OGN Group looking to diversify into renewable energy on Tyneside

After bringing North Sea platform construction back to Tyneside – and creating hundreds of new jobs – the OGN Group is looking to its long-term future with a diversification into renewable energy. Peter McCusker reports

OGN Group
OGN Group

The oil price falls of the late 1990’s decimated the North Sea oil and gas fabrication industry leading to the closure of almost all of the region’s yards.

In the years that followed, as the oil price recovered from its $20 a barrel low, much of the demand for new offshore platforms was met from fabricators on the Continent and Asia.

But the OGN Group and its predecessor SLP have reversed that trend, and in the last few years have once more put Tyneside at the forefront of the industry.

David Edwards, chief executive officer of OGN Group, said: “It was a fight to get the industry started again on Tyneside.

“There was the perception that the skills were still here in the North East, and we believed that to be the case. A lot of the work was going abroad but Apache decided to buy British and we proved we could do it.”

The award of the £400m Apache contract was the major breakthrough for OGN. It was a turnkey project which involved the design and manufacture of jacket and topside for installation in the Fortes field.

It entailed building a team from scratch and at the height of the contract OGN was employing 2,000 people at its 75-acre Hadrian yard base, with hundreds more jobs being supported in the supply chain.

Since then OGN secured, and is close to completing, an offshore jacket (foundation) for Talisman and recently secured another large order for an FPSO (Floating, Production, Storage and Offloading) refit for EnQuest.

Edwards expects the North Sea oil and gas industry to continue to perform with little sign of significant downward pressure on the oil price, but OGN is also casting its net further afield.

While there are many similarities between the renewables industry and the oil industry Edwards says the former is inherently more stable.

He said: “In the offshore oil and gas industry you can almost map the number of employees to the oil price. The higher the oil price then the higher the headcount.

“But offshore wind is different. It is not subject to the vagaries of the price of oil.”

OGN has secured planning permission for a new offshore wind jacket manufacturing facility at its Hadrian yard base which has the potential to create hundreds of new jobs.

Following years of uncertainty, last December’s Government announcement on the financial support levels for renewables has created the environment the industry has been craving.

Edwards, who also sits on the national Offshore Wind Industry Council, which advises the Government, said: “The New Year will kick off with a bang for the UK renewable industry.

“I think it’s game on. We now have the stable pricing mechanism we needed and the Government is looking for the industry to get on with it.

“The industry accepts that costs have to come down and as the industry develops more standardised products this will help.”

“The utilities and investors seem to be more gung-ho. A strike price of £155 per MW/h is at the highest level expected and this is providing the best opportunity for the industry for years.

“The UK supply chain is set to benefit from the volume of work that will become available.”

The offshore wind industry is currently under the microscope with the Government wanting to triple installations to 10GW by the end of the decade. It also wants to see costs come down and is encouraging more UK content.

Edwards continued: “Initially the turbines will be made abroad but there will be opportunities for UK companies with foundations, transformer sub stations and balance of plant operations such as installation and cabling.

“No turbine manufacturer has yet committed to the UK. They all have agreements of one kind or another but no one has said ‘yes’.

“At this stage it is not clear how the industry will develop. The utilities will be the ones placing the contracts and it is not yet clear whether they will sub contact this out to third parties or manage the projects themselves.”

Whichever model emerges one thing is clear says Edwards, the industry will have to work together.

He added: “One thing we can be certain of is that there will be plenty of work for everyone, creating thousands of new jobs.

“The most important things are the ability of the supply chain to match the needs of the developers and operators and to ensure that the right products are delivered on time and at the right price.”

Since the strike price announcement Edwards has spoken to utilities, turbine manufacturers and scores of businesses and he understands the invitations for contracts will be emerging in the next few weeks and months.

OGN landed the Apache work in 2010 and completed the contract with the delivery of the topside in May 2013.

The company had emerged from the Lowestoft headquartered SLP group which arrived on Tyneside in 2008. Edwards, a former director of SLP helped in the creation of OGN and the securing of the Apache contract.

At the end of the last decade the Government encouraged development in the North Sea with brownfield tax breaks and the OGN directors saw the opportunities emerging from this and the emerging offshore wind industry.

Edwards continued: “We wanted to develop a yard in the North East to build large platforms and jackets and compete for the contracts that were coming along at the time.

“We were also aware that the renewables industry had the potential to become quite big and the Hadrian Yard is the best yard in Europe for projected developments in the North Sea.

“The skills needed for the offshore oil and gas industry are pretty much the same skills for the offshore wind industry.

“The oil and gas industry was getting some reasonable deals from the Government, such as the brownfield allowances, and this helped with the development of the Apache and Talisman contracts.

In the last few months there has been a hiccup in North Sea developments, with delays to the Bressay and Rosebank projects, jointly totalling around £7bn. These have been attributed to technical and financial issues.

But Edwards believes the sector will soon reignite with production set to increase by almost one-third by 2020.

“The North Sea industry is less robust at the moment however by the end of the year I am sure it will pick up, both in Norway and the UK.”

OGN currently has around 600 full-time staff and this will be rising to 1,000 over the coming months to fulfil the EnQuest contract.

Edwards said: “We are expecting to secure more orders from the oil and gas industry in the coming months, in new work and from some of the projects which have been delayed.”

Edwards acknowledges the skills concerns experienced by many peers in the North East oil and gas industry but says it has so far been successful in recruiting the staff it needs.

“In the short term we have found the staff we need but long term there needs to be a lot of training.

“We proved there is the skills base within a 40-mile radius of Tyneside. We were able to build a team and we are here for the long term.

“We are now looking at our future staff needs and have successfully launched an apprenticeship programme.

“We need more people for the future and we are beginning to find there is a real desire amongst many youngsters to come and work in an exciting green energy business.”

Edwards concluded: “The River Tyne is ideal for wind turbine companies with its location for access to the proposed Round 3 offshore wind sites.

“It is a wide river, with room for manufacturing and assembly facilities, and we have the skills to provide logistical support to the industry.

“The potential is here. The question now is whether we will grab it?”

Offshore wind plans

The company has secured planning permission for a new £50m offshore wind turbine facility at its Hadrian yard base.

The development, pictured, will receive £4,500,000 from the Regional Growth Fund and create 1,000 long-term local jobs.

The 36,000 sq m factory will be able to manufacture various types of steel foundations suitable for large turbines with the capacity of 5MW or more each.

These will include the Triton foundation, an innovative three-leg steel jacket, developed by OGN and its subsidiary Aquind, specifically to address the needs of developers of large-scale offshore wind farms in the UK and Europe.

The new purpose-built facility at Hadrian Yard will be capable of producing 150 jackets a year.

Oil and gas work

In May last year OGN completed work on the first central North Sea platform to be built at a single construction yard in the UK for 25 years.

The final part of the fabrication, the topside (deck), was towed to the North Sea Forties Field, 110 miles off Aberdeen, following the earlier completion of the jacket in August 2012. The £400m construction project for US oil and gas exploration and production company Apache Corporation had been awarded to OGN in 2010.

From concept to completion, it required over 3 million man hours of work, providing 2,000 jobs at OGN’s Hadrian Yard at Wallsend and a further estimated 5,000 jobs throughout the British supply chain.

Next spring OGN is expected to complete work for Talisman Energy (UK) Ltd on engineering, procurement and fabrication of new oil and gas jacket, which will form part of a new bridge-linked platform within the Montrose North Sea project.

And late last year OGN announced it had secured a multi-million pound contract with independent UK oil and gas development and production company EnQuest, which will lead to the creation of 600 new project jobs at its Tyneside facility. OGN will provide its specialist fabrication services to undertake commissioning works on the EnQuest Producer, a 249m long Floating Production, Storage and Offloading (FPSO) vessel.

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