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The newly formed UK Oil and Gas Authority (OGA) has awarded 41 new licences to explore the UKCS in the North Sea. The new awards are the remaining winners of the 28th Offshore Licensing Round, which saw 134 licences confirmed November 2014. The total of 175 awards covering 353 blocks makes it the biggest licensing round since the first in 1964.

The challenge will be translating the licenses into drilling activity as most companies merely pledged to gather or reprocess seismic data. OGA CEO Andy Samuel said that awarding licences was just a start and that industry, government and the OGA needed to work together to revitalize drilling activity in the basin, which has been at its lowest levels since the early 1970s.

“The UK Continental Shelf remains a world-class hydrocarbon province where significant resources and economic value remain to be realized. The good level of interest in the 28th Round highlights the continued attractiveness of the UK’s oil and gas resources,” Samuel said. “Licences are however just a start and industry, government and the OGA now need to work together to revitalize exploration activity across the basin and convert licences into successful exploration wells.”

The latest awards were primarily in the northern and southern sectors of the UK North Sea, but also included fields in the west of Shetland region. Shell was awarded one licence, covering ten blocks, Italy’s Eni was awarded three, covering 23 blocks, and OMV was awarded one, covering nine blocks. Other companies that gained awards included Total, BP,

to provide secure, reliable energy for hardworking families and businesses and reduce our reliance on volatile foreign imports. We are backing our oil and gas industry which supports hundreds of thousands of jobs across the UK. The 28th offshore licensing round comes after the Government announced a major package of support in March to encourage £4 billion of additional investment in the North Sea which will prolong the life of this vital industry.”

UK awards 41 new offshore licences

Nexen and UK independents Parkmead Group and Hurricane Energy.

UK energy minister Andrea Leadsom welcomed the successful awards, noting that the tax cuts introduced by the government in March would be likely to attract an additional $6.2 billion of North Sea investment and new production totalling at least 120 million barrels of oil equivalent in the upcoming five years.

Leadsom said, “We are determined to make the most of our North Sea resources

ToTal sells laggan sTaKe To sse ToTal has sold a 20% stake in its Greater Laggan Area development, located west of Shetland, to SSE for £565m. The area includes the Glenlivet, Laggan, Tormore and Edradour gas fields. The sale also includes a 20% share in the Shetland Gas Plant at Sullom Voe.

Total will continue as operator and own 60% of the assets, with the other 20% held by Dong Energy.

Some reports suggested SSE got a bargain, with Total originally seeking a significantly

higher sum. Addressing concerns over low prices and high UKCS costs, SSE said the fields were new and would have relatively low operating costs. The Greater Laggan Area development is expected to start production later this financial year.

The deal is part of a $5 billion asset divestment by Total, and some observers believe it could signal the start of a series of similar asset transfers. This was breaking news at the time of press, so we will look at this story in more detail in our next issue.

Sullom Voe gas plant

OGA CEO Andy Samuel

NEWSOffshore Aberdeen | July/August 2015 | offshoreaberdeen.com2 |

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ois aWarded north sea decoMMissioning contract by antriM energy and centrica energy OffshOre InstallatIOn servIces (OIS), an Acteon company, has been awarded a contract by Antrim Energy to decommission four subsea wells in the central North Sea. The offshore scope of the campaign, which also includes six wells from Centrica Energy, will include complete offshore and onshore project management, vessel charter, equipment and personnel.

Rhodri Davies, OIS president, said, “Since 1996, OIS has successfully completed more than 118 well decommissioning projects

clair ridge toPsides installedBP and Its co-venturers, ConocoPhillips, Chevron and Shell, confirmed the instal-lation of the new Clair Ridge platform’s quarters and utilities (QU) topside modules in late June, a major milestone in the Clair Ridge project.

The QU platform comprises three mod-ules – the quarters and utilities integrated deck, which has a lift weight of 9,400 tonnes; the power generation module which has a lift weight of 4,550t; and the living quarters module which has a lift weight of 2,210t. Supplied by South Korean yards, they were safely lifted onto the pre-installed jackets by the Heerema Thialf heavy lift vessel.

Clair Ridge is a multi-billion investment

without a single lost-time incident. With Antrim Energy and Centrica Energy now involved in our 2015 subsea well abandon-ment campaign, OIS is currently decom-missioning 10 subsea wells within the UK continental shelf. As an enabler of multi-operator campaigns, OIS values collabora-tions such as this in the decommissioning field and is well suited to working alongside progressive organisations such as Antrim and Centrica.”

The wells, in categories 2.1 and 1, will be abandoned using Acteon sister company,

ithaca Production rises Ithaca energy saId its average pro-duction in the second quarter of 2015 was 12,667 boe/d, resulting in average produc-tion for the first six months of the year of 12,578 boe/d. It restated its full year guid-ance of 12,000 boe/d (95% oil), taking into

account planned maintenance shutdown activities in the second half of this year.

Ithaca said that its producing assets con-tinued to perform well over the course of the second quarter of 2015, with solid operational uptime achieved across the main fields. The

tie-in of the Ythan field development well was completed and brought into production at the end of May 2015, before planned main-tenance at the Dons facilities and the Sullom Voe Terminal. The initial performance of the Ythan well has been encouraging.

in the second phase of development on the Clair field which lies 75km to the west of the Shetland Islands. The project comprises two new bridge-linked platforms and new pipeline infrastructure to connect storage, as well as redelivery facilities on Shetland.

The next major milestone will be the installation of the production and drilling platform topside modules, scheduled for summer 2016, with production expected to commence in late 2017.

Trevor Garlick, regional president for BP’s North Sea business, said the installa-tion had been a “fantastic achievement” for the project. “In a challenging time for the industry, the project shows the potential of our basin and why it’s so important that we work to ensure a competitive future business,” he said.

The Clair Ridge development will have the capability to produce an estimated 640 million barrels of oil over a 40 year period, with peak production expected to be up to 120,000 b/d.

Around half of the project’s investment is being directed towards the UK, with more than 80 British companies providing engineering design and support, hook-up and installation services, plus equipment and man power, according to BP. The hook-up and commissioning of the topside modules by Amec Foster Wheeler created more than 600 jobs, including six electrical apprentices. Following the installation, Cape was awarded a contract extension

worth £9.8million, for work in support of the hook-up and commissioning of the two new platforms.

Although discovered in the 1970s, the field was not brought on stream until 2005, owing to its location and geographical com-plexity. It will be the first ever large-scale project using saltwater injection technol-ogy to enhance recovery. It will use reduced salinity water injection to extract a higher proportion of oil over the life of the field.

Vessel-based well decommissioning from OIS

Claxton’s, Suspended Well Abandonment Tool (SWAT). SWAT is a diver-less, vessel-based approach and will be completed as part of a multi-operator campaign in summer 2015.

The offshore campaign will be conducted from an anchor-handling tug supply vessel (AHTS), the Island Valiant. Dur-ing phase one, SWAT will be deployed through the vessel’s moon pool to set cement plugs in the bore and across all the casing annuli. The second phase will use an abrasive sever-ance system for the cutting of the wells and sequential removal from the seabed.

OIS is experienced in or-chestrating multi-party col-laborations, having planned and executed 17 campaigns involving more than one operator in the North Sea since 1996. The OIS busi-ness model enables opera-tors to share project costs and provides a cost-efficient

way to decommission suspended wells and comply with UK oil and gas legislation.

Recovered wellhead from a previous OIS well decommissioning project

NEWSoffshoreaberdeen.com | July/August 2015 | Offshore Aberdeen | 3

It has been a couple of months since our last issue, and while crude prices did look like stabilising at around $65/bl at that time, more recently they seem to have taken a bearish turn once more. First fesh Iraqi oil and now the removal of any constraint on Iranian exports, combined with record Saudi and US output, are together likely to maintain that bearish tone for some time to come, according to many experts, leaving most companies and the sector as a whole busy adjusting to a less cash-rich environment – especially in the North Sea where costs are well known to be among the highest globally. As such we have chosen cost reduction as the theme for this month’s issue, with a variety of articles on different aspects of what is currently perhaps the over-ridding goal of many companies involved in the offshore UK sector.

It may come a little surprise that expensive and speculative exploration activities have been among the areas hardest hit in the attempt to reduce costs. New figures show the number of exploration wells is expected to fall by 20% on average around the world this year, although there may be some surprising relief in Europe – please see “Global offshore exploratory drilling falls; Europe bucks trend” on page 13.

The downturn in exploration, as well as other uses for rigs, such as appraisal and development – means oversupply in the rig market is growing. The situation is made worse by a backlog of new orders made in the good times when day rates were sky-high. But within the disaster lies the seed of recovery - the oversupply is driving down day rates and drilling costs generally, especially in the most expensive exploration activities. We take a look at the situation for the rig market, rig owners, drillers and shipyards in “Tough times ahead for rig-owners but operators benefit as drilling costs fall”, on page 14.

Also on drilling costs, Wood Mackenzie recently released research suggesting they would fall by 30% in the North Sea by 2016, which should be sufficient to leave most drilling programs in pretty good shape despite budget cuts. We take a look

at their analysis in an article on page 17. (Wood Mackenzie: Lower drilling costs to absorb bulk of budget cuts).

Continuing on the cost theme we take a look at technological and operational innovation and in particular the way it is applied to the growing list of decommissioning projects fast approaching in the North Sea. News that the OGA has been tasked with finding a way to cut the anticipated multi-billion tax bill (see page 4), makes the issue all the more critical. Insights can be found on page 16: “Companies target cheaper decommissioning”.

In addition to cost, top among North Sea issues is how to design the best fiscal and regulatory regime to encourage development under current conditions. In the case of the UK, the new Oil & Gas Association (OGA) has a relatively clean slate to work from and is also tasked with the Wood Report objectives. We discuss the relative merits of the various North Sea regimes, which may influence the choices made by the OGA and UK government over up-coming months in “Picking the best fiscal and regulatory regime for Europe’s mature offshore”, on page 12.

Changing global fundamentals are also having an effect on oil trading practises. More specifically, North Sea Brent may find its position as the leading global benchmark challenged over future months by the US West Texas Intermediate futures contract. It has benefited recently from growing physical liquidity related to strong US crude production, alongside infrastructure improvements, which have left it more integrated into the international market, and consequently in a far better position to challenge Brent. See page 15 “International markets: Brent challenged for top spot”.

In the next issue in the run up to SPE Aberdeen Offshore conference in September, we will move away from the cost theme and take another look at the markets, as well as at companies that are expanding in the North Sea during the current slump, and the reasons behind their bullishness. Until then I hope you enjoy the read and please do look out for us at the SPE conference.

coMMentWood grouP Wins $250Mn cats deal WOOd grOuP saId it has secured a $250 million deal with Antin Infrastructure Part-ners for operating services on the Central Area Transmission System (CATS) in the North Sea for up to 10 years.

Wood Group will act as the duty holder of the CATS terminal and pipeline and will have day-to-day responsibility for operations. The company said that a dedicated Wood Group Kenny team based in Glasgow will be integrated into the operating services team to provide pipeline management expertise.

Wood Group's announcement comes after Antin agreed to acquire BP's stake of CATS in April for $486 million, taking their interest to 99%. Wood Group said it will work closely with Antin IP to ensure "a safe and smooth transition." It's expected that Wood Group will assume responsibil-ity for operating CATS by the end of 2015 once the agreement between BP and Antin IP has concluded.

“This partnership enables us to extend our existing duty holder capabilities and

globaldata: uPstreaM oil and gas deal activity doWn $4.3 billion in JuneglOBal uPstream OIl and gas deal activity, including capital markets and Mergers and Acquisitions (M&A), totaled $19.3 billion from 125 transactions in June 2015, marking a $4.3 billion decrease in value from the $23.6 billion across 119 deals posted in May 2015, according to researchers at GlobalData.

According to the company, upstream M&A accounted for $8.8 billion from 18 transaction announcements in June 2015. While this was a significant drop from $11.7 billion in May 2015, the number of M&A transaction announcements increased from 13 in the previous month.

Matthew Jurecky, GlobalData’s Head of Oil & Gas Research and Consulting, said: “Capital raising continues at the healthy clip seen in 2015, driven by debt

expertise into new markets,” said James Crawford, Wood Group's UK and Africa managing director. “By leveraging the ex-pertise of WGPSN and WGK, we will draw on the strength of Wood Group for our new client and our priority is to ensure a safe and smooth transition of operatorship with particular focus on retaining and develop-ing the existing CATS workforce. We have already established a strong relationship with Antin IP and we are looking forward to working with them to grow and develop CATS," he added.

CATS transports gas through 254 miles of pipeline from the Central North Sea to its UK terminal in Teesside where it is then processed on behalf of major North Sea gas producers. The system now serves 34 producing fields with a high portion of contracted revenues.

CATS can handle more than 1.7 billion cubic feet of natural gas per day, and in 2013, it was responsible for the transporta-tion of 13% of UK domestic gas production.

offerings in the US almost a year from prices collapsing. Companies continue to seek financial flexibility and restruc-ture short- and reserves-based capital to avoid bankruptcy.”

GlobalData’s report said that Europe, the Middle East and Africa (EMEA) led the global acquisitions market in terms of value in June 2015, with a 39% regional share of $4 bil-lion. This came from 18 deals, of which 14, with a combined value of $4 billion, were an-nounced, and four, with an undisclosed value, were completed. The majority of M&A activ-ity in EMEA was centred on offshore assets.

Mr Jurecky said: “M&A momentum con-tinued in June with Emirates National Oil Company proposing a buy-out of Dragon Oil, BP buying a stake in one of Rosneft’s Siberian fields, and Wintershall selling a

package of North Sea assets to Tellus Pe-troleum (Tellus).”

Other significant transaction announce-ments include a proposed $2.3 billion merger between Vedanta and Cairn India, as well as an acquisition of royalties from Cenovus for $2.67 billion by the Ontario Teachers' Pension Plan.

Jurecky concludes: “Market conditions will continue to fuel a desire for M&A. After a failed attempt years ago, Emirates National Oil Company is another case of a company taking advantage of depressed asset values to consolidate ownership in one of its positions, Dragon Oil.

“On the other hand, Wintershall is dis-posing of lower growth assets, which for Tellus is an opening into a stable and de-pendable production base.”


attracting new talent could guarantee the long-term Future of the industry No industry can survive and thrive without ensuring that the older gen-eration passes the relay to the younger one – it is not just a “circle of life” but a continuum of human development, technological advancement and scien-tific discoveries.

As the largest individual upstream oil and gas membership organisation in the world, the Society of Petroleum Engi-neers (SPE) has always striven to ensure that young people – school children, secondary-school pupils and students – are constantly engaged, enthused and challenged by the fascinating world that oil and gas exploration and production represents.

Perhaps, unlike many other industries and walks of life, the oil industry has always been the one mostly subjected to geopolitical influences, international politics plays and stock markets influ-ences. As such, this fluidity has spurred times of peak development as well as serious downturns.

It cannot be argued that, globally, the industry is not struggling against the current downturn – because it is. Nevertheless, until the entire world’s population and businesses are solely using renewable energy, fossil fuels will be necessary and existential. The generational gap which affects not only the oil and gas industry in the UK but across the world is gradually deepening. The industry has tried and somehow failed to make its case “attractive“ to the younger generation. The level of competition on the technology playing field is high and, if we are to combine that with the fluidity of the oil and gas market itself, the promise of a “job to retire from” seems unattainable.

Few sciences are as challenging as the petroleum industry and even fewer science subjects use a variety of add-on subject matters to the extent the oil indus-try does, which include mechanics, elec-tronics, electrical engineering, geology, technical design, IT, mathematics, physics and chemistry, to name just a few.

A child’s career decisions are mainly shaped by his/her immediate social circle, with family playing the most in-

fluential role. Naturally, talks by industry experts and other educational materials support the case of pursuing a career in the oil and gas industry but, unless the parents, carers or tutors understand the immense opportunities that their chil-dren could have and the applicability of the professional skills they will obtain by choosing to work in the oil industry, they are unlikely to follow that career path.

To me, on a socio-psychological plan, the oil and gas industry is absolutely fascinating. Across the sector, people of all ages, backgrounds, nationalities, religions, colour and gender work to-gether, understand each other and make an incredible contribution not just to the industry’s progress and develop-ment, but to humanity’s evolution and advancement as a whole.

As a parent it is important to have a clear understanding of what career op-portunities are available for your child in the future and the best route for them to take to ensure they achieve such goals. A parent who would not advise their child to pursue a career in the oil and gas in-dustry, should consider researching the potential such a career would provide them with. A career in the oil and gas sector offers endless opportunities to challenge their knowledge boundaries and re-write the laws of what is currently classed as “impossible”.

We are in a time where news of re-dundancies is relentless, negative mes-sages about the North Sea’s future have become an almost daily occurrence in the media, and political friction re-garding the UK’s Continental Shelf ’s “British or Scottish” heritage emerges constantly in various Party election debates. It is important that we, as an industry, remain positive and face this challenging time head on.

Perhaps, to ensure the future of an industry which, at least in the UK, is far from dying, the industry bodies, op-erators and service companies should unite their voices, addressing not only children, but their parents too, with a single concerted message – a career in the oil industry is not a bad option – it is one of the best options.

Ella Minty, Another Perspective Committee Chair, Society of Petroleum Engineers (SPE) Aberdeen Section

www.spe.org

OnesuBsea, the Cameron and Schlum-berger joint venture, and Subsea 7 have joined forces – the fourth such partnership in the sector since 2012, as companies seek to cut costs and offer the best combined product in a cash-strapped market. The two compa-nies will jointly design, develop and deliver integrated subsea development solutions.

The global alliance combines Subsea 7's experience and technology in seabed to surface engineering, construction and life-of-field services with OneSubsea's reservoir expertise and subsea production and pro-cessing systems technologies. This is aimed at enhancing project delivery, improving recovery, and optimize the cost and effi-ciency of deepwater subsea developments for the life of the field, OneSubsea said.

Since 2012 there have been three similar tie-ups: In 2012, Cameron and Schlum-berger announced the OneSubsea JV, focusing on reservoir recovery through integration and optimization of the pro-

another PartnershiP For subsea service sector

oil & gas uK WelcoMes suMMer budget; calls For Further consultationOIl & gas UK welcomed the Chancellor’s post-election Summer Budget, in particular the cut in corporation tax and confirmation that the types of investment qualifying for the Investment Allowance will be broadened.

Deirdre Michie, Oil & Gas UK’s CEO, said: “With continued signs that investment in the UKCS is falling rapidly, it is vital the scope of the Investment Allowance, an-nounced in the March Budget, encourages all forms of productive investment if it is to provide the strongest engine for growth. We are pleased to note that the government has [now] taken steps to extend this allowance as they previously proposed, and eagerly anticipate the required legislation by the end of the summer.”

“In addition, the announced two per cent cut in corporation tax over the next five years, will support companies throughout the sector’s supply chain and help its competitiveness.”

With five more years in power, George Osbourne is likely to try and further re-duce business taxes over the period of this parliament.

Ms Michie noted that industry too was playing its part in addressing the challenges it currently faced: “There is increasing evi-dence that big strides are being made to im-prove the efficiency and reduce the cost of operations. Lifting costs are anticipated to fall as a result over the next twelve months. The pace of work behind the scenes must now be stepped up to continue the imple-mentation of fiscal reform the industry urgently needs to support its own activities to improve efficiency.”

“We would like to acknowledge the con-tinued commitment of the UK Government to provide a competitive tax regime as part of the shared objective to Maximise Eco-nomic Recovery from the UK Continental Shelf (UKCS). Whilst previous fiscal mea-sures including the introduction of the

Investment Allowance and reductions in the headline tax rates have been helpful, the agreed program of fiscal reform must also continue to respond to the prevailing business environment,” she added.

“HM Treasury had already proposed in the March Budget to consult on further measures to support exploration, improve access to decommissioning tax relief and reform the fiscal treatment of infrastruc-ture, and with the Summer Budget now behind us, it is imperative HM Treasury now commence these consultations to en-sure the fiscal regime drives investment through the downturn.”

The rate of exploration on the UKCS re-mains extremely low, with just 14 explora-tion wells drilled in 2014, and only seven so far this year – at a time when industry

should be aiming to drill upwards of 30 wells a year to reinvigorate the basin. That harsh fact underlines why we need effective regulatory, licensing and fiscal measures in place by Budget 2016 at the latest.

“The industry is currently working closely with the Oil and Gas Authority (OGA) on technical measures to promote the discov-ery and development of prospects including the new seismic funded by HM Treasury, but this work alone will not allow us to turn the corner.”

Oil & Gas UK is the leading representa-tive organisation for the UK offshore oil and gas industry. Its members, who number over 500, are companies licensed by the government to explore for and produce oil and gas in UK waters and those in the industry’s supply chain.

duction system over the life of the field. Since this signing, the new company has also established an additional alliance with Helix Energy to add subsea well interven-tion capabilities.

Last year, Aker Solutions and Baker Hughes announced the SubseaProduction alliance. The rationale for this deal was to develop technology for production solutions that will increase production, boost recovery rates and reduce costs for subsea fields.

And earlier this year, FMC Technolo-gies and Technip announced the Forsys Subsea JV, aimed at redefining the way subsea fields are designed, delivered and maintained by bringing their experts to-gether early in the project concept phase, as well as significantly reducing the cost of subsea field development.

Mike Garding, OneSubsea’s CEO said: "The technology and expertise from Subsea 7 perfectly complements OneSubsea’s busi-ness strategy to offer a holistic approach

to subsea development solutions...Our established competencies in subsurface modelling and production systems engi-neering will be further strengthened by integrating the SURF expertise provided by Subsea 7. By integrating these key areas of expertise, we can further reduce risk and uncertainty to deliver the optimal solution for our clients to produce cost-effectively from subsea reservoirs.”

Jean Cahuzac, Subsea 7 CEO: "This com-bination of subsurface, SPS, SURF and life-of-field expertise is unique in its breadth of integrated service offering and provides clients with the opportunity to significantly improve subsea field economics over the lifetime of the development. I am looking forward to developing further our relation-ship with OneSubsea as we will be able to capitalize on the synergies between our strong technology portfolios and develop joint technologies to improve our offering for our clients.”

Five more years


PreMier taKes Full control oF solan Field, Pushes ahead With catcher PremIer annOunced It had taken full ownership of the Solan field, acquiring the 40% stake that it did not already own from partner Chrysador. It also signed a deal with FlowStream Commodities, where it is paid $100 million up front, in return for the proceeds from 15% of Premier’s production from the field for a period of time.

With improved weather, the company said good progress had been made with the commissioning work on the Solan facilities, West of Shetland, which is due on-stream in the fourth quarter of this year. The Ocean Valiant rig is now on location drilling the second pair of producer-injector wells. Solan is estimated to hold recoverable reserves of 40 million barrels of oil, with an estimated initial output rate of about 24,000 boe/d.

Tony Durrant, Premier’s CEO, said: “We are pleased to have concluded these new arrangements over a key asset for Premier. The agreement with Chrysaor enables us to focus on delivering first oil from the Solan project without partner funding concerns, while the transaction with FlowStream reduces our balance sheet exposure to the project and releases capital to fund comple-tion of the development. We continue to look at further opportunities to realise value from the project.”

buzzard shut doWn again in July aFter PoWer outagea POWer Outage closed the Buzzard Field – the UK’s biggest producer – for a couple of days in mid-July, cutting the flow of the Forties crude stream, one of four crude grades underpinning the Brent price, which is linked to Brent futures. The shut-down came only two months after another incident halted production for four days.

The anticipated tightening of physical supply in July pushed the front month Brent higher relative to later months. A planned maintenance shutdown had been pencilled in for one week from June 11, but was rescheduled for October, with its

hansa aWarded dutch, gerMan licenceshansa hydrOcarBOns has recently been awarded a number of licences in the Dutch and German sectors of the Southern North Sea. The awards comprise five contigu-ous licences, namely blocks N04, N05, N07c & N08 in the Netherlands and the Geldsack-plate licence in Germany, together termed the GEms (Gateway to the Ems) acreage.

The company also confirmed that drill-ing on its Catcher field in the UK central North Sea would go ahead soon. The project remains within budget and on schedule for first oil in 2017. Subsea installation work has commenced with two templates al-ready installed and laying of the gas export pipeline well underway, and development drilling about to start. Construction of the FPSO remains ongoing with the mating cone module completed and delivered to the hull fabrication yard.

Catcher is expected to produce 96 million boe with a peak production rate of around 50,000 b/d. The project will entail the drill-ing of 22 subsea wells (14 producers and 8 water injectors) on the Catcher, Varadero and Burgman fields which will be tied back to a leased FPSO. The oil will be offloaded by tankers while the gas will be exported through the SEGAL facilities.

The company said that despite the North Sea progress, first half results posted in August were anticipated to show a drop in revenue of 34% to $580 million for the six months to the end of June. At the same time, UK production is expected to fall 21% and global output 7.8%, although its global production estimate was increased to 60,000 boe/d from 56,700, owing to deliveries being above its estimates so far in the year.

timing determined in partnership with the Forties Pipeline System, so as not to lower Brent physical volumes too much.

The field is located in the central North Sea and normally produces 170,000 to 180,000 b/d. Oil from Buzzard is exported via the Forties pipeline to the Kinneil Ter-minal in Scotland. Natural gas is exported via the Frigg pipeline system to the St. Fer-gus Gas Terminal in northeast Scotland.

Nexen, which is owned by CNOOC, is the operating partner of Buzzard (43.21%), with Suncor Energy (29.89%), BG (21.73%) and Edinburgh Oil and Gas (4.70%) the main partners in the field and its facilities.

Dutch island of Schiermonnikoog,

The gross area is some 814 sq km and the licences are situated about 20 km north and northeast of the Dutch island of Schiermon-nikoog, where the water depth ranges from 10m to 30m. The GEms acreage is bounded to the north and northeast by the 4Quads and H&L licences where Hansa holds in-terests of 60% and 20% respectively.

North Sea assets acquired by Premier Oil in March 2009, including the Catcher, Caledonia and Sheryl properties

w fqmltd.com e [email protected]

t 01224 628 260

What saFety training should organisations Provide For non-saFety Personnel? The primary function of training is to instil knowledge and understanding. Many providers these days go further in order to develop and nurture skills to compliment the knowledge but essentially it must begin with ‘Safety Awareness’ to make the recipient familiar with the topic and the associated terminology.

is that enough?Safety Awareness is only the starting point. Front line staff who interact with potentially hazardous processes, materials and equipment, should receive further training to develop both their knowledge (what to do) and their skills (how to do it). This now goes beyond simply being aware and is the beginnings of competence (the skilful application of knowledge).

What about senior staFF?In the event of a serious incident Senior Executives, who are usually distant from the actual event, may well be called to account for their decisions which may have affected the likelihood of the accident occurring or its severity. They must balance safety with other Key Performance Areas like cost, reducing environmental impact, capacity and efficiency therefore need a much deeper understanding to guide and support them in their safety decision-making and leadership.

Their understanding must cover vital points such as: how safety works; how incidents happen; how to interpret safety information; how to ask the right questions; where the possible threats lie; how to demonstrate commitment to safety and how to accurately determine safety performance.

This is now called Safety Intelligence and will help CEOs and their Directors to stay sharp on safety while growing the business.

every Month the editor, JereMy boWden asKs FqM a Fact Finding question...

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Nigel Jenkins is Chief Executive of Decom North Sea, responsible for leading the representative body for the decommissioning industry. Previously a director with Decom North Sea from 2011 – 2013, he took up his current position in July 2014. Previous roles include board leadership positions with AMEC and AECOM, and most recently as board director with KDC Contractors – specialists in decommissioning. He is passionate about industry’s collective responsibility to efficiently manage and deliver end-of-asset life solutions.

norWegian Production rises nOrWay’s PrelImInary PrOduc-tIOn figures for June 2015 show an average daily production of about 1.948 million barrels of oil, NGL and condensate. This is 49,000 b/d (about 3%) more than in May 2015. Total gas sales were about 8.3 bcm, slightly less than the previous month. The average daily liquid production in June was 1.57 million barrels of oil, 353,000 barrels of NGL and 25,000 barrels of condensate.

This puts oil production 10% above the levels seen in June last year, and is around 5% above the NPD’s forecast for the month.

oil and gas hiring Managers doWnbeat on recruitMent ProsPectsresults frOm the latest global hiring survey by Rigzone indicate that oil and gas companies are continuing to put a brake on recruitment as a result of ongoing market uncertainty. Over half (51%) of hiring man-agers polled said they had decreased their hiring efforts in the second quarter, with an additional 13% saying they had frozen recruitment plans completely.

The majority of global hiring managers also remain reluctant to expand their hiring efforts over the next six months, with 65% acknowledging that they had decreased their hiring plans in this timeframe. In addition, 54% said they believed job cuts were more likely in the next six months, and 65% said they expected to experience a loss of budget for approved headcount for the year.

This means companies that are still in the market for talent are in a strong po-sition. Over 80% of hiring managers said that the candidate pool had grown in the second quarter, and 32% said the time-to-fill open positions had shortened. In terms of salary expectations, 70% of hiring managers said candidates were not asking for more compensation compared to the first quarter. In addition, professionals who are currently employed are expected to hold on to their current positions, with nearly 70% of the survey anticipating a decline in voluntary departures over the next six months.

“Despite some early positive signs in mar-ket trends, the oil and gas market continues to experience volatility and, as a result, companies remain reluctant to expand their hiring plans,” said Bob Melk, President of Rigzone. “For many companies, potential hiring opportunities have been postponed for the foreseeable future.”

The NPD said total petroleum output on the NCS for the first six months of 2015 has now reached around 702 million boe, in-cluding 279 million barrels of oil, 70 million boe of NGL and condensate and about 352 million boe of gas. The total is 23 million boe higher than was reached by the same stage in 2014.

Despite these positive figures, recent data from Statistics Norway has showed a levelling off in investments in oil and gas, following strong rises during the last five years.

Full details, including sponsorship,

accommodation, and delegate

bookings will be available shortly.

FOR FURTHER INFORMATIONPlease contact Jennifer Dunbar

[email protected] or Clare Rees [email protected]

We are delIghted to announce a record attendance at Decom North Sea’s annual Decom Offshore conference in May, with nearly 400 delegates attending. That’s an increase in attendance of over 60% on 2014 and with impressive statistics like that, it is clear to see that the decommissioning announcements of recent months have certainly propelled the sector into the headlines and consciousness of everyone involved with North Sea oil and gas.

Described by one delegate as the “best one day event on decommissioning I’ve attended”, “Decommissioning - the Economic and Operational Challenges” was buzzing with conversation as soon as registration opened – with familiar faces being greeted and the all-important networking taking place almost immediately. Decom North Sea chairman, Callum Falconer got official proceedings underway by introducing the first of three sessions: “A Collaborative Approach to Improving Decommissioning Cost Efficiency to Support MER UK”, sponsored by Amec Foster Wheeler Group Limited. First to the podium was Paul de Leeuw, Director of RGU’s Oil and Gas Institute, who set a thought-provoking tone, with his keynote address, “Decommissioning, The ‘Supermarket Way,’” - placing

decommissioning in the wider context and highlighting how and what the industry can learn from other sectors.

With updates from the Oil and Gas Authority, and insight from a variety of speakers on taking collaboration from intentions into actions, the session closed with a panel discussion, as the audience engaged with the presenters on a number of key questions. Delegates benefited from two subsequent sessions in the same format, entitled “Supply Chain: Reduce Cost and Improve Efficiency” (sponsored by EverSea NV) and “Operators: Insight into Economic and Operational Challenges”. The aim of Decom Offshore is to cover the topics relevant to you, and with a total of 21 speakers representing operators and a wide range of supply chain and service companies, feedback tells us that this was exactly what our delegates were looking for.

A key element of this year’s conference was an increased number of exhibitors, who were available during the event’s four networking sessions. With 90% of exhibitors judging Decom Offshore 2015 as excellent or good value for money, it was an unrivalled way in which to reach the correct audience. The exhibitors' reaction to the event was neatly summed up by those who experienced “…greater than expected footfall" and felt that

"connections made were outstanding." Based on this response, we look forward to growing the exhibitor numbers even further at Decom Offshore 2016.

In addition to the value of attending and interacting during the conference sessions, delegates were complimentary of the ample networking opportunities available throughout the day. At Decom North Sea, we understand how crucial that opportunity to connect with others can be, especially within the decommissioning industry, where so many of us are in initial stages of planning and activity. With scheduled sessions at the beginning of the day, during morning coffee, lunchtime and at our close of conference drinks reception, the opportunities for discussion were plentiful. Rest assured however, we will continue to look at ways on enhancing those opportunities at Decom Offshore 2016.

We look forward to welcoming you back to Decom Offshore 2016, and for those unable to attend this year, we urge you to join us at an event described as "…a great experience and an important opportunity to view and take part in the continued development of the Decommissioning market. A great location to discuss business with individuals from all over the UK and North Sea region."

Offshore Decommissioning Conference17 - 19 November 2015Fairmont Hotel, St Andrews


ithaca coMPletes norWegian sale to MolIthaca energy saId it had completed the sale to Hungary’s MOL of its wholly owned Norwegian subsidiary, Ithaca Petro-leum Norge. MOL paid $60 million, and the deal leaves Ithaca with the potential upside of additional bonus payments of up to $30 million, dependent on successful discover-ies being drilled on Ithaca Norge’s existing licence portfolio between 2015 and 2017.

Following repayment of Ithaca’s Norwe-gian debts, the net cash payment received was about $30 million, which is being used to pay back other debt. Ithaca said the sale of its Norwegian division concluded the company’s successful restructuring and monetisation of Norwegian operations, acquired as part of the acquisition of Val-iant Petroleum in April 2013.

interest in FridMan assetsrIverstOne hOldIngs and Blackstone Group-backed Siccar Point Energy are re-ported to be considering a bid for the North Sea oil and gas assets owned by Russian bil-lionaire Mikhail Fridman’s LetterOne. The firms, as well as Brazilian producer, PetroRio, were expected to bid for the assets by the end of July in a deal that may be valued at about $1 billion, although at the time Offshore Aberdeen went to press there had been no further developments.

LetterOne, which acquired its North Sea assets as part of a deal agreed last year to buy German utility RWE’s oil and gas division, is being forced to sell the fields by the UK government as part of sanctions related to Russia’s involvement in Ukraine. The com-pany, which counts ex-BP CEO Lord Browne as executive chairman, was given until mid-October to relinquish control of its UK assets or have its operating licences revoked.

uK oil and gas Well services contractors rePort steady but sloWing deMand in 2014demand fOr the expertise of well ser-vices contractors operating in UK waters remained steady according to figures in the 2015 Oil & Gas UK Well Services Con-tractors Report, which looks back at how the sector fared in 2014. These companies, which support the UK offshore oil and gas industry throughout the life cycle of well operations, reported gross revenue of £1.97 billion, which is a small increase of 1% on the 2013 figure. The information contained in the 2015 report represents around 85% of well services contractors.

Oonagh Werngren, Oil & Gas UK’s opera-tions director, said: “Throughout the first half of 2014, it was clear that well services contractors continued to benefit from the high level of investment in the UK continen-tal shelf (UKCS) which occurred in 2013. In the latter half of 2014, however, a number of companies reported a slow-down in the demand for their services and expect this trend to continue in 2015, with respondents predicting that the oil price fall will have a

STUDYenhanced oil recovery (eor) best oPtion For uK co2 storage lInkIng the develOPment of enhanced oil recovery in the North Sea to low-carbon electricity can bring significant benefits to the wider UK economy, while accelerating carbon storage and providing the most cost-effective pathway to UK decarbonisation targets, a new report proposes.

The report from the Scottish Carbon Capture & Storage joint industry body, shows that a synergy between CO2-EOR and Capture and Storage (CCS) could be the driver for developing both technologies in the UKCS. The approach could extend the producing life of the North Sea, reduce imports of oil, maintain employment, develop new export capabilities, and provide additional direct and indirect taxation revenues.

This approach could also provide the most cost-effective way to accelerate an energy transition between 2018 and 2030 to meet UK Committee on Climate Change decarbonisation pathways, especially given the new UK government’s moves to cut onshore wind and solar subsidies – which have left many observers concerned the country will miss its domestic and European targets.

Professor Stuart Haszeldine, SCCS Director at the University of Edinburgh, said: "North Sea oil and gas are facing an existential cost challenge, and at the same time the UK is struggling to fund its electricity decarbonisation clean-up. The beauty of this new analysis is that it shows how to help develop big projects in the power industry, while also supporting a transition of the abilities and profits from offshore hydrocarbons into new, sustainable jobs."

The project analysis suggests that this CO2-EOR route creates business demand, which drives the sequential construction of CO2 capture projects – reducing the costs associated with CO2 supply and enabling cheaper low-carbon electricity. CCS by this route would develop more rapidly and protect the onshore UK economy and industry from increasing carbon prices.

It claims that accelerated CCS deployment would mean more CO2 is abated, more quickly, than by any other route, and this includes emissions from the additional oil produced. Public subsidy towards the cost of a low-carbon transition would be greatly reduced, and CO2-EOR may even be profitable across the whole economy. Investment in CO2-EOR has a national return of up to 7.2x, which is much larger than rival energy opportunities.

However, the report points to a lack of clear supportive legislation and fiscal regimes for CO2-EOR in the UK. New supportive regimes are needed for CO2-EOR projects, similar to existing brown field or development allowances, and these must make investing in CO2-EOR in the UK competitive with the alternative global investment opportunities.

Professor Stuart Haszeldine, SCCS Director at the University of Edinburgh – Could CCS patch up Tory green policy?

negative impact on drilling activity.” The report confirms that along with the

rest of the UK oil and gas industry, well ser-vices contractors face a challenging business environment and therefore recruited fewer staff during 2014. However, the sector high-

MOL buys Ithaca Norge

lighted its intention to encourage broader commitment to shared industry tools includ-ing standard contracts which would con-tribute to the industry’s cost and efficiency efforts and help both operators and supply chain companies become more competitive.


uK MarKet leader in develoPMent oF tidal energy solutions the grOWIng emPhasIs on renewable and carbon neutral energy generation has pushed tidal energy into the spotlight. The UK is leading the field globally, and new, experimental concepts - such as dynamic tidal power, which enable production even in low-tide regions - possess the potential to disrupt existing technologies and make tidal power a key energy resource, accord-

reporToil and gas industry at risK oF PerPetuating talent crisiscOmPanIes WOrkIng In the

oil and gas industry must now put talent recruitment on the agendas of senior executives as the skills gap presents significant business risks, according to a new report from KPMG and Rigzone.

Effective leadership is required to address the talent shortage that has challenged the industry since the 1990s, and businesses must not be distracted from it by the payroll reductions and project postponements that have come in the wake of depressed oil prices since late 2014, they say.

The report, which is based on a survey of more than 2,500 oil and gas professionals, puts the lion‘s share of the blame for the industry’s on-going talent problem on a failure to anticipate an aging workforces and other demographic-related issues. Employees first hired in the 1970s and 1980s are now approaching retirement, and an industry-wide slump in the 1980s and 1990s, combined with inadequate workforce planning, has translated into a lack of qualified personnel ready to replace them.

The survey showed a deeply concerning lack of internal candidates (only 21% of companies are able to draw from their own ranks) and defined strategies for talent management (only 23% have planned sufficiently). In addition, only 24% of respondents believed that their company’s leadership team was effectively engaging employees.

Eddie Norrie, associate partner for people services with KPMG in Scotland, said: “Companies need to take a strategic approach, even as they deal with the multiple challenges posed by the current low oil price. This will help to address internal issues and will bring considerable advantages when it comes to competing for new talent. If the industry does not change its approach the crisis will persist and when the price of oil increases it will only worsen.”

“The industry has a history of overlooking issues related to its talent needs. Long-term strategic planning has not been the priority for many companies and most short-term strategies have fallen short in solving the problem. This unintentional neglect has led to significant shortages, inflated salaries, the overuse of third party contractors and widespread poaching. It has also left the oil and gas

sector a step behind other industries when it comes to attracting talented people in the early stages of their careers.”

Duncan MacAskill, senior partner with KPMG in Aberdeen, added: “The industry has to recognise the business imperative to put talent management at the top of its agenda and take a strategic approach to attracting and retaining the right skills. Senior executives in businesses of all sizes must show leadership by becoming more engaged with the issue. This is even more critical when it is put in the context of the different expectations that people in their 20s and 30s have for their careers.”

Eddie Norrie, KPMG associate partner for people services

Duncan MacAskill, senior partner with KPMG in Aberdeen

lerWicK harbour undergoes Further exPansionfurther exPansIOn Of facilities for the offshore industry at deep-water Lerwick Harbour underlines the Port Authority’s confidence in the sector’s future, with three development projects, costing around £30 million and including 880m of additional quays, on schedule.

At Dales Voe South, the quay is being extended by 75m to 130m, with a load-bearing capacity of 60 tonnes per square metre, unique in Scotland. The full quay will have 12.5m water depth alongside, which is

among the deepest of its type in Scotland. Completion is due next spring. The exten-sion will be complemented by more space for equipment and materials, with a phased expansion totalling 45,000m2 by 2016.

An L-shaped jetty at Holmsgarth North jetty will extend to 800m-plus once completed next year, with ultimately 10m water depth alongside. The outer arm will create addi-tional berthing for offshore industry vessels.

Sandra Laurenson, Lerwick Port Author-ity Chief Executive, said: “The harbour

already has almost 4,000 metres of quay, including over 1,300 metres of deep-water berthing, and 130,000 square metres of laydown, meeting offshore industry re-quirements. The latest developments will underpin Lerwick’s continuing role as a leading support centre, with the versatile facilities servicing ongoing operations, in-cluding subsea developments – particularly west of Shetland – and opening the door to further decommissioning work and the renewables market.”

ing to analysis from Frost & Sullivan. In a recent study (Tidal Energy: Current

Status and Future Outlook), the consulting group finds that the UK is the front-runner in the development of newer tidal energy solutions buoyed by an ideal tidal pattern and a supportive regulatory scenario.

“The success of smaller demonstration plants will propel the immediate adoption

of tidal stream and tidal barrage technol-ogies,” says Technical Insights Research Analyst Lekshmy Ravi. “The deployment of hybrid energy systems consisting of a combination of tidal and offshore wind energy seems probable in the long term.”

Although the basic technology of tidal energy is similar to that of wind turbines, the harsh conditions of the ocean multiply the issues faced during operation. Hence, parameters such as material strength, per-formance, maintenance and lifespan of tidal converters are aspects that research and development (R&D) efforts must ad-dress. Low capacity factor and high costs are further drawbacks.

The setting up of R&D centres and fund-ing institutions dedicated to the cause of tidal energy generation will be crucial to speed up advancements. “Stakeholders must build a coordinated, multi-disci-plinary strategy for tidal power to con-tinue creating ripples in the renewable energy sector,” urges Ravi. “A concerted approach by regulatory agencies, technol-ogy developers, funding bodies and infra-structure firms will open the floodgates of development and give rise to tidal energy solutions with significant industrial and societal value.”

The Atlantis AK-1000 tidal turbine deployed at the European Marine Energy Centre (EMEC) in Orkney.

SPE OFFSHORE EUROPE 2015 Advertisement Feature

Offshore Aberdeen | July/August 2015 | offshoreaberdeen.com10 |

A positive future for the oil and gas industry despite the current difficult market conditions will be a key message at the SPE Offshore Europe 2015 conference and exhibition being

held at the Aberdeen Exhibition and Conference Centre (AECC) from 8-11 September 2015.

The choice of this year’s theme, inspiring the next generation, empowers the industry to address both the technical and people challenges facing the oil and gas business today to secure future success. At the heart of this is a need to attract and encourage the next generation of talent into the industry. More broadly, industry aims to get across its message to the next generation of the vital role played by oil and gas in maintaining society’s living standards, constraining the costs of energy and ensuring the health of national economies in producing countries.

Oil and gas will remain indispensable to the world for securing heat, light, mobility and prosperity for many decades to come. According to the International Energy Agency’s World Energy Outlook 2014, oil and gas will still supply around half of the world’s energy demand by 2040. Sourcing skilled, innovative and motivated people and developing new technologies are essential for the industry to be successful in meeting this demand.

Over the four days of the world’s largest upstream oil and gas conference and exhibition outside North America there will be a series of keynote sessions, technical sessions, topical lunches and breakfast

briefings. Alongside the conference, visitors will have the opportunity to view the latest technology, product and service exhibits from the global industry. Taking over an entire hall, the dedicated Deepwater Zone will comprise its own conference and exhibition programme. And, for the first time, the event will include a series of workshops and meetings to connect entrepreneurs and investors. An ambitious ‘Inspire’ programme aimed at the younger generation will feature as well.

KEYNOTE PROGRAMMEThe event will open on Tuesday 8 September with a plenary session focusing on the basic challenge of meeting energy demand while balancing concerns over climate change, security of supply and consumer affordability. Professor Brian Cox is confirmed as a speaker. Arguably the UK's best known physicist, his books and TV programmes are read and watched around the world and are credited with making science engaging and accessible to millions. Other confirmed speakers include: Keisuki Sadamori, Director, Energy Markets and Security, International Energy Agency; Simon Bittleston, Vice President, Research, Schlumberger; and Matt Corbin, Managing Director, Aker Solutions.

The keynote conference programme will feature 11 sessions dealing with important elements of the framework within which the industry is likely to have to operate for at least the next five years. Topics to be addressed include: health; the safety and security of people and assets; IT and cyber

security; well intervention; financing investments in the oil and gas industry; oil spill response; securing energy supply for Europe; and careers in oil and gas: perception versus reality. Speakers will comprise a mix of senior representatives from international operating companies and contractors, as well as trade association representatives, government regulators and academia. A full listing can be found on the event website at: www.offshore-europe.co.uk/en/Conference/Conferences/Contributors

Michael Engell-Jensen, Keynote Chairman of SPE Offshore Europe 2015 and Executive Director of the International Association of Oil & Gas Producers, comments: “Our licence to operate ultimately depends on addressing society’s concerns about the industry’s operations and the hydrocarbons on which the world relies. Our activities must be regarded as both acceptable and useful.”

The development of technology to access resources from increasingly challenging locations and reservoirs is also fundamental to the future of the industry and forms another strand of the event’s focus on inspiring the next generation. More than 75 technical papers will be presented over the four days, including topics such as asset management and maintenance; well integrity; the application of advanced techniques – wells and processes; maximising economic recovery, smarter and more efficient field development; subsea pipelines and risers; subsea processing and power; talent development; unconventional gas development; process safety; and decommissioning of wells and pipelines.

CONTINUED PROGRESSTechnical Chairman of SPE Offshore Europe and Chief Executive Officer of Expro, Charles Woodburn, adds: “Whilst we continue to push the boundaries of technology and innovation, we must find better

ways to attract and encourage the next generation of talent into our industry.

“For the first time we are including papers based on both people and technical challenges, to address both aspects in parallel. By embedding this approach within the fabric of SPE Offshore Europe 2015, we will deliver a conference that ensures continued progress within our industry.”

Frano Mika, Health System Manager for Saipem and chair of a keynote session on health, sees the event as a forum where the future – for both individuals and the industry as a whole – can be created through shared experiences, collaborative working, and lively discussion. “Respect for each other’s opinions and solutions, however different from our own, is what helps the dialogue and facilitates progress,” he states.

Meanwhile, on the exhibition floor, a diverse range of exploration and production companies from around the world will showcase their technologies, services and expertise. Covering 27,000+ square metres, the exhibition equals the record space sold in 2013. Around 1500 organisations are expected this year, including at least 300 companies, large and small, exhibiting for the first time at the show. Exhibitors will represent the complete supply chain of companies including operators, drilling contractors and oilfield service companies, consolidating Aberdeen’s established reputation as a supplier of services and products to global projects. Feedback from registered visitors indicates that a large proportion of them are engaged on projects all over the world – 35% are involved in projects in Africa, 30% in the Middle East and 25% in Asia Pacific. In addition to the technical oilfield services on display, other exhibitors will focus on areas such as health, safety and environment, management and information, and training and education.

Reflective of the global nature of the industry as

INSPIRES THE NEXT GENERATIONSPE OFFSHORE EUROPE 2015

Visitors can view the conference

programme and exhibition list on

a mobile phone, with no internet

required, by downloading the Event

App in advance of arriving onsite.

It is also possible via the app to

log into ‘MyOE’, the event’s online

networking tool, to check a pre-

planned schedule while on the move.

Advertisement Feature SPE OFFSHORE EUROPE 2015offshoreaberdeen.com | July/August 2015 | Offshore Aberdeen | 11

a whole there will be a large international exhibitor presence with representation from 44 countries and 33 international pavilions. Large delegations are expected from Brazil, Canada, Malaysia, Nigeria and Korea. UK Trade & Investment commercial officers and buyers from key international regions will be running a series of free-to-attend country briefings and opportunities for 1-2-1 networking to discuss the opportunities that exist in each of their respective markets. Regions and countries represented will include East Africa, Azerbaijan, Kazakhstan, Nigeria, Mexico, and Saudi Arabia.

As part of a new initiative for 2015, entrepreneurial visitors will have the chance to meet potential investors on Wednesday 9 September. After a morning of investment workshops presented from the operator, venture capitalist and entrepreneur perspectives, a limited number of companies will be invited to one-to-one meetings to discuss investment projects with some grant, early seed and direct industry funding providers. Pre-booking is essential via the event website.

DEEPWATER CHALLANCEPlanning is also well advanced for the Deepwater Zone, dedicated to the latest state-of-the-art technologies helping the industry advance into one of the world’s most challenging, harsh – yet potentially commercially rewarding – environments. Despite pressures on operator budgets deferring the sanctioning of certain projects, a Douglas Westwood report of April 2015 still expects deepwater expenditure to increase by 69%, compared to the preceding five-year period, totalling US$210 billion from 2015 to 2019. A dedicated

theatre will host industry experts presenting case studies and participating in panel discussions. This will give attendees the opportunity to learn about some of the very latest developments in the sector, with content programmed by Subsea UK, the Society for Underwater Technology (SUT) and ITF. Subsea UK’s sessions will address deepwater developments and the future of inspection, repair and maintenance. SUT’s programme will focus on new technologies for efficiency and effectiveness, and subsea challenges for enabling deepwater production. And ITF’s session will cover ultra-deepwater challenges.

Looking forward to finalising the speakers for the SUT sessions, Bob Allwood, Chief Executive of SUT, comments: “I have attended SPE Offshore Europe for over 30 years and remember how in the early days 150 metres was regarded as deep. The industry has made enormous progress in recent times in developing the technology and people to harness resources lying in waters up to around 3,000 metres deep.”

In the event’s largest Deepwater Zone to date, more than 30 companies from this rapidly evolving sector will display their latest products and services. These range from equipment such as valves, imaging systems and underwater vehicles to well control and intervention products, specialist material solutions, and inspection services. Aberdeen’s subsea companies will also be well represented, highlighting the City’s standing as a global subsea centre of excellence.

The exciting breakfast briefings and topical lunches are booking up fast – tickets are available to purchase via the event website. On the opening morning, Tuesday 8 September, Steve Varley, UK Chairman

and Managing Partner, EY, and Lars Christian Bachar, Executive Vice President, Development & Production International, Statoil, will speak at the Aberdeen and Grampian Chamber of Commerce business breakfast. Oil & Gas UK is organising a breakfast briefing on its Economic Report 2015 on Wednesday 9 September. Then, on Thursday 10 September, international oil and energy consultant, Manouchehr Takin, will chair the breakfast slot on ‘The price of oil, did market analysts forget about E&P?’ And on Friday 11 September the breakfast session will focus on feeding the pipeline of female talent in STEM: Science, Technology, Engineering and Mathematics.

BP’s Bernard Looney, Chief Operating Officer, Production, is the confirmed lunch speaker on Tuesday 8 September, and Andy Samuel, Chief Executive, Oil & Gas Authority will speak at the lunch on Wednesday 9 September. And on Thursday 10 September, the lunch session will be given over to a small operators’ panel chaired by Neil McCulloch, President, North Sea, EnQuest. Speakers will include: Oonagh Werngren, Operations Director, Oil & Gas UK; John Pearson, Group President Northern Europe & CIS, Amec Foster Wheeler; Matt Corbin, Managing Director, Aker Solutions; and Robin Allan, Director of Business Units, Premier Oil.

‘INSPIRE’ PROGRAMMEWith its emphasis on recognising the long-term need for a secure talent pipeline, the event will be running ‘Inspire’, its largest ever programme of activities for a younger audience.

Charles Woodburn adds: “The short-term impact of the recent downturn on our industry has undoubtedly cast a shadow over the sector and its attractiveness to new and emerging talent. But, as the past has taught us, we cannot afford to lose our next generation as they play a vital part in advancing safety, innovation and the technology our industry demands. While we must take action to respond to these challenging conditions, we need to maintain our focus on the high quality workforce of the future.”

A wide range of ‘Inspire’ events and workshops throughout the week, organised in advance by SPE and supported by OPITO, will allow students to engage with the industry face-to-face and learn more about

this impressive industry.Running throughout the four days of the event,

the SPE Student Development Summit will include a programme of lectures, games, networking, and attendance at the opening plenary and Friday keynote session. A number of schoolchildren will also be invited each day to participate in a programme of activities being arranged by the SPE Aberdeen Section Young Professionals. And for schoolteachers, the SPE programme Energy4Me will offer practical advice about teaching science and demonstrations of possible experiments via classroom sessions as well as visits to the exhibition floor.

BREAKFAST BRIEFINGSThis event provides a global industry hotspot where it is possible to connect with individuals and companies drawn from North and South America, Africa, Asia and Europe without having to make numerous trips to different regions. With so many industry leaders and influencers under one roof, there will be ample opportunities to network and catch up with colleagues from around the world. As John Deasey, Sales Manager for Trelleborg Offshore, sums up: “A great meeting place to see old and new friends and to catch up on the latest technology.”

Vasyl Zhygalo, Senior Exhibition Director for Reed Exhibitions, the joint partner in the Offshore Europe Partnership, concludes: “Don’t miss the free-to-attend SPE Offshore Europe 2015 if you want to refresh your industry knowledge, discover new technology, and network with established and new business contacts.”

Visit www.offshore-europe.

co.uk for more information

about this free-to-attend

global event, and to

register. Badges are sent to

all pre-registered visitors in

advance of the event.

In terms of travel and accommodation during this busy period for Aberdeen,

it is advisable to book travel tickets and hotel accommodation as soon

as possible. The organisers help visitors to save time and money by

providing free, regular shuttle buses to the AECC from the airport and

city centre as well as from offices and hotels around Aberdeen.

TRAVEL


FOCUS

“The success of the Netherlands in creating significant value for the state and operators indicates that similar models could be utilised in other mature oil and gas regions where projects face profitability hurdles, such as the UK North Sea.”

Picking the best fiscal and regulatory regime for euroPe’s mature offshore

a s oil prices continue to remain low, the task of incentivising exploration, production and development of the remaining reserves across Europe’s high

cost offshore provinces, is becoming ever more challenging for governments. At current prices the North Sea oil and gas sector – outside Norway at least – is certainly no longer capable of providing a huge tax income, and must be nurtured at least until prices rise again, or risk being lost altogether.

Generous budget cuts in the UK this March, for example - which were considered essential to rescue a sector besieged by rising costs and falling revenue - have led to a fall of £10 billion in anticipated tax revenue over the next five years, according to the UK’s Office of Budget Responsibility (OBR). The UK government is now reviewing the long-term future of the fiscal regime to ensure that the tax and regulatory systems work together to support maximising economic recovery as the basin matures.

The UK’s oil and gas sector has also undergone a major overhaul at regulatory level, and the results of this are continuing to fall into place. The newly formed Oil and Gas Authority (OGA) has been tasked with maximising recoverable production, and is now fully staffed and preparing to launch full operations. It will be a powerful body, which should help provide greater certainty and clear incentives for investors.

An important question is how much emphasis do you put on encouraging the development of discovered reserves, relative to exploration? In Norway, the largest and least mature of Europe’s offshore sectors, the emphasis is very much on exploration, with an exploration tax allowance that allows to claim back 78% of the cost of a dry exploration well – something the SNP has called for in UK waters.

The UK Department of Energy and Climate Change, which transferred regulation of the industry to the OGA in April, has opposed direct tax incentives for exploration drilling of the kind found in Norway. The body has warned that this structure could lead to a series of poorly targeted drilling endeavours.

In Norway the exploration rebate has been particularly useful for smaller companies with little access to finance, such as Faroe and Noreco, which have been able to borrow for exploration against the assurance of future tax rebates, should the drilling prove fruitless. It is said to have contributed to encouraging exploration that led to major discoveries, such as Johan Sverdrup, Johan Castberg and Havis, which could underpin the industry’s long term future.

The UK and Holland, however, have recently focused more on incentives for development of marginal reserves, which also indirectly encourages exploration activity, as they increase the value of future discoveries. The UK’s field allowance promotes development activity on small, high-pressure, high-temperature and deep-water fields. In March the UK government doubled the value of the small field allowance, introduced a £500m allowance for large shallow-water gas fields, a £3bn allowance to support investment in large and deep fields, an allowance for incremental investment in older fields, and a new cluster area allowance for ultra high-pressure, high-temperature projects.

In the UK fields can also be developed using other companies’ infrastructure, and the different approach means the UK has a far greater number of small and marginal field developments – over 200, compared to just 30 in Norway – but a lower level of exploration activity. Norway may need to consider similar measures as it becomes more thoroughly explored, although by then the companies with low cost marginal

experience could well come from the UK.Another problem with the UK system

according to some investors is that it is always changing. This year’s tax cuts came only a few years after rises, and if prices rise again, past experience suggests taxes may be increased again – which adds to uncertainty for those planning investment. (The UK cuts in March included a full reversal of the 2011 rise in the supplementary charge, bringing it back down from 30% to 20%, as well as a reduction in Petroleum Revenue Tax (PRT) from 50% to 35%.)

Both the Norwegian and Dutch systems are more stable, however, and in May Edinburgh-based energy consultants, Wood Mackenzie, said it might be worth the UK considering the Dutch model, which through its Marginal Field Tax (MFT) varies government take as the price moves. This gives greater certainty to investors, splitting the pain and gain of price moves between operators and the tax man.

The Dutch government implemented the MFT for fields and prospects in 2010, to encourage the development of marginal offshore gas fields. Wood Mackenzie say the policy worked, with its research showing that 17 bcm of additional reserves were found at 16 projects, thanks to the incentive. Although falling short of the desired 21 bcm, they added 10% to Dutch reserves (excluding the giant Groningen field), over €700 million in value to companies and €825 million in direct government take.

Norway favours exploration with tax rebate

North Sea fiscal zones

With the MFT applied, value is transferred from government to companies at lower prices, in order to improve economics and make the projects attractive enough to invest in. “The success of the Netherlands in creating significant value for the state and operators indicates that similar models could be utilised in other mature oil and gas regions where projects face profitability hurdles, such as the UK North Sea,” said Wood MacKenzie.

Norway too has had a far more stable fiscal regime than the UK. Although

headline tax rates are higher in Norway – at 78% - for new developments, they haven’t been changed in over two decades, and this is claimed to have provided investors with the stability required to make long-term investment decisions. Scotland’s SNP has consistently called for the UK Government to shift to a more predictable North Sea oil tax regime, “allowing investors to move their focus away from fiscal risk and towards the significant investment opportunities that remain.”

Dutch influence could benefit UK

FOCUSoffshoreaberdeen.com | July/August 2015 | Offshore Aberdeen | 13

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global offshore exPloratory drilling falls; euroPe bucks trend

sharp declines in the number of wells in Africa, Asia, South America and Central America is contributing to an overall 20% drop in aggregate global

exploration drilling activity in 2015, according to Derrick Petroleum. This year, drilling activity is expected to fall 31% in Africa (75 fewer wells), 39% in Asia (62 fewer wells) and 26% in South/Central America (55 fewer wells). In contrast to elsewhere in the world and rather surprisingly, Derrick’s data shows a slight upturn for offshore Europe, with overall figures for the region rising to 154 in 2015, from 122 in 2014.

Mr Tom Ellacott, VP Corporate Upstream Research for Wood Mackenzie said exploration was down due to low oil prices: "Cutting back on exploration spend has been a core element in the strategic response to low oil prices. The industry has moved more rapidly than it did during the previous, short-lived, price crash of 2008-9. But the scale of the cuts varies widely. International explorers such as Tullow have had to slash spend by up to 80% to conserve cash. In contrast, some of the Majors are continuing to invest through the cycle, with Shell keeping conventional exploration spend flat year-on-year."

Wood Mackenzie sees an unexpected

upside: "Whilst overall well numbers will dip this year, we expect recovery in 2016 as many explorers seize their chance to drill at lower cost. Those that hold exploration spending flat or make only modest cuts could yet achieve 'more with less'. The time is right for strong explorers to be counter-cyclical and increase their drilling in high-impact plays."

EmErging north SEa, atlantic margin contributE to EuropEan SurpriSEWithin Europe’s positive story this year, Derrick said drilling activity is expected to increase in the emerging areas of the North Sea. This includes wells such as Repsol’s Hagar well (targeting 491 million boe) in the Halten Terrace and Lundin Petroleum’s Neiden exploration well near the Alta discovery in the Barents Sea.

In addition, the Atlantic Margin, stretching from Northwest Africa to Ireland, is a major new European area of focus, with significant exploration activities planned by Exxon, Kosmos, Eni and Repsol. After the success of Liza-1, Exxon plans to spud Ranger-1 in the Guyana basin. Kosmos is planning a couple of wells near the newly discovered Tortue complex in Mauritania. Moving north to deepwater Portugal,

Repsol plans to drill the Cadelinha well in the Algarve basin while Eni plans to drill the Santola well in the Alentejo basin. Repsol also plans to drill a trio of wells offshore Spain in the Alboran Sea and Aquitaine basin areas. In addition, Kosmos is planning to drill a couple of noteworthy wells in the Porcupine basin, offshore Ireland.

Derrick Petroleum’s data also shows that oil and gas majors are focusing on a varied mix of exploration assets, including

in the proven exploration areas of North Sea and Gulf of Mexico, which it predicts may generate significant activity for them. Large Cap E&Ps continue to focus on Africa, Australia, and North Sea and Europe, with a total of 209 wells in 2015, of which 55 are in Africa, 43 in Australia and 30 in North Sea region and Europe. Small Cap and Micro Cap E&Ps are venturing into West Africa, a region previously dominated by Majors and Large Caps.

Commenting on the likely trends in offshore exploration in future, Woodmac’s Dr Latham said: "Explorers have been finding smaller overall volumes in new discoveries each year since 2010 as the mega-plays of Brazil's Santos basin and East Africa gas move towards appraisal and development. Reduced spend and activity, together with more emphasis on low-impact exploration, will likely continue this declining volume trend into 2015."

Lundin’s Neiden prospect


FOCUS

tough times ahead for rig-owners but oPerators benefit as drilling costs fall

t he collapse in oil prices and consequent cut in drilling programmes means drillers are cancelling rig orders and pushing for reduced day-rates,

leading to a fall in income for rig owners, oversupply in the rig market, and a lack of new contracts for the backlog of rigs currently under construction.

ConocoPhillips, for example, recently cancelled a three year deepwater new-build rig deal, despite having to pay contractor ENSCO as much as $400mm of day-rate (2 years) plus fees. BP and Statoil have also opted to pay out multiple years of day-rate to halt drilling rig contracts. The collapse in demand has been particularly acute for jack-ups. In 2015, 40% of the jack-up contract base will fail to be renewed, while only 11 of the 110 jack-up rigs under construction have contracts lined up, according to data from consultants McKinsey & Co.

The combination of weaker demand

and buoyant supply is expected to cause full fleet utilization to go as low as 68% by 2017, with the highest cost, ultra-deepwater (UDW) segment hit hardest. Further falls are expected as new un-contracted rigs add to supply - of the 32 new-build rigs around the world without contracts, 28 are UDW capable rigs, according to McKinseys. Some relief may come as companies accelerate the scrapping of older rigs. The last 18 months have already seen record levels of write-offs as rig owners upgrade their fleets - 19 were decommissioned in 2014, along with another 9 by March 2015. In July another two rigs, Rowan Alaska (built 1975) and Rowan Juneau (1977), were retired from service.

As contracts are cancelled, they drive down day rates, with ENSCO’s DS-9 for example, back on the market competing for work with other un-contracted units. Data released by Wood Mackenzie in July showed that rig rates had already fallen by up to 20% for new contracts agreed in 2015, with further falls expected in 2016.

“We have already seen rig rates dropping significantly with a fall in the number of new contracts agreed in 2015,” said Wood Mackenzie’s principal North Sea analyst, Malcolm Dickson. “Forty percent of mobile rigs in the UK and 23% in Norway are either currently without contract or due to come off by the end of 2015, giving scope for high reductions in future contract renewals.”

While the trend is worldwide, the regions most affected are expected to be the more mature and commercially driven markets of North America and Western Europe. Much of the fall-off in demand is due to operators delaying development spending on pending offshore projects, with more than 50 pre-FID deepwater projects no longer viable under a $70/bl scenario.

Capital projects already under development are also being hit by the lower oil prices, as the deterioration in operators’ cash flow reduces funds available for approved work, and operators

attempt to renegotiate approved contracts. Some external funders are eager to reduce exposure to upstream oil and gas, leaving some operators with little choice but to cancel or delay planned projects, even if they could be viable at lower prices.

The easiest area to cut back on is

exploration drilling, as opposed to development or appraisal, although the potential for cost reduction is also higher. Floating rig demand for exploration is set to fall sharply by 12% per year in 2015 and 2016 – from 76 to 59 rigs – leading to strong downward pressure on day rates.

The fall in income is putting rig owners under considerable pressure, and all offshore drilling companies have seen their equity market value hit. Falls have varied from around 40%, up to 70% for those most exposed, including Seadrill and Transocean, although some relief was seen at SeaDrill as it managed to beat analyst earnings predictions earlier this year.

WEak markEt drivES coSt cuttingIn response to falling income, companies are making major efforts to cut costs – for example, Seadrill cut operating costs by US$250 million last year and expects to

make deeper cuts this year and next. Many major drilling companies are attempting to negotiate with shipyards to delay delivery of new rigs, in order to avoid adding costs to their balance sheet and a further deterioration in utilization rates. Other companies are cancelling orders, with Sete,

for example, expected to cancel 15 of their 29 ordered floaters.

Generally yards are proving flexible to requests for delivery delays, hoping to avoid cancellations or failure to pay in the current cash-strapped environment. The majority of the delays appear to be focused on jack-up rigs, which are expected to remain oversupplied until 2020. Rig-owners delaying include Seadrill, which has deferred 8 jack-ups by up to 44 months and a semi-submersible by up to 36 months (see table), from its current order book of four drillships, three semi-submersibles, and eight jack-ups. Transocean, has announced a similar move, saying it had reached an agreement with Keppel to delay

delivery of five jack-up rigs. If the yards are stuck with unwanted rigs they face an inevitable discount if they attempt to sell given current market conditions.

With half the money in the business compared to just a year ago, it is hardly surprising that expensive offshore drilling is being hard hit. With very few observers expecting any sharp price rebound for some time to come, it could be several years before rig rates recover, although this in itself may help cushion the impact of low prices on some operators and projects, as costs fall. The dramatic decline in drilling rig day rates and other service costs is undoubtedly enabling operators to accomplish more work with their reduced capital budgets.

ExamplES of dElayEd and cancEllEd nEW-build rig ordErS

Rig Owner Asset Type Delay Shipyard

Transocean 5 jack-ups 6 months + further delay Keppel

Seadrill semi-sub 12-36 months COSCO

Seadrill 8 jack-ups 44 months Dalian

Northern Offshore 2 hi spec jack-ups 9 months COSCO Dalian

Naftagaz 2 semi-subs cancelled Keppel

KS Drilling jack-up 2 years COSCO Nantong

Rigs without a home

One of Seadrill’s jack-up rigs


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international markets: brent challenged for toP sPot

w TI’s improved physical connection with the international market could enable it to challenge Brent as the

preeminent global crude benchmark.Over the last five years, ballooning U.S.

domestic and Canadian crude production, combined with transport bottlenecks to the coast, caused the gap between US benchmark, WTI, and Brent, the established international oil marker, to grow to over $28 a barrel in 2011. That premium has now softened, indicating that the growth in supply from within continental North America has slowed – as a result of reduced drilling due to lower crude prices - leaving the US domestic market balanced with the international one for the first time in years. This has been underpinned by new rail, barge and pipeline capacity - the development of which was driven by WTI’s heavy discount - allowing a more extensive and stable physical connection between WTI and wider global oil markets.

WTI’s re-established international connection, combined with improved flexibility in trading physical WTI and ample physical volumes - as inland production continues at a high level –

is beginning to provide a more robust competitor to Brent as the leading global benchmark. With the U.S. hailed as the new global swing producer, this may well be appropriate, and the market is already reflecting a degree of change in the form of sharply higher WTI futures liquidity. WTI is likely to be more sensitive to changing fundamentals related to US shale oil production, which is more sensitive to price in the short term than conventional production.

While WTI’s logistics problem has been largely addressed through increased rail shipments and pipeline capacity, Brent has more fundamental issues related to adequate supply, which is less easily dealt with. Before recent investment, a long-term decline in production of the four North Sea Dated grades — Brent, Forties, Oseberg and Ekofisk — had led to concerns that the benchmark would see the physical liquidity upon which it is based dry up. Between 2008 and 2013, loadings of the four grades declined by an average of 9% each year, dropping to a low of 864,000 b/d in 2013 from 1.4 million b/d in 2008.

However, in 2014 new start-ups began to offset the declines at existing Brent grade fields, and measures were taken to increase

the effectiveness of the benchmark. This lifted loadings to 870,000 b/d in 2014, and it is hoped that North Sea production should now remain relatively stable for several years. Beyond that, there are concerns that the fall in oil prices since last summer will put an end to new field development in the region, or even lead to abandonment of mature fields where the cost of extraction is high – illustrated by Shell’s decision to decommission Its Brent platforms early - causing a resumption in the long term decline in production. These are not concerns that affect WTI, which is expected to be amply supplied for decades to come.

Further efforts are being made to bolster Brent, including recent proposals to expand the date range for physical dated Brent cargoes, in order to further increase its liquidity. They focus on extending the window for assessing individual grades to include cargoes loading up to a month ahead of the day assessment. Presently, only cargoes loading 10-25 days ahead of the day of assessment are used in establishing prices. The move would allow more cargoes to be included in the price assessment, especially Oseberg, which currently trades further ahead than Forties or Ekofisk, and so rarely affects the benchmark.

Billions are traded in crude futures every month


FOCUS

comPanies target cheaPer decommissioning

a s a growing number of North Sea oil and gas fields head towards the end of their productive lives, and their date of decommissioning

approaches, more companies are devoting time and money to developing new techniques and products to address problems and cut costs. These companies range from services specialists such as Baker Hughes, to operators such as Marathon, and well project managers Acona UK and Jee Ltd, all of which have announced advances over recent weeks, including claims of savings of up to 40% on rig-based abandonments, which could shave billions of pounds from the decommissioning costs of the 5,000 wells and 600 platforms in the North Sea alone.

Innovation in contract behaviour can also cut costs by taking a fully collaborative approach with rival producers, which alone could save between 30% and 40% of Plugging & Abandonment (P&A) costs, according to Jim Christie, Global Decommissioning Manager at Marathon Oil. A group of leading operators at the start of what will become a conveyer belt of big decommissioning projects – including Marathon - are cooperating by offering suppliers a guaranteed pipeline of work. This can help reduce the risk of equipment downtime, which minimises the average contract rate required, encourages suppliers to invest in new technology, and in equipment that has a limited market, such as light well intervention vessels.

While oilfield operators tend to avoid collaborating in upstream exploration and development in order to have as much control over their schedules as possible, with decommissioning the focus is more on quality and cost, rather than deadlines. The advantages of sharing a decommissioning campaign include economies of scale, knowledge sharing and increases in expertise. Contractors such as Helix Well

Operations have already brought together operators in joint subsea P&A campaigns.

However, cost reduction of the technical aspects of the process remains the focus of innovation for most. Acona UK’s business development manager Nick Ford said recently that the company’s key offering to operators was its ability to drive down decommissioning costs: “With evidence from the rig-based abandonments performed to date, we estimate that, through the utilisation of our contracting strategies and operational performance, we have realised savings of between 30-40%... Decommissioning is a big focus for us and we are working on several different angles for our offering to operators.”

Baker Hughes said it had been focusing its cost reduction efforts on improving technology and processes for cutting and pulling well casing, which is sometimes used in decommissioning if well integrity is an issue. Its’ new techniques are designed to minimise the time spent over a well with a drilling rig or vessel, saving up to $300,000 a day. The Harpoon technology it uses applies familiar hydraulic cutting techniques coupled with a large number of high-tech improvements to allow re-setting of the spear, allowing multiple attempts with a single trip.

Baker Hughes has also introduced more wear-resistant cutters to improve the mechanical milling process and has also been working on improving cement evaluation. The main innovation is to create an acoustic wave directly on the casing rather than inside the logging tool, making it easier to evaluate wells containing contaminated, lightweight or foam cement.

Elsewhere, groups are looking at other specifics of decommissioning. A group including Decom World, DNS and Zero Waste Scotland and Jee Ltd, is looking at a variety of areas, including pioneering re-use and salvage options for concrete subsea

mattresses. This involves innovative new solutions for subsea mattress removal, which would work without diver interventions during the lift procedure, resulting in improved safety and reduced costs.

Adam Smith, Subsea Engineer at Jee Ltd, said: “[The project] will form a basis for economic and environmental assessment of mattress conditions and the options for removal and re-use going forward. We also helped to identify the criteria required to determine whether subsea mattresses should be removed or left in situ, the main considerations being the safety of the subsea

divers and the environmental impact.”Jee developed a number of innovative

suggestions for the re-use of the mattress concrete including tidal lagoons structures, the construction of artificial reefs to encourage new sea life and to lay road foundations, resulting in less new concrete needed to be produced and as a result, reduced carbon dioxide emissions.

Iain Gulland, Chief Executive of Zero Waste Scotland, said: “[Initial] findings point to some exciting cross-over potential with other sectors, such as offshore renewables. Circular economy practices present a terrific

economic opportunity… and we can best realise this by collaborating across sectors and industries.” Problems often come from dealing with older technology - most wells that are being decommissioned were drilled several decades ago, using different generation technology, working to different regulatory requirements. If there is insufficient well data this can lead to considerable challenges.

As the decommissioning ball gets rolling, more companies are devoting time and effort to developing their capabilities in the area. For example, NorSea – which has recently begun decommissioning the Renee and

Rubie fields – is switching focus: “We are primarily known as a logistics and base services company servicing the offshore industry; but as part of our future growth strategy, we are developing our decommissioning capability,” said Walter Robertson, Managing director of NorSea Group. The contract requires reuse of material, including 1,000t of concrete mattresses, 200t of pipework and skid units, manifold valves, and a 17t crossover manifold.

As more wells and platforms are completed, lessons are learned and more

efficient techniques are introduced, many of those involved expect to see a steady decline in costs and hours of input. In the case of the Brent platform decommissioning programs, for example, stakeholders from over 180 organisations, including NGOs, academic institutions, including the University of Aberdeen, and independent scientific experts have been involved for almost nine years already. Once such high profile operations are complete, the combined input should translate into something more routine, driving down costs - especially if development activity remains weak and service companies find themselves looking for new markets.

Structures returned for scrap

ROV working on subsea structure

Decommissioning of Hutton topside


wood mackenzie: lower drilling costs to absorb bulk of budget cuts in north sea

t he oil and gas industry is responding to the low oil price environment with exploration budget cuts in 2015 that will average 30 percent, leading to

suggestions that exploration activity could be significantly curtailed. However in an effort to drive value, Wood Mackenzie says the industry is addressing a long standing cost inflation issue, and asserts that on average exploration costs will fall by a third, softening the blow of budget cuts.

So while budgets are cut by 30%, the group expects growing deflation to reduce the corresponding activity decline to just 15 percent this year, and by 2016 deflation could have largely matched the fall in spending, with the industry moving forward on a new cost-efficient basis.

Energy companies have already made considerable progress in terms of cutting headcount and capital costs in the North Sea, and they are getting tougher in negotiations with services companies. The efficiency drive under way in the North Sea is an important and long overdue development, which could help secure a longer term future for the sector.

Operating costs rose by around 50% in the three years to June 2014 and at up to $40/bl were among the highest in the world. The consensus last year was that cost cuts of around 20% would be an acceptable target for the North Sea. But Oil & Gas UK now says that cuts as deep as 30% or 40% could be essential to secure the basin’s long-term future.

Dr Andrew Latham, VP Exploration Research for Wood Mackenzie said: "Rising costs are not a new problem for explorers.

Over this decade, inflation has more than offset price gains and left much of the industry struggling to create value. Now that prices have fallen sharply, this problem has become acute. In the short term, many explorers will react by simply spending less. But what they really need is lower costs."

Oonagh Werngren, the UK Oil & Gas industry association’s operations director, said: “Although tough decisions on resources and projects are having to be taken by individual companies, there is also now a concerted effort to work together to tackle the fundamental behaviours that have driven cost escalation on the United Kingdom Continental Shelf [UKCS],” “The goal is to achieve a more internationally competitive oil and gas province and attract the fresh investment needed to unlock the North Sea’s remaining potential. Achieving this will require a 40% reduction in the industry’s cost base.”

Wood Mackenzie concludes that exploration deflation will average a dramatic 33% by 2016, comprising three global elements that are locally compounded by favourable exchange rate moves: like for like costs will decline by 19%; simplification of activities could save 5%; efficiency improvements will save another 5%; and US dollar strength will save 4% overall.

"Only about half of these gains will be enjoyed during 2015 as contracts unwind and operators take time to adopt new practices. We expect the full benefit during 2016, unless oil prices recover quickly. Deflation at this rate could allow any companies that hold spending flat into 2016 to fund 50% more exploration versus 2014. Even those

with cuts of around the average 30 percent may see their 2016 activity bounce back to 2014 levels," Dr Latham added.

Spur to innovatEThe cost squeeze is also creating opportunities for innovative supply chain companies and other specialists able to help oil and gas companies make savings. “The industry is looking to companies that can meet its efficiency demands through the creation of disruptive and innovative technologies and services,” said George Rafferty, CEO of NOF Energy, an energy business development organisation. To this end, NOF has launched a “Smarter Supply Chains” initiative aimed at helping the energy supply chain work together more effectively.

Ken Cruickshank, Oil & Gas UK’s operations manager also pointed to the cost saving potential of supply chain rationalisation: “One of the key ways the supply chain can contribute to pan-industry initiatives aimed at removing unnecessary costs from the basin is to work with operators, major contractors and small to medium enterprises to simplify and standardise processes, including equipment procurement, technical standard setting and processes including equipment procurement, technical standard setting and manufacturing of components,” he said.

“This would help to reduce unit costs in design and maintenance and address the expensive ‘gold plating’ approach which characterised some of the more ‘bespoke’ contracts of the past.” The oil and gas sector

is also taking cues here from production practices in other industries such as aerospace and car manufacturing.

Exploration offErS biggESt potEntial coSt SavingSThe Woodmac report highlights that prior to the recent oil price falls, some of the strongest service sector margins had been among drilling and seismic contractors: "Exploration-focused contractors should therefore be able to reduce their prices further and quicker than relatively less profitable general oilfield service providers. Exploration cost deflation will thus exceed equivalent falls in costs of development.”

Lower costs of exploration will help reduce breakeven prices and improve full-

cycle economics, with some of the best improvements expected in deepwater plays. “However exploration savings alone are only a small part of the story, perhaps shaving $5 or less from typical breakeven prices. Reductions are also needed from the relatively much larger development and operating costs," said Dr Latham.

“Operators are pushing contractors hard to secure lower prices, but are conscious that if this causes a drop in standards then it may prove a false economy. We believe that performance bonus contracts are one tactic to address this risk. We've already seen rig owners and seismic contractors retiring rigs and vessels to remove older equipment and technology from the market resulting in a remaining fleet that is relatively newer and, crucially, more efficient," he added.

George Rafferty, CEO of NOF

Energy

INFORMEDOffshore Aberdeen | July/August 2015 | offshoreaberdeen.com18 |

RecoRd offshoRe safety peRfoRmance continues to impRove; maintenance builds - RepoRtThere have been further improvements in the management of major safety hazards offshore, according Oil & Gas UK’s Health & Safety 2015 Report published in July. However, on the down-side, the report did find a growing backlog of safety-critical maintenance on offshore installations.

Based on incidents reported to the Health and Safety Executive for April 2014 to March 2015, the total number of hydrocarbon releases - oil and gas leaks - has gone down and is at its lowest level ever.

Offshore oil and gas has a lower personal injury rate than many other sectors including construction, transport, manufacturing, health, retail and education, the report reveals. The non-fatal injury rate for offshore workers also continues to show a declining trend.

Robert Paterson, health, safety and employment issues director at Oil & Gas UK, said: “Industry, on the whole, is performing well across a range of safety criteria. However, ours is a major hazard sector where complacency has no place. The

overall reduction in hydrocarbon releases is to be welcomed and we must continue our focus on curbing these even further.”

Preparing for the introduction into UK law of the EU Offshore Safety Directive – the single biggest shake-up of offshore health, safety and environment management for a decade – has also been a key focus for the industry.

Securing continued effective search and rescue helicopter cover for offshore workers in the Central North Sea was a major milestone for the sector. The industry remains focused on aviation safety, with the launch of measures such as a new emergency breathing system for offshore flying and changes to helicopter seating allocation based on passenger size.

“Safe offshore transport remains a priority. 2014 saw the launch of the Civil Aviation Authority’s (CAA) CAP 1145 report into aviation safety. Some of the measures proposed were already under way, but this is an area where progress continues to be made with the CAA, helicopter operators,

aiken GRoup expands modulaR divisionaberdeen-based aiken Group has announced a 9,000 square foot expansion to cope with an upturn in business. The additional workshop and warehouse space has been acquired for use by the Group’s growing modular division, Modu-Link, to allow expansion of its turnkey services for the provision of A, H and Blast rated modular units for the UK and overseas markets.

In the past year alone, more than 100 modular units have been completed resulting in a 20% increase in the number of personnel working within the division. The growth brings the division’s workshop space to almost 30,000 square feet of Aiken Group’s 40,000 square feet city premises,

impact selectoR and WiReline enGineeRinG announce stRateGic combinationimpacT selecTor has acquired Wireline Engineering following a strategic agreement to join forces in the design, development and deployment of products and solutions for mitigating risks during well evaluation and intervention operations. The merged operation will maintain key hubs in the UK, US, Southeast Asia and the Middle East, and will combine existing management teams.

“The combination of Wireline Engineering and Impact Selector perfectly aligns with our vision of being the most reliable and trusted

located next to Aberdeen Harbour.The expansion coincides with Modu-

Link’s recent completion of its first ever A60, Zone II DNV 2.7-2 Control & Workshop Modules. Conforming to these latest industry standards, the 20 feet by eight feet modules are also DNV2.7-1, Gas Group IIB, T3 and IEC-Ex compliant and operational within temperatures of -20 to +40°C.

Proposals director Eric Scott said: “These two modules represent a company first, and we are delighted that both projects have arisen thanks to repeat business from existing customers. We are also very pleased that both units have been completed to the satisfaction of our customers.”

industry and trade unions meeting regularly to monitor progress and stimulate action,” said Paterson.

“Our report did find a growing backlog of safety-critical maintenance offshore and this is an area that needs close attention. However, decisions on deferring

maintenance are taken following robust management systems that assess risk and involve the relevant technical and engineering authorities. All operators are also being encouraged to participate in providing data to all stakeholders to best reflect how the industry as a whole

is managing safety-critical maintenance.”“Producing hydrocarbons safely, ensuring

assets are operated safely, and transporting our workforce to and from installations safely is of paramount importance to the industry. Despite these difficult times they must always remain our priority.”

provider of conveyance technology solutions that mitigate risk, enhance efficiencies and improve safety worldwide. This new partnership of employees, products, services, and locations further expands our capabilities to provide operating efficiencies and cost saving solutions to our customers,” said Mr. David Lane, President and CEO of Impact Selector.

“It is highly unusual when two companies come together for there to be such a

complementary fit – both in terms of their current organization and future strategy,” said Mr. Alan Gordon, Managing Director of Wireline Engineering. “I am convinced the combined business will allow us to add even more value to our customers and provide new opportunities for all our staff.”

Turnbridge Capital and Amegy Bank provided additional funding in support of the transaction, which was completed on June 30, 2015.

INFORMEDoffshoreaberdeen.com | July/August 2015 | Offshore Aberdeen | 19

Ways to save costs thRouGh collaboRationcollaboraTion is one of the Wood Report’s key recommendations, and Gary Henderson, Managing Director – Grampian Fasteners, picks it as the best way to achieve cost savings and improve your business performance overall. Over to you Gary:

“I get quite frustrated by the calls for cost-cutting in the industry. Not because I don't believe they're needed, they definitely are, but because of how they're expected to be achieved by many companies. We've seen the same process in every downturn - cut jobs and tell companies up the supply chain they have to cut prices. If, like us, you're a product supplier who is always conscious of having a lean organisation you'll know that the margins just aren't there to make price cuts and remain a viable business.

Just because product suppliers can't cut prices it doesn't mean we can't help cut costs. We can!

When it comes to the total cost of fasteners around 15% can attributed to the visible cost of the fastener and 85% to design, sourcing, ordering, logistics, stocking and assembly. It doesn't take a rocket scientist to understand where the biggest savings can be made. For example, one of our major customers

Back Row – left to right: Gary Henderson (Managing Director), David Anderson (Customer Care Manager), Ruth Stout (Purchasing Assistant), Craig Stratton (Warehouse Manager). Front Row – left to right: Jason McGillivray (Warehouse Assistant), Blair Hendry (Trade Shop Supervisor) and Ann Doyle (Operations Manager).

Gary Henderson, Managing Director

asked how we could help them cut costs. Through previous discussions, we knew it cost them over £100 in business costs for every purchase order they raised. A quick analysis showed that 63% of the orders they placed with us had a value under £50. They were able to make savings by adjusting their procurement process and it's a good example of what can be achieved through collaboration.

Collaboration: the action of working with someone to produce something. Talk to your suppliers. Invite them in to see how you work. Likewise, go and visit them and see how they work. The more you understand each other, the better the collaboration will be. Developing a deep and meaningful relationship happens over a long time but you have to get started and take the first step.

We have more technologies than ever available to us that utilise the power of networks in order to communicate and collaborate with people all over the world. The use of technology has been key to the development of Grampian Fasteners and we're continuing that theme in order to aid collaboration, including a new Internet platform that's designed to improve efficiency and accuracy by integrating with our customers' systems.

Is your thinking really ready for collaboration?”

equalizeR’s xteGRity Wins top innovation aWaRdequalizer Flange inTegriTy Systems (EFIS), part of Aberdeen’s Equalizer Group, won the Grampian Award for Innovation at the Elevator Awards in June for its Xtegrity flange repair system.

The system provides a unique solution for dealing with heavily corroded or degraded bolts in flange joints on offshore and onshore installations. It takes away the need to remove corroded bolts by “replacing” them with a new set of bolts that clamp around the outside of the flange, held in place with a floating frame.

Of particular relevance to ageing assets such as those in the North Sea, it provides a solution to the problem through a system that is safe, efficient and cost effective. Xtegrity can reduce the time required to carry out work from days to hours, resulting in potentially huge savings across the energy sector.

The Award presented by Elevator (previously known as the Grampian Awards for Business Excellence) went to EFIS for demonstrating that innovation was at the core of its current and future success.

“This is a great achievement for the company and we are delighted to accept this prestigious award,” said Alan Morrison,

General Manager of EFIS. “The Xtegrity Flange Integrity System has significant operational and commercial benefits with the potential to revolutionise the market. This is a safe, cost-effective and budget-able solution which can significantly reduce or eliminate the need to shutdown in order to carry out necessary work.”

EFIS was established in 2014 as a new service company set up by Equalizer International as part of the Equalizer Group

to take forward the development of the Xtegrity system. Xtegrity was primarily developed for customers in the energy sector after one of its customers, a global operator, approached Equalizer and asked them to develop a solution. Its use is now being rolled out across the industry with ongoing potential across a wide range of other industry sectors.

This is the third award won by the Equalizer Group in recent months. Equalizer International’s Secure-Grip (SG) tools were recognized in the EDF Energy Nuclear Generation Challenge Awards as having an impact on safety and quality while challenging tasks durations and costs.

The company was also awarded a Diploma of Distinction for Innovation at the 8th Gas Engineering Fair EXPO-GAS held in Kielce, Poland. The organisers of the event particularly singled out the SG tools for pipe flange spreading which they highlighted as one the most innovative products on show during the two-day exhibition.

The Equalizer Group comprises Equalizer International, the parent company which is headquartered in Aberdeen and two new divisions established in 2015 - Equalizer Americas Inc headquartered in Houston, and Equalizer Flange Tool Innovation Asia Co Ltd., based in Taiwan.

From left, Bob Stephen, Alan Morrison and John Morgan of EFIS with James Brown, Director of Patents, and category sponsor Murgitroyd & Co.

Integrity system

scottish fiRms still focused on houston eneRGy maRketback due To continuing demand, the Scottish American Business Alliance, SABA, finished their 2nd annual visit to the UK earlier this summer after a week long run of meetings and one to one sessions with business leaders, Civic officials, notably from Aberdeen City and Shire and Fergus Ewing – MSP for Business Energy and Tourism.

SABA, which was established to guide companies wishing to internationalize or grow their overseas business via Houston, either through establishing new offices or acquisition, reached out to companies in Aberdeen, Edinburgh, Glasgow and London. Off the back of a turbulent year in the oil and gas sector, the delegation

found that demand was still high, if a little more cautious than previously experienced.

Lisa Morton, who represents the Accounting firm of Alonzo, Bacarisse, Irvine & Palmer, stated that business was still very much committed towards growth in the Texan oil capital and there was much to gain: “The Houston region is an undisputed global leader in international business, its geographical location making it an easily-accessed portal to virtually the entire the global marketplace. From the Port of Houston to the Houston Airport System, to a host of international entities doing business around the clock, Houston is where you want to be if your business

is looking to go global. We don’t see that changing soon”.

According to Gus Bourgeois, SABA founder member and corporate attorney at Boyar Millar, current market conditions are unlocking new potential: “Companies that have proprietary tools or processes that can increase efficiency or cut costs will be in high demand, as oil & gas companies seek to drive costs down. Recent layoffs have eased a tight labour market in Houston, with the result that a greater number of highly experienced employees may now be available for employment to new market entrants. Now more than ever is an excellent time to enter the US”.

SABA delegates


tco appoints manaGinG diRectoR FasT-growing aberdeen-based well completion technology specialist, TCO, has appointed Paul Betteridge as managing director. He will provide strategic vision and focus on the expansion of TCO’s global presence.

Prior to joining TCO, Mr Betteridge worked for AGR, initially appointed as a business development manager in 2008. During his time there, he identified key opportunities for the business, including in Israel, and was promoted to asset and general manager of newly established AGR Energy Israel.

More recently he was promoted to vice president of AGR seabed intervention. Reviewing the business, Mr Betteridge implemented changes which stabilised the division and resulted in it being acquired by Marin Subsea in late 2013.

TCO specialises in the design, manufacture and installation of completion barrier plugs (laminated glass barrier plugs), chemical injection systems, topside chemical injection systems, multi-cycle valves and Annulus Pressure Relief Systems, as well as the provision of tubing-conveyed perforating (TCP) equipment and services.

The company currently employs 130 people across its bases in Aberdeen, Norway, North and South America, Australia, Russia, Africa and the Middle East. This number is expected to grow in the coming months as the company achieves its plans for global growth.

need foR cost Reductions dRivinG GRoWth at step chanGe enGineeRinGThe oil and gas industry’s need to reduce capital expenditure is driving growth at an Aberdeen engineering and design business. Step Change Engineering, established eight months ago, says it has secured a clutch of new orders in the last two months as a result of its ability to deliver significant cost and schedule savings to clients by efficient use of engineering systems and new technology.

“With a combined value of £500,000, the orders are the direct result of operators demanding more efficient delivery mechanisms as they seek to reduce the cost of maintaining ageing assets. The majority of these orders are for minor brownfield modification projects, although the firm has also been approached to undertake larger multidiscipline projects,” the company said.

Utilising 3D data capture technology and advanced engineering software, Step Change Engineering claims to be delivering savings to clients of up to 50% in respect of project schedules and expenditure. Working closely with fabricators, it says it has been able to improve efficiencies by reducing the deliverables required for each project to a minimum.

Technical director Colin Bruce said: “We have invested heavily in our systems and processes to the point where we can now auto generate fabrication drawings with a full bill of materials. The whole process from offshore 3D scan to the start of fabrication is now hours rather than weeks.”

The firm’s growing order book has resulted in it strengthening its workforce, which now stands at around 40. It underlines the firm’s decision to relocate to offices in Regent Centre earlier this year, which provides scope for further expansion.

(L to R) Managing director John Wilson, technical director

Colin Bruce and consultancy director Satnam Shoker

Step Change Engineering remains on target to turn over £1.5 million in 2015.

Managing director, John Wilson, said: “Over the past eight months we have witnessed the oil and gas industry reigning in its expenditure, and the impact this

has had on people and companies. As an industry we need to work in partnership in order to sustain its future viability and operators have quite rightly started doing this by re-evaluating expenditure in order to reduce costs.

“The team at Step Change Engineering have reduced costs by 50% on minor modifications, with even greater schedule savings. We have also worked with operators to remove unnecessary activities and even scopes.”


efc GRoup Wins aWaRd foR siGnificant business GRoWtheFc group, a designer and manufacturer of instrumentation, monitoring, handling and control systems has won the ‘Business Success Over Three Years’ category at the Elevator Awards 2015.

The award win comes in recognition of EFC Group’s strong growth and record sales figures over nearly three decades of business. In February, the Group announced that it was one year ahead of schedule for reaching its 2016 turnover target of £30 million.

CEO of EFC Group, Bob Will, said: “Since the inception of EFC Group, we have experienced significant growth and we have continued to build upon our strong reputation for delivering a high standard of service and product quality. We pride ourselves on offering innovative solutions to the global energy industry and having a personable approach with clients. I

saltiRe eneRGy ceo Wins entRepReneuRial aWaRdmike loggie, chieF Executive of Saltire Energy, a supplier of drilling tools to the offshore oil and gas industry, has been announced as the overall winner of the Ernst & Young Scotland Entrepreneur of the Year Awards 2015.

Mike was chosen from among 25 Scottish business leaders to claim the top accolade, and will go onto represent Scotland at the EY UK Entrepreneur of the Year final in October 2015.

Mike established Saltire Energy in 1986 and has since grown the company into a group of three highly successful subsidiaries. Over the past three years, the company’s turnover figures have increased by 68%, with its on-the-ground presence in Australia, Africa, Europe, the Middle East and the Far East growing as a result of client demand.

David Mitchell, EY Director of Entrepreneur of the Year Scotland, said: “Saltire Energy is a true Scottish success story, delivering exceptional profit and rapid international growth in a very competitive and volatile market, with further scope for growth still. Mike’s stewardship together with his focus on, and commitment to, his staff and clients have seen the company go from strength to strength.”

Deputy First Minister, John Swinney, said: “The… Award is a great example of the Scotland ‘can do’ ethos. Our vision is for Scotland to be a world-leading entrepreneurial and innovative nation - one in which growth and innovation go hand-in-hand with a commitment towards delivering wider benefit to all of society. I applaud Mr Loggie on his vision and entrepreneurial spirit.”

Earlier this year, Saltire Energy was named one of the 1,000 most inspiring companies in the UK by the London Stock Exchange, which followed its listings on The Sunday Times Fast Track 100 Ones to Watch and The Sunday Times Profit Track 100 league tables in 2014.

Saltire Energy is headquartered in Portlethen, Aberdeen. Around 60% of its business is international, with a focus on the Middle East, Africa, Asia Pacific, the Caspian Region and The North Sea, with further global development planned.

Left to right – Michael Scott (Business Development Manager), Donna Stewart

(Internal Sales Manager), Anand Puthran (Managing Director), Ian Allan

(Global Product Manager).

see this as the driving force behind our success. I look forward to building on these achievements in the future.”

The Elevator Awards celebrate outstanding achievements by businesses across the North East of Scotland, in categories which include Most Promising New Business, The Grampian Award for Innovation, Emerging Entrepreneur of the Year, and Employer of the Year.

Organiser of the awards, Elevator (previously known as Enterprise North East Trust), is a social enterprise dedicated to supporting the entrepreneurs, business leaders and employees of today and tomorrow by providing expert business advice and teaching entrepreneurship and enterprising behaviour. The Elevator Awards acknowledge entrepreneurial companies and individuals that are capable of leading the future prosperity of Grampian.

Mike Loggie Saltire Energy - EY Entrepreneur Of The Year 2015


haRkand secuRes decommissioninG WoRk With maeRsk oilglobal inspecTion, repair and maintenance company Harkand, has begun decommissioning work in the UKCS supporting Maersk Oil UK’s work on the Leadon field.

Earlier this year, the firm secured a multi-million pound 12-month frame agreement with Maersk Oil for the provision of its two dive support vessels (DSVs), the Harkand Da Vinci and Harkand Atlantis, as well as supporting onshore and offshore personnel.

This new award will see Harkand deliver project management and engineering services to Maersk around their drill rig program for subsea well plug and abandonment. The scope of work which is being undertaken by the Harkand Atlantis includes barrier testing at 13 trees, removal of production and gas lift spools at trees and towhead ends along with power and control jumpers and mattress recovery. The works also involve flooding and disconnection of a 4” gas import flowline.

David Kerr, managing director of Harkand Europe said: “We are delighted to have secured this decommissioning work in the North Sea for such a high profile operator. Removal of subsea infrastructure can be challenging and this contract reflects our well-established and successful track record for decommissioning activities such as inspection and survey, valve operations, mattress removal, pipeline cutting and recovery.

“There’s an estimated 500 – 690 facilities reaching the end of their operational life over the next three decades, so North Sea asset decommissioning projects will play a large part in Harkand’s future. We look forward to successfully completing this work for Maersk Oil UK.”

Harkand provides offshore vessels, ROVs, diving, survey services, project management and engineering to the oil and gas and renewables industries. Headquartered in London with operations bases in Aberdeen, Houston, Mexico and Ghana, Harkand aims to be the leading subsea IRM and light construction contractor globally.

uk offshoRe sectoR needs to be sustainable in a $60 WoRld, WaRns oil & Gas ukoil & gas uk’s chief executive, Deirdre Michie, has warned that the UK offshore oil and gas industry must become sustainable in a world of $60 oil.

“Here in Aberdeen and throughout the UK, we have built an industrial powerhouse for the UK… However, we now face real and present threats that are challenging our future. At $60 oil, 10 per cent of our production is struggling to make money and there is a shortage of capital and a shortage of investors willing to place their money here. While demand for our products remains strong, critical for our transport and heating our homes and giving us a whole host of everyday products, our productivity as an industry has fallen - and fallen rapidly.”

“In relation to our escalating cost base, we know that as an industry we have been part of the problem; now we need to be

part of the solution. Over the last 20 years, the price has averaged at $62 per barrel and the forward curve is between $65 and $75. Therefore it is not unreasonable for the North Sea to set out its stall at being sustainable in a $60 world. As a target, it's one that we as a trade association can champion, Government can align with and the regulator can pursue as an enabler, for example, to focus on key infrastructure.”

“To succeed with this approach, we have to be open to change. We must avoid doing the same things in the same way and expecting a different outcome. We have had a decade of escalating costs, so we can be sure that our current approach doesn’t work. We need to think about this from an investor’s point of view. Given that we compete for investment dollars on a global basis, we must ensure the UK is a commercially attractive and predictable

place in which to invest. “Learning from our mistakes, we know

that our focus cannot merely be on ‘cutting costs’, but must more fundamentally address the efficiency of the basin. Focusing on efficiency means that, if or when the oil price bounces back, we will be best placed to seize new opportunities. And let’s not forget, efficient management is also safe management – and I know safety remains the top priority for everyone in this room.”

Ms Michie gave examples of efficiency improvements already happening within the industry, highlighting the gains Total and Nexen have made by engaging with the workforce to help drive positive change, adding: “In order to be successful in the future, we too must raise the bar in terms of co-operating. We must work together to secure the future of this industry – for this country. There is a role for everyone –

client, customer, employer and employee. For unions, for governments, for regulators and for trade associations. This is not a time for conflict or entrenched positions. We don’t need to wait for consensus, but we do need leadership in this industry to drive co-operation and an ‘early adopter’ culture from companies willing to rise to the challenge.”

“With over 20 billion barrels of oil and gas still to play for, there’s plenty of opportunity to ensure an indigenous supply for the country. On a global-scale we might be a small player, but we’re also a world-leader. Our technical expertise is unsurpassed and reflected in the quality, the capability and the success story that is our supply chain.”

Oil & Gas UK’s chief executive, Deirdre Michie


decommissioninG contRact Win foR noRsea GRoup (uk) norsea group has won north-east Scotland’s first major “small piece” decommissioning contract. Work has already begun on the six-month project, which is being carried out at NorSea Group’s Peterhead facility on behalf of Endeavour Energy and involves safe disposal of subsea manifolds and associated pipework from the Renee and Rubie fields.

All materials from the fields, which lie 200km north-east of Aberdeen, are being delivered to Smith Quay which is operated by NorSea Group. An important element of the £0.5million contract was the requirement that reuse of returned material be maximised; NorSea Group will achieve a 100% recycling rate.

The returned material includes 1,000 tonnes of concrete mattresses which will be used as hard core and in road construction projects; 200tonnes of pipework and skid units which will be recycled as scrap metal; manifold valves which will be refurbished and reused and a 17 tonne crossover manifold which will be transported to the Underwater Centre at Fort William where it will be used for diver training. The work will initially create up to six new jobs.

“This is our first decommissioning win and the first such project to be carried out in the North-east,” said Walter Robertson, MD of NorSea Group (UK). “We are primarily known as a logistics and base services company servicing the offshore industry but as part of our future growth strategy we are developing our decommissioning capability. In the current economic climate we anticipate that many more decommissioning projects will be coming forward and we are already involved in tendering for additional contracts in this area.”

“In addition to Peterhead we have facilities at South Quay, Montrose capable of carrying out similar types of small piece decommissioning work, so we see great potential for servicing

multi-million investment foR ne fiRm folloWinG planninG appRovala norTh-easT storage and inspection company is set to make an investment of up to £10million to develop its site at Peterhead.

Independent Oilfield Services (IOS) has secured planning permission to develop a further 30 acres of its 80 acre supply base at the former Longside airfield, near Peterhead, to create secure warehouse facilities for the oil and gas and renewables industry.

The firm, which also has an office in Aberdeen’s Golden Square, currently utilises 30 acres of the site for pipe storage and inspection services. The planning permission granted by Aberdeenshire Council this week has given the green light for one 60,000 sq ft warehouse and a further two 30,000sq ft warehouses, including office accommodation, car parking for around 60 vehicles and yard space.

IOS was established in 2014 and the management team has more than 20 years of experience in tubular and drillpipe inspection.

Current services provided from

additional contracts there.”Operations Director Mike Munro, said:

“With 200m of quayside and a draft of 10m, Smith Quay is ideal for the landing of small piece decommissioning works and can handle structures up to 4,000tonnes in weight. A laydown area in excess of 15,000m2 and our on-site crane with a 220t capacity makes us self-sufficient in the landing of most materials and larger capacity cranes are available at short notice.”

the site, which is just four miles from Peterhead Port, include external storage, OCTG inspection, drillpipe inspection, offshore inspection, equipment rental, transportation and tubular management. The multi million pound development will add secure warehousing to the facility to meet customer demand.

There are currently 40 members of staff based at Peterhead working for IOS and new jobs are in the pipeline during and after the construction phase.

The firm is currently in discussions with a construction firm and work on the warehouse facilities is set to commence in the third quarter of 2015 with completion estimated for the second quarter of 2016.

Symon Wadsworth, finance director for IOS, said: “Securing planning permission for the redevelopment of the vast storage and inspection facility at Peterhead is an excellent opportunity for the business, local area and industry. We feel there is sufficient demand for both Internal and

“We also carry out rigorous testing of all decommissioning materials to detect the presence of NORM (Naturally Occurring Radioactive Material) and if it is present, we work with Scotoil Services, our specialist partnership company, to carry out decontamination at our on-site SEPA approved licensed premises.”

NorSea Group took on the operatorship of Smith Quay and Embankment at Peterhead on a 10-year agreement in 2014.

This is phase 1 of a 3 phase development that will see expansion onto Merchants Quay and provide 400m of deep-water quayside berthing supported by over 50,000m2 of quayside laydown area. NorSea also has a long term agreement with Scrabster Harbour Trust and a 15-year lease at South Quay in Montrose.

NorSea Group opened its first office in Aberdeen in 2013. Since then there has been significant growth in the company’s

business activity in the UK. In addition to establishing a presence in Aberdeen, NorSea Group acquired Danbor Ltd. the leading Danish offshore logistics company and their UK assets are now incorporated into NorSea Group (UK). In 2014, the company also moved to new premises at NorSea Group House in Altens, providing the company with its own 4,000m2 warehouse, 15,000m2 concreted yard and 800m2 of office space.

From left - Guy Cook and Hywel Evans of

Endeavour Energy with Mike Munro,

Operations Director, NorSea Group (UK) at

Smith Quay, Peterhead

External storage facilities in the Peterhead Area to compliment the excellent and growing port facilities. The planning permission which has been granted will allow us to increase the services we can offer both current and potential clients

with not only storage but also additional complimentary tubular services, as we look to offer more cost effective solutions in this difficult market.”

IOS also has a further 20 acres at the Peterhead site which could still be developed

as the business grows to introduce complimentary services to clients.

With plans to expand the independent business and further enhance its offering, IOS is set to create a number of local job opportunities in the coming months.

(L-R) Symon Wadsworth, Finance Director and Glynn Geddie, Business Development Manager of IOS

INTERVIEWOffshore Aberdeen | July/August 2015 | offshoreaberdeen.com24 |

Q What are DNV GL’s plans for the UK offshore - have the oil price falls changed your investment/business development plans?

The fall in oil price has given DNV GL in the UK an opportunity to have a closer dialogue with our customers. In a challenging climate, it is important to listen to what the market is saying, appreciate the key challenges facing our customers and deliver the optimum value and efficiency. The on-going increases in operating costs combining with a dramatic fall in oil& gas prices earlier this year made operators across the industry respond with further cut backs on their capital expenditure plans and cost cutting across their existing operations. We are reacting to the market conditions by supporting our customers with their challenges head on, and two areas that we have seen a significant increase is in our decommissioning work, covering safety, verification and marine operations, and our due diligence work as assets change hands. Our business objectives have remained the same and we are working hard to win new customers, but it is clearly a tough business climate.

Q What is your presence in Aberdeen?We have 280 people working in Aberdeen following the merger in 2013 between DNV

and Germanischer Lloyds. We have a further 500 colleagues in the rest of the UK working in support of the oil & gas business area. Our Aberdeen location is fundamental to our operations, as it is close to the oil and gas companies and their suppliers. We are close to the energy hubs in the mid- section of the UK with offices in Newcastle, Manchester and Loughborough, whilst our London offices are close to the design houses and the financial community.

Q How are your products and services (assurance, standards, certification, expert advice) developing now and in the future in

the UKCS? Are you moving into any new areas?Changes in the oil & gas industry are taking place at an increasingly rapid pace, and projects today will need to be robust against the changing requirements of tomorrow.

Following the merger in 2013 our local service offering has expanded resulting in combined revenues of around £130 million per year. We are now able to support operations and projects from “subsea to the shore” and from “shore to the street”. The segments of key strategic importance in UK are Pipelines; Mobile Offshore Units (MOU) and Subsea; Fixed Assets; Marine and Gas Value Chain. The services delivered in the segments are Technical Assurance, Technical Advisory, Marine Assurance, Marine Consulting and Risk Management Advisory.

DNV GL is working on a number of projects related to the key challenges facing operators in the areas of aging assets, onshore and offshore pipelines, subsea and well integrity. Despite the challenges of the oil price, we continue to invest 5% of our global revenues in research & development in order to help our customers find the key innovations that will help them improve their business performance. At our test site in Spadeadam and our Flow Centre Laboratory in Bishop Auckland we are ensuring new technology and materials will be both effective and safe.

In our experience, it is highly valuable if the industry players can work together and learn from each other. That is why every year we carry out Joint Industry Projects – where the participants solve a common or new challenge - and publish the new knowledge in Recommended Practices, guidelines or standards. Presently, we are running 60 Joint Industry Projects and have provided the O&G industry with about 170 standards.

Q Is there pressure from your clients to cut the price of your services due to the oil price fall?

There is a lot of pressure from our customers

to reduce costs, and we have to be sensitive to that as we can see the cuts in headcount emerging from most of the operators and supply chain companies. I firmly feel, however, that savings are best achieved through smarter working. Reducing complexity and using standardisation to stream line processes, ma-terials and documentation will help the industry to adjust to lower margins. We have to develop and op-erate fields for less.

There is increasing evidence that advances are being made to improve the efficiency and reduce the cost of operations. Lifting costs are anticipated to fall as a result over the next twelve months. The pace of work behind the scenes must now be stepped up to continue the implementation of fiscal reform the industry urgently needs to support its own activities to improve efficiency.

We, in DNV GL, are fully supportive of working with our customers and the industry on standardisation and efficiency and think we have much to offer in this arena. However, I strongly feel that we must learn from previous downturns and avoid knee jerk reactions that will harm our sector in the long run.

Understanding our customers cost drivers offers opportunities to more closely align performance, and we are always open to discussions with our customers on how we can help them manage their costs, whilst maintaining safety levels.

Q Any anticipated impact from M&A?We are closely watching the market. Royal Dutch Shells’ much publicised acquisition

of BG Group earlier this year evoked speculation about others. The market is reshaping, consolidating and introducing new players. This will impact the entire supply chain and we need to be flexible in this changing environment. Through our support to both operators and the financial institutions in Technical Due Diligence, we have however seen an increase in the number of M&A deals being considered, or completed.

Q Any recommendations for changes in fiscal regimes/regulation in the North Sea to get more oil and gas produced/tackle cost issues?

- for either government or the OGA?The UK government following the March and the

summer budget sessions broadened the types of investment allowances that could be claimed, and cut the corporation tax for non-ring-fenced trade. We see this as a positive move.

The rate of exploration on the UKCS remains extremely low, with just 14 exploration wells drilled in 2014, and only seven so far this year - at a time when industry should be aiming to drill upwards of 30 wells a year to reinvigorate the basin, according to Oil & Gas UK. That harsh fact underlines why we

need more effective regulatory, licensing and fiscal measures in place by Budget 2016 at the latest.

The Oil and Gas Authority (OGA) are working on practical measures that can be taken by the industry and government to mitigate the immediate risks facing the UK oil and gas industry. The formation of this group and the subsequent actions and communications has been well received by the industry. However, it is time for these actions to become a reality. The industry needs clear leadership and there is an expectation that the OGA will deliver. I think it is best for us to support the OGA in any way we can, and we look forward to having the opportunity to share our views with the OGA in the near future.

Q What are the most promising innovations/new products you are seeing in the North Sea currently?

The growth of the subsea sector as the move towards deeper waters and away from simpler jacket structures with dry wellheads has seen some promising new developments. It is estimated that the world’s subsea market is expected to grow by 100% in the period 2013 to 2018 to £40 billion bringing massive opportunities, both in the UK and globally.

We are increasingly seeing the challenges of working in the subsea arena addressed by ideas being introduced to expand the capabilities of subsea production and to improve efficiencies while doing so. We have the Statoil subsea factory concept which can withstand great depths and high pressures, while increasing recovery from the reservoirs. In addition, the operational costs for such installations are lower. We see electric trace heating, HPHT and ultrasound inspection technologies being introduced to the subsea market so going deeper is certainly an exciting prospect.

Whilst not perhaps the area we would always wish to promote, we also see substantial innovations occurring in the decommissioning market, which are helping to reduce the cost, and improve the management of risks in such operations.

Interview with Hari Vamadevan, DNV Regional Manager UK and Southern Africa

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ACROSS DOWN1 Woodworkers; joiners (10) 2 National -----; patriotic song (6)7 Flying insect with powerful sting (4) 3 Kind of air-powered drill; jackhammer (9) 9 English river, emptying into North Sea (5) 4 Crazy person; lunatic (informal) (7) 10 Eg. gulls, terns, cormorants and penguins (8) 5 Simpler; less difficult (6) 11 Colleague; co-worker; fellow player (4-4) 6 Smash; break into fragments (7)12 Units of heat-energy (esp. of natural gas) (6) 7 ----- House, residence of U.S. president (5)13 Alloy of iron and carbon (5) 8 Deposit or bed of rock, minerals, etc. (8)14 Flammable gas used in portable stoves, aerosols, etc. (7) 15 Chemical or biological agent used to destroy harmful domestic or agricultural organisms (9)17 Informs; instructs (7) 16 Cranes or lifters of mast-and-boom design (8)19 Soft, light wood used in modelling (5) 18 Organ of sight (7) 23 European country (6) 20 Go without; avoid; refrain from (7)25 Resilient metal or alloy, cooled and solidified in a mould (4, 4) 21 Bolts with spiral thread (6)26 Bladed boot for use on rink (3, 5) 22 Cartoon sailor with a liking for spinach (6)27 Living; not deceased (5) 24 Homes of 10 across (5)28 Requests; makes inquiries (4)29 City in southern California (3, 7)

QUICK CROSSWORD

Across: 1 carpenters 7 wasp 9 Trent 10 seabirds 11 team-mate 12 therms 13 steel 14 propane 17 teaches 19 balsa 23 France 25 cast iron 26 ice skate 27 alive 28 asks 29 Los Angeles Down: 2 anthem 3 pneumatic 4 nutcase 5 easier 6 shatter 7 White 8 sediment 15 pesticide 16 derricks 18 eyeball 20 abstain 21 screws 22 Popeye 24 nests

...go online and read the full interview at offshoreaberdeen.com...

Offshore Aberdeen July August 2015

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