain opportunities. Thermochemical facilities, which make up 90% of announced developments, are similar to traditional thermal power plants (i.e. coal) and therefore offer a diversification route for companies involved in conventional power. The main stages of facility development, from feasibility to operations and maintenance provide a range of openings for supply chain companies, and the key areas are listed below. Feasibility
Front-end engineering design
Engineering, procurement and construction
Operations and maintenance
Regulation complience, approvals and permits
Conceptual design and layout
Boiler manufacture – turbines, membranewalls, tube bundles, cladding
Plant inspections– Long-term service preventative and contracts – publiccorrective maintenance private partnerships, corporate power purchase agreements
Economic and market analyses – risk and opportunities
Waste collection and transportation
Waste transfer – cranes, chutes, grates, conveyors
Residue disposal and emissions monitoring
Site evaluation–land use and zoning issues
Infrastructure works and access roads
Refuse-derived fuel/ solid recovered fuel production – shredder, baler
Health, Safety and Environment regulatory compliance
Public involvement campaign
Civil engineering – steel and concrete construction
Impact assessment and due diligence
Transmission – substation, transformers, switchgear, overhead cables
Laboratory services – chemical sampling and analysis
Electrical and auxiliary systems Decommissioning and dismantling
waste streams are better suited for EfW than earlier stages, it is vital that the sector, and the option of energy recovery, does not diminish or contradict efforts to overcoming these barriers to producing less waste. Nonetheless, the situations discussed in this article, combined with increasing electricity demands and closures of Europe’s coal plants, provide opportunities for the EfW sector to play a key role in the transition to a low-waste, low-carbon, circular economy.
By Richard Vale, Power, Nuclear and Renewables Energy Analyst at the EIC For further information: The EIC Energy from Waste Insight Report is now available. EIC Reports are available free of charge to EIC members and for purchase (£195+VAT) by non-members. Please contact firstname.lastname@example.org for more information or to buy your copy.
www.the-eic.com | energyfocus
Renewables Floating wind
Floating wind comes of age
The UK is an attractive market for floating wind development. But for Roberts Proskovics, the engineer responsible for ORE Catapultâ€™s floating wind project portfolio, a steady pipeline of projects and a supportive policy framework will be critical to catalyse growth and attract inward investment
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The opening of Hywind Scotland was a real milestone for the floating offshore wind sector. What is now needed from government to help overcome commercial barriers and to support the next phase of floating wind? The Hywind Scotland project benefited from the support mechanisms put in place by the government to help accelerate development of new innovative renewable energy technologies. The current support mechanism is due to run out this year and, currently, there is no new mechanism in place to build on the progress made to date. This means that, under current arrangements, future floating wind projects will have to compete for Contracts for Difference against other more developed technologies such as bottom-fixed offshore wind. The key requirement for the sector in the UK is a route to market and commitment to a steady pipeline of projects, recognising that, at this stage of development, costs for floating wind are high relative to more mature renewables. This should be supplemented with policy measures which support the development of the UK supply chain in order to ensure the UK can reap the economic benefits as well as clean energy from deploying floating wind. It is also critical that sites suitable for
floating wind are included in the next round of offshore wind development zones. There is an opportunity to make the UK the centre for this emerging technology. What is required from the industry to make this happen? The UK already has strong oil and gas, and bottom-fixed offshore wind supply chains. Floating wind could tap into these, as there are many commonalities between these industries. However, there are components, processes and requirements that are unique to floating wind. Some can be tackled through targeted research and innovation, while others will require direct investment in the facilities to make these fit for floating wind (e.g. upgrading port infrastructure). There are also opportunities for collaboration between different segments of the supply chain to create more optimised, holistic solutions (e.g. anchors, moorings and substructures). For the supply chain to invest in its facilities and in research and development, there needs to be a steady pipeline of projects. Currently, this does not exist, but a sector deal that includes floating wind would show industry commitment, which could be matched by government.
Floating wind: Renewables
To build a global industry the LCOE for floating offshore wind must be brought down. How can critical parts of the supply chain cut costs? We have seen some good cost reduction in floating wind already (Statoil claims a 70% reduction in the capital expenditure per megawatt for the Hywind Scotland project compared with the original prototype); however, further reduction is required. We believe that the reduction will mainly come through scale (larger wind turbines, as substructures scale very positively; and fixed costs being split across a larger number of units â€“ e.g. offshore and onshore substation, cables to shore, vessel costs, onshore facilities, fixed operations and maintenance costs and development), and maturity and innovation (further design optimisation, serial manufacturing, reduced installation times, mass market). What lessons can be learnt from other energy sectors to help the industry drive innovation and deliver a capable, competitive, and innovative local supply chain? Bottom-fixed offshore wind, but more so oil and gas, has been very good in coming together to solve common challenges. The
CRINE initiative of the early 1990s demonstrated how competing oil and gas companies could collaborate effectively to achieve critical cost reductions through adopting new approaches and culture. Floating wind is well placed to take advantage from the already developed industries for onshore and bottom-fixed offshore wind, and oil and gas by reusing already developed components and processes, and not repeating mistakes made in other industries. France and Japan are two lucrative markets for the expansion of floating offshore wind energy. How can UK suppliers leverage their expertise to become competitive in these emerging markets and indeed the global marketplace? The starting point will be developing a domestic market where UK companies can grow and showcase their expertise. Investment and R&D should be focused on areas well suited to exports. This includes: high-value, easily transportable components such as electrical connectors; engineering and design expertise; remote monitoring and inspection equipment and techniques; and (eventually) artificial intelligence solutions.
As well as leveraging their expertise, it may be necessary to partner with companies established in these markets and form trade links with the help of government bodies such as the Department for International Trade. The UK is well known around the world for its ability to innovate and for the quality of its products. However, this often comes at higher cost compared to some other countries, and so a focus on cost reduction will also be critical. What technological innovations and developments do you expect to see in five yearsâ€™ time? With more floating offshore wind turbines being installed globally, the technology will be further proven, but more importantly commercially de-risked. The four pilot-arrays and the launch of a commercial tender in France will help to achieve this. Use of floating wind for directly powering marginal oil and gas fields, as investigated in the Wind Power Water Injection (WINâ€“WIN) project could also be proven. Additionally, we should see large 10MW+ wind turbines being rolled out; floating wind substructures being further optimised; new designs of holistic anchor-mooringplatform solutions developed; development of dynamic cables and wet-mate connectors with high power rating; and remote inspection. www.the-eic.com | energyfocus
From the EIC: Back to the future
Back to the future
As the EIC celebrates its 75th anniversary
Energy Focus asks three energy leaders to examine the impact that their organisations have had on the development of the industry, and their views on what the future has in store Advertising feature in association with:
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IMI Critical Engineering: Back to the future
A great leap forward TM with DRAG technology IMI Critical Engineering’s Chief Technology Officer, Mike Semens-Flanagan, reflects on the past, present and future of DRAGTM technologies
ack in 1961, during the battle to win the Space Race, NASA was trying to manage the flow rate of liquid hydrogen and oxygen to power its rockets. The solution to its problem was developed by one man, Richard Self – and his invention was nothing short of a quantum leap forward in severe service valve technology. At that time, severe service valves were not that advanced – there was minimal flow control and corrosive fluids shortened the lifespan of equipment dramatically. The challenge was to control very high fluid velocities caused by pressure reduction – if pure oxygen fluid flow is not kept low, it will oxidise metal like an acetylene torch. DRAGTM technology was a truly innovative approach to managing destructive fluid flow velocities. DRAGTM flow technology divides the flow of a fluid into many streams, creating multiple tortuous paths through which the fluid will pass. These create long laminar flow streams with high frictional drag forces, which cause the pressure drop. Mr Self went on to found the company that is now IMI CCI,
designing, building and patenting the world’s first multistage control valve in 1967. Capable of handling high-pressure liquids and gases including, oil, steam, natural gas, petroleum products and chemicals, DRAGTM technology has revolutionised the valve industry, and the practices of end-users, designers, and manufacturers of flow control solutions. Fast-forward to 2018, and DRAGTM technology is undergoing further innovation, thanks to the possibilities unleashed by the Industrial Internet of Things (IIoT) and the advent of additive manufacturing, aka 3D printing. The IIoT is already opening up new possibilities. By building sensors into valves, we can collect
real-time information on the performance of valves in critical applications and use the data to build predictive models for the future, potentially improving a valve’s safety, performance and efficiency. IMI Critical is already trialling ‘smart’ valves with customers, allowing monitoring of valve performance remotely. Within the next decade, ‘smart’ valves will become mainstream products. Meanwhile, additive manufacturing opens up new ways to conceive of and design valves. While successful for smaller valves in low pressure applications, manufacturers are working hard on applying the technique to the much larger valves and more challenging materials used in high pressure critical applications. IMI Critical has already commissioned valves using components made by direct laser sintering, and there are exciting possibilities to make DRAGTM even better for our customers’ applications. Fifty years after it was invented, DRAGTM technology still sets the standard today for fast and precise flow control. By harnessing the power of the IIoT and 3D printing, DRAGTM technology will set the standards for tomorrow too.
About Part of IMI plc, IMI Critical Engineering is a world-leading provider of critical flow control solutions which enable vital energy and process industries to operate safely, cleanly, reliably and more efficiently. Employing around 4,000 talented people, the company operates a global service network with over 20 manufacturing facilities in 16 countries worldwide. It draws on extensive technical knowledge, engineering design capability and application experience to create customdesigned products offering unrivalled durability, safety and performance. www.imi-critical.com
www.the-eic.com | energyfocus
Back to the future: CompEx
CompEx – an accredited international competency scheme CompEx Operations Manager Martin Jones explains how the CompEx Scheme has been driving the highest standards for assuring workplace safety for 25 years
his year, 28 May sees the 25th anniversary of the launch of the CompEx Scheme, an initiative led by industry for industry, to enhance awareness and workplace safety procedures and various protection concepts for equipment designed for use in explosive atmospheres. The scheme has always embraced industry best practice with in-country regulations and references, the IEC 60079 Standards in this regard. Combinations of modules have been developed to address electrical safety in workplaces containing gas and vapours, fuel, water with recent modules for mechanical (non-electrical), application design and responsible persons. Recent developments have also seen the US NEC 500/505 Code of Practice and API 500/505 Recommended Practice for offshore installations being added. Back in 2007, to give confidence to the industry that supports the use of CompEx Certified staff and contract staff, JT Limited, the CompEx Certification Body, set a strategy to gain international accreditation for the scheme against the recognised
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international standard ISO/IEC 17024: 2012 Conformity assessment – ‘General requirements for bodies operating certification of persons’. This accreditation demonstrates technical competence is in place for a defined scope as detailed in the accreditation certification www. ukas.com . This was originally achieved against the 2003 standard back in 2010 and upgraded to the 2012 standard as one of the first certification bodies to achieve the new standard in early 2014. Since 2010, JT Limited have undergone eight years of witnessed assessments by the United Kingdom Accreditation Service (UKAS), who are registered under the International Accreditation Forum, at various licensed CompEx Centres worldwide, to confirm that the CompEx Scheme meets the highest levels of professionalism, integrity, impartiality and maintains the scheme’s currency in terms of industry expectations. The unique combination of knowledge assessment and practical assessment of candidates to an industry benchmark has created a global core competency scheme which serves users worldwide across
four continents. From 2007 onwards, the scheme has grown significantly on an international scale and now has 60 centres licensed worldwide to deliver various CompEx modules. To date, over 72,000 candidates have been certified under the scheme in the 25 years of its existence. Unrivalled in its breadth and depth, the CompEx Scheme continues to provide industry with local access to core competency validation. This assists engineering management and responsible persons with their own competency management programmes to help to maintain workplace safety and protect the expensive capital assets therein and will continue to deliver the needs of the users into the future. This proactive approach with both the users and the regulators by JT Limited, the CompEx Certification Body, will see the development of future modules, where required, to meet the changing pace of the working environment, to ensure persons working in workplaces containing explosive atmospheres have the competencies in place to safely install, inspect, maintain and manage all the new equipment and associated technology in a professional manner.
About The CompEx Scheme is the recognised global scheme for the protection of oil, gas and chemical workers in both offshore and onshore activities. The scheme assesses the competency of employees and contract staff who are working in environments with the potential risk of explosive atmospheres. Developed by the Engineering Equipment and Materials Users’ Association (EEMUA) and JT Limited, the CompEx Certification Body is accredited by UKAS to ISO/IEC 17024 : 2012. www.compex.org.uk
Safelift Offshore: Back to the future
Safelift Offshore can be the key to the success of your next major EPC project Safelift Offshore Director Ritchie Barron describes how the company strives to exceed expectations on supply chain efficiency and procurement costs
reenfield and brownfield project procurement is yet another service that continues to grow both onshore and offshore. Indeed, many operators and globally based project teams may not be aware that Safelift already has considerable experience and expertise in the full scope and extent of provision required for all the mechanical handling and lifting equipment package requirements for a new build platform, rig, FPSO, ship or land-based operation. As an original equipment manufacturer (OEM), Safelift couldn’t be better placed to provide projects with a full technical procurement solution. Direct access to the manufacturer ensures specification of the equipment meets the requirements of the project; quicker response times ensuring key deadlines are met and delivered with a comprehensive documentation package tailored to the level of supply. The knowledge and experience that Safelift offers in technical procurement of project equipment has many direct benefits to any new project: improving supply chain
efficiency and reducing procurement costs while sharing best practice to raise industry-wide safety standards. Our company has grown organically from our humble North Sea beginnings over the last 24 years as our products and services have gone from strength to strength, continually requested by clients as they take on new projects. We were naïve to an extent of the overall size of the oil and gas sector, with so many great projects on going throughout the world. Over the last year we’ve been actively focusing on new markets and new areas of business with positive results. With the help of the EIC we are now more aware than ever of the opportunities available to us on a global scale. We have been pleasantly surprised by how well our products
Safelift couldn’t be better placed to provide projects with a full technical procurement solution
and services have been received both internationally within the oil and gas industry, and also from other energy sectors such as the nuclear and renewables sectors. Safelift has an unrivalled client base including all UK North Sea operators as well as major blue chip companies. However, we understand that different areas and also different energy sectors require us to adapt our products and solutions to meet their needs. It may be that Brexit has been the catalyst to the increase in our export business we’ve been experiencing, we’re not entirely sure, but it’s certainly changed our everyday business. Every day we are dealing with new enquiries from all over the world and it’s important that we continue to make ourselves approachable and flexible. We’re committed to applying the same basic principles we’ve learnt from the North Sea of exceeding our clients’ expectations on product quality, specification and on time delivery. We’re celebrating 25 years in business next year and we’re confident we’re laying the foundations for at least another 25. We look forward to discussing your next project.
About Established in 1994, Safelift Offshore has become internationally recognised as a market leader in the design, manufacture and procurement of all types of mechanical handling and deck equipment to the oil and gas industry. www.safelift.co.uk
www.the-eic.com | energyfocus
EIC Member Focus YPS Valves
YPS LANGLEY VALVES
Rachel & Jonathan Wormald, YPS Valves Ltd
Can you tell us a little bit about YPS Valves? Rachel: YPS Valves was established in 1972 and is a family-owned and UK-operated manufacturer, stockist and modification valve provider. We specialise in the manufacture of high-alloy valves from casting and forged bar for critical applications within the oil and gas, petrochemical, water and offshore industries. Our manufactured product is a ‘Langley’ valve and has been supplied to all leading end-user operations worldwide. How did YPS Valves start out? Rachel: YPS started life as Yorkshire Pipeline Supplies, which initially traded pipes and fittings until 1980 when it turned to the manufacture, modification and stocking of special alloy valves. The business then acquired the trading name and design rights for ‘Langley’.
What’s the best thing about working as a husband and wife team? Jonathan: You have a direct understanding of each other’s highs and lows. It is also important to know your role and respect the hierarchy. Rachel is Managing Director and has the final say. If you hadn’t founded YPS Valves, what would you have done instead? Rachel: I am not sure, valves are in my blood! If I had to choose, it would be something like forensics. Jonathan: I still operate my own consultancy for the delivery of automotive car dealerships, so I would continue to undertake that.
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What’s next for YPS Valves? Rachel: We are currently working on broadening our range of Langley Valve product, including a bespoke ball valve in exotic materials that will be available to the market in Q3 2018, and we are aiming to offer our current products in aluminium bronze in Q4.
Energy Focus caught up with wife and husband team, Rachel, Managing Director, and Jonathan, Commercial and Operations Director, to find out what day-to-day life is like at YPS Valves What has been the biggest industry change since YPS started more than 40 years ago? Jonathan: The emergence of low-cost overseas manufacturing and the decline in the UK’s refining, petrochemical and gas markets. We are all now competing internationally with emerging countries such as India and China providing low-cost product. What’s been YPS Valves’ biggest highlight to date? Jonathan: Surviving the downturn in oil and gas market while keeping all our employees, and managing to invest in new machinery and product such as our Nozzle, Wafer and Dual Plate valves.
What would it surprise our readers to know about YPS Valves? Rachel: We have been manufacturing and supplying valve products from our Leeds facility for more than 40 years. We are a Lloyd’s-accredited UK manufacturer of valves and stockist of internationally approved manufactured products, offering an accredited modification and test approval service on all our valve products. What would it surprise our readers to know about you? Rachel: I am probably the only female MD of a valve manufacturing company in the UK. Jonathan: I am a songwriter/guitarist who enjoys an open mic night. I’m also a black belt in karate and competed at national level. As we celebrate our 75th year, what do you think are the biggest challenges ahead for UK suppliers? Rachel: One challenge is balancing the continuing depression in the sectors we serve against maintaining a level of investment for the continual development of our product, employees and infrastructure. Jonathan: Encouraging young people to see UK manufacturing and engineering as a career. Initiatives to promote and attract young people to plug the skills gap need to be considered further.
WE CONTINUE T INVEST IN O O STOCK PROG UR RAMME We have had 30
THE LEADING GLOBAL STOCKHOLDER & SUPPLIER OF PIPES, FITTINGS & FLANGES
0 tonne of st Duplex and ock Super Duple x delivered to the UK br anch this ye ar with the same again to be deliver ed before the end of th e year.
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