The subsea industry is the hidden gem of the UK economy,” said Neil Gordon, as he unveiled its latest research which shows revenues have grown 50% to almost £9bn in the last three years.
His aim is for the sector to be recognised as the economy’s crown jewel – with Subsea UK announcing these new activity levels to MPs at a Westminster reception.
Subsea UK’s industry activity report for 2013, unveiled in the last few days, shows the sector has grown from ï¿½6bn in 2010 to ï¿½8.9bn now.
The activity review shows the UK now dominates the global stage with 45% of the ï¿½20bn worldwide subsea market.
The survey of more than 750 companies shows that 16,000 new jobs have been created in the sector since 2010, bringing the total number of jobs supported by the industry to 66,000.
Here in the North East the sector has added an extra 5,000 jobs in the last three years taking the total number employed in the subsea industry in the region to 15,000.
Revenues from the region’s 50-plus subsea companies increased by ï¿½500m to ï¿½1.5bn, between 2010 and 2013.
Gordon continued: “The sector currently employs 66,000 people in the UK and we expect that number of people to double in the next 10 years.
“The subsea industry is global, and we need to attract new people into the industry to help us stay ahead of growing worldwide competition.”
The success of the subsea industry seems to gaining some traction with energy minister Michael Fallon saying: “This report highlights what a Great British success story the subsea sector is. The subsea sector has translated incredible feats of engineering and construction into market-beating performance.”
“World-class expertise and cutting edge technology has created a British industry worth £8.9bn that supports 66,000 jobs and leads the global stage. The subsea sector has earned the substantial praise it deserves – the figures in this report are truly impressive.
Gordon added: “These findings are further proof of the success, dynamism and sustained growth potential of subsea. Not only has our sector out-performed any other in the UK, it has improved its global position and now dominates with an impressive 45% of the global market, despite a faltering economic climate.
“Extracting the remaining world’s reserves will increasingly fall to the subsea industry – already almost 45% of UKCS (United Kingdom continental shelf) production comes from subsea wells with 70% of new developments planned. It is therefore of vital importance to the security of the world’s energy supply.”
Subsea production is set to rival traditional offshore production by the end of the decade with exploration and production companies are going deeper and deeper, taking advantage of new technologies that can handle higher pressure and higher temperatures.
The sector set to quadruple in size to one with annual revenues of £85bn by 2020.
Members of Subsea UK play a crucial role in this quest and the North East of England is home to some of the world’s leading subsea companies.
Newcastle-based British Engines, of which subsea powerhouse BEL Valves is its main subsidiary, has recorded a 50% sales increase in the last two years to ï¿½160m this year and foresees further strong growth to £200m within five years.
It has created over 200 new jobs in the last two years taking total staff numbers to 1,200 and expects to recruit an additional 200 staff in the next few years.
BEL Valves is a member of Subsea UK and also Subsea North East which represents the interests of many of the region’s sector companies.
These include the following from Tyneside; the IHC Engineering Businesses, which is a leading player in subsea trenching market, Duco (Technip) for umbilicals, Wellstream (GE Oil & Gas) for pipes and SMD for ROVs (remotely operated vehicles).
Teesside has its own cluster of subsea companies including DeepOcean, Subsea Innovation, Wilton Group, Tekmar, Global Marine Energy and JDR Cables.
Andrew Hodgson, managing director of SMD and chairman of Subsea North East, says the region leads the way in technological innovation, surpassing even Aberdeen.
He said: “Once again the continued growth in the offshore sector has delivered positive news to our region. The improved activity in the North Sea, together with the continued trend towards improving technology, plays to the strengths of the North East.”
The North East’s lead in the sector was recognised by the Government earlier this year when it said it would support the creation of a new Tyneside innovation centre.
The £7m Neptune National Centre for Subsea and Offshore Engineering centre is a joint venture between Subsea North East, Newcastle University and the Higher Education Funding Council for England.
Based in Wallsend it will lead the UK’s efforts to become the world-leader in subsea and offshore engineering.
Gordon said: “Neptune is a great start but we need more innovation centres if we are to stay ahead of the global competition.
“There is a worldwide demand for subsea technologies. It’s not a great amount of money in this industry and there is plenty of room to have a number of these facilities in other parts of the UK such as Scotland.
“The great thing about the Neptune centre for the North East is that we expect it to act as a will act as a catalyst to attract inward investment into the region.
“We expect to see businesses move to the North East to take advantage of the technologies, knowledge and skills being developed at the Neptune.
“The North East is strong on manufacturing and engineering, technology and support operations
“However the technology has to be driven by the industry, working in partnership with the Government and academia.
“We need to have the research centres to come up with the solutions to the challenges we face.”
Hodgson added: “The North East is seen as a good place for subsea businesses to locate with a number of businesses establishing units here. The Neptune research centre is a notable strong attraction for relocating businesses, however we remain very concerned at the capacity in key skills areas.”
Gordon continued: “There is strong competition from the US and Norway but the UK is leading the way in subsea engineering at the moment, as these new figures show.
“The oil majors know the UK is a great place to invest but we cannot stand still.”
The 2013 Subsea UK survey reports that almost half the respondents are anticipating growth in excess of 20% in the next three years with almost 30% predicting growth of up to 20%.
If these forecasts from these member companies are achieved the sector could grow to over ï¿½11bn by 2016.
Exports account for 45% of total subsea revenues with the Norway, West Africa, North America and Asia being the key export markets for UK subsea companies.
Based on Subsea’s members’ responses, the renewable market is not currently a significant driver of the UK subsea industry with data indicating that the total subsea-related turnover from UK companies attributable to renewables is approximately ï¿½770m, up ï¿½350m on the 2010 review.
Almost 40% of respondents do not provide any goods or services to the renewables sector. Sales in renewables accounted for between 1% and 9% of total subsea turnover of around only 28% of respondents.
Mr Gordon commented: “With such a buoyant oil and gas market, it is hardly surprising that renewables account for only a small percentage of turnover although there are growing signs that this will increase in the future and Subsea UK is committed to helping its members diversify into marine renewables where their skills, technology and expertise can add real value.”
George Rafferty, chief executive of Durham-based NOF Energy, is full of praise for the industry. He said: “Without doubt the subsea industry is a jewel in the crown of British industry, not only in the North East, but across the UK.
“However, the North East is an exceptional hub for subsea activities with manufacturers such as IHC Engineering Business and SMD developing some of the most advanced underwater technologies, which are being deployed by companies from the region including Modus and DeepOcean.
“The supply chain supporting this sector in the region is deep and varied and is also one of the most mature in terms of operating across the offshore renewables sectors as well as the oil and gas industry.
“The early offshore wind farms relied heavily on the expertise of our subsea companies, which was originally created for the oil and gas and telecommunications sectors.
“Now, with Round 3 wind farm developments on the horizon, alongside the continuing prominence of oil and gas operations, the subsea sector will be increasingly in demand.”
James Bryce, head of Jesmond-based Square One Law’s energy team, said: “High oil prices, technological developments and the need to counterbalance declining production in mature shallow-water basins have been driving the move of offshore oil and gas operations into deep and ultra-deep waters.
“As a result, the last few decades have seen a steady increase in the number of subsea developments. Increasingly, operators are cost-effectively targeting reservoirs over a much wider area, tying back subsea wells both to fixed platforms in shallow waters and to floating infrastructure in deeper waters.
“The subsea industry therefore shows very positive prospects for growth in the next five years, particularly when looked at with the offshore wind industry, and a number of our clients are poised to take advantage of this potential.”
One of the main issues for the future success of the UK subsea industry is attracting the right people with the right skills.
While the situation is not yet critical Gordon is concerned future growth could be hampered by a shortage of talent.
Subsea UK launched its Target initiative aimed at raising awareness of the sector and attracting more people into the industry.
One aspect of this is to engage with skilled people in other professions with a particular drive currently under way to recruit ex-forces personnel,
Gordon: “We need the people for the future to create the new world-leading technologies that will maintain the UK as the premier subsea innovator.
“We are trying to raise awareness of the industry and let people recognise the potential of subsea.
“We are the hidden gem of the economy. This is not an Aberdeen story this is a success story for the North East of England and whole of the UK.”
The fixed 'topside' platform dominated North Sea oil and gas production for the industry's first decade.
But from the mid 1980s there has been an increased emphasis on installing subsea recovery infrastructure on the ocean floor.
This has led to the development of the subsea industry and its developing technology allows exploration and recovery companies to work in depths once thought impossible - 5,000ft and beyond.
The technological challenges involved in such endeavours are immense, operating at pressures and temperatures previously thought impossible.
In some fields a subsea production factory is established on the seabed with the reserves being tied-back through a network of pipes over dozens of miles to a fixed platform, floating platform or even onshore.
This subsea infrastructure required to support this features a diverse range of technology including pipes and risers for recovering reserves, cables and umbilicals for providing the power to operate the subsea factory and, pumps and valves and associated hydraulics for powering and controlling the flow of hydrocarbons.
Further equipment allows for the injection of seawater into reservoirs to boost recovery, and new developments are under way to establish subsea gas compression stations to boost recovery quantities.
There is a further class of subsea technology which is used to install and monitor the equipment which includes remotely operated trenching, ploughing and mining machines.