Budget was a "purposeful ­foundation" laid down for the regeneration of the North Sea

Despite the trials and tribulations of the wider offshore industry the subsea sector continues to plan for rapid growth

Angela Upex
Angela Upex

Two years ago when The Journal launched its first energy and offshore supplement we alluded to a major announcement on a new technology centre for the region’s subsea industry.

A few days later, in a blaze of publicity, Vince Cable unveiled plans to create the Neptune National Centre for Subsea and Offshore Engineering on Tyneside.

This is currently being built on the Shepherd Offshore Neptune Energy Park in North Tyneside and now, just a few miles upstream, work is set to begin on a second world-leading subsea research facility – and a third may follow.

Despite the trials and tribulations of the wider offshore industry the subsea sector continues to plan for rapid growth.

Andrew Hodgson, chairman of Subsea North East and chief executive of Wallsend subsea ROV (remotely-operated vehicle) maker SMD, says the creation of the two centres will cement the region’s reputation as a “global hub” for the industry.

He tells The Journal: “The North East, and Tyneside in particular, are the leading world centres for subsea innovation and our aim with Neptune subsea development is to ensure we maintain and build upon that position.

“Our aim is to create a world-leading innovation hub, one which will lead the growth of the industry both at home and abroad.

“Despite the oil price fall the subsea sector is set for rapid future growth and these centres of excellence will ensure the North East is at the heart of that.”

Today we hear how many of the region’s subsea companies will be ideally suited to work in the offshore wind industry, and after years of delays there are signs this industry is at last developing some momentum.

Brent Cheshire, managing director, of DONG Energy, the world’s biggest offshore wind industry player, tells The Journal that some £20bn of work is on its way and that his company is “desperate” to work with businesses in the North East supply chain.

One of the UK’s leading energy experts, Prof Ian Fells, writes for the supplement on the issue of energy security and discusses the relative costs of renewables and fossil fuels.

And Dermot Roddy, chief technology officer at Newcastle-based Five Quarter – which aims to use the region’s underwater coal reserves to produce power for homes and business and feedstock for industry - argues the world will need fossil fuels for many years to come.

We hear how the falling cost of renewable solar energy can help business save costs and we take a close look at developments on Teesside, which is becoming the undisputed hub of the North East low-carbon energy sector.

Mike Pedersen, of The Procurement Directory looks at the growing links between the offshore industries of the UK and Norway. Meanwhile George Rafferty, chief executive of NOF Energy, outlines how the technological skills and advanced manufacturing capabilities of the North East supply chain is helping the offshore oil and gas industry adapt to the current period of low prices.

Dominic Lipinski/PA Wire George Osborne
George Osborne

Chancellor George Osborne took steps last week to support North Sea oil and gas production and two of the region’s most senior offshore industry figures share their views on the mood of the industry.

Dennis Clark, chairman of Wallsend fabricators OGN, says: “There was a lot in the Budget to encourage the industry. It certainly sends out positive signals to the people who can potentially invest in the North Sea…”

But he adds: “At the current oil price of around $50 a barrel then the smaller oil companies are not profitable, and they will not be investing in the immediate future.

“The big companies such as Chevron and the BG Group have sanctioned projects and we’ll just have to see if this Budget will be the signal for these to be moved forward.”

Neil Kirkbride, managing director at Newcastle-based BEL Valves says: “The industry had become bloated before price started to drop.

“What we are now finding is that many contracts are being re-examined and reassessed and this is slowing projects down.

“In the North Sea letters are flying around asking for re-workings to be done. Everything is in the mix. Project economics are being studied closely and contractor rates are being looked at.

“We are hoping to see the oil price rally up to $80, but how quickly that will happen is anyone’s guess. It may be 12 to 18 months away? While some projects can still proceed at $60, a lot more projects are viable at the $80 price but at the current $50 price many more or not.”

The supplement sponsors Oil & Gas UK were amongst those who welcomed the Budget announcement saying it should boost investment.

Its outgoing chief executive, Malcolm Webb, said: “These measures send exactly the right signal to investors. They properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.”

Angela Upex, commercial editor, Trinity Mirror North East

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