Trading views on subsea sector opportunities discussed at County Durham event

Record numbers of companies and delegates from across the UK and Europe attended the bi-annual conference of the region's successful subsea sector in County Durham last week. Peter McCusker reports

The conference at Hardwick Hall Hotel, Sedgefield
The conference at Hardwick Hall Hotel, Sedgefield

Norwegian engineer and businessman Per Arild Nesje graduated from Newcastle University in the 1980s and recently returned to the region for the first time in 30 years.

He told Journal Energy: “The area has been transformed since my last visit. It was poor back then and now it’s booming. The people are optimistic, you can hear it from the businesses, and they are doing well and looking ahead with purpose and optimism.

“Some of the businesses, such as SMD, are doing some fantastic stuff. It’s very hi-tech engineering and they are developing some very smart solutions.”

Per, business development manager for subsea systems at technology business Kongsberg, visited the Subsea North East conference as part of a trade delegation on a visit organised by Newcastle-based business Norway2UK).

He highlighted how the Norwegian supply chain is looking to cut costs and how the technological expertise and competitive pricing of the North East is attracting worldwide interest.

His views were echoed by speakers and the 200 delegates at the conference at Hardwick Hall Hotel, Sedgefield, last week.

Neil Gordon, chief executive of Subsea UK, highlighted how the global subsea market is expected to double in size over the next four years from £20bn annually to £40bn.

The UK accounts for 45% of the global market and he says the challenge is to ensure that the UK can maintain that market share.

He said: “As we move into deeper water with wells on the seabed at depths of 3,000 meters, we are going to need reliable technology and the UK companies have that experience, with the North Sea being home to over 2,000 of the 5,000 wells that have been drilled in waters around the world

“There is a lot of work going into extending the life of wells. We have been doing this for 40 years and have the best supply chain in the world.”

Douglas F. McLean, supply chain leader for GE Oil & Gas Trees and Controls Division
Douglas F. McLean, supply chain leader for GE Oil & Gas Trees and Controls Division
 

He highlighted how there is a need to continually develop and innovate with existing and new technologies and praised the creation of the Neptune centre – a Subsea North East and Newcastle University technology hub on Tyneside which is expected to open next year.

Gordon said he hoped this technology focus would nullify what is seen in the industry as the ‘race to be second’ and help counter the stigma of being the ‘first to fail’.

With the industry watching Norway’s efforts to develop the first subsea ocean floor factory he said it is important for the UK Government to support technologies.

Government support also comes in the shape of tax breaks and the latest one for high temperature, high pressure fields in the North Sea will encourage new field developments, said Gordon.

Looking further afield he said the major areas for subsea opportunities are the Gulf of Mexico, Malaysia, Singapore and Brazil.

Addressing concerns from Andrew Esson, managing director at Tyneside business Quick Hydraulics on rising costs in the UKCS (United Kingdom Continental Shelf) Gordon shared the views on many peers.

“Globally there is a renewed focus on costs, but the overall sentiment is still positive and over the next few years the projects will come back on stream,” he said.

In a message to supply chain companies he added: “Look at how your business can fit in to the overall picture, speak to potential customers to gauge their needs and develop a strategy.”

Paul Williams is subsea projects and operations manager at Apache North Sea, an American oil company which began operating in the North Sea with the purchase of the Forties field from BP in 2003.

He told the conference: “As the bigger players continue to leave the basin there will be another round of entries from the smaller players. The investment community can still get a good return from the North Sea.

“But there are risks ahead, we are desperately trying to rein in costs and if the industry continues to go on overheating than it will grind to a halt.

“Apache is here to stay and we are trying to find creative ways to get the job done.”

Apache was instrumental in helping OGN re-establish large-scale fabricating on Tyneside when it awarded it a £400m jacket and topside North Sea contract in 2010, creating 2,000 jobs.

Apache is looking at further investment opportunities but Williams highlighted how his plans for the UKCS rub up against the company’s efforts in its home market with the development of shale oil, this resulted in a near 50% fall in North Sea investment in the last year

But he added: “There is still a lot of life let in the North Sea, with plenty of work to keep the supply chain fed.”

Andrew Hodgson chief executive of SMD
Andrew Hodgson chief executive of SMD
 

Marine Richard, an associate analyst at oil intelligence firm Infield Systems, highlighted how projected developments in the global oil and gas market over the next four years are worth an estimated US$660bn with subsea accounting for 22% of these projects.

However she highlighted how 27% of these global projects needed oil to stay at $100 a barrel to be viable.

Last year, US oil company Chevron put a hold on its Rosebank development in the deep water frontier, West of Shetland.

Peter Blake, subsea manager at Chevron North Sea, explained it was redesigning this £7bn scheme to make it cost-effective, but said projects in this part of the North Sea would slowly go ahead.

Blake also threw out a challenge to the North East supply chain highlighting how there were global capacity constraints in the subsea sector for products known as Christmas trees, which are essentially a steel fabrication unit on the ocean floor which acts as a distribution hub for some of the pipes and electronic control equipment.

He continued: “Aberdeen is overheating and there are great opportunities for companies in the North East to look at this as a potential new market.”

Further technology advances will also see a growing need for UK composite spool manufacturers, said Blake.

Subsea North East is comprised of senior executives from some of the region’s major companies and aims to promote and act as a single voice for the industry in the North East.

Earlier this year it compiled its own activity survey from 15 member companies – including IHC Engineering Business, SMD, BEL Valves and GE Oil & gas (Wellstream) – which show they expect to grow revenues by 25% this year to a combined total of almost £1bn.

Andrew Hodgson, chief executive of remotely-operated subsea vehicle firm SMD of Wallsend, is chairman of Subsea North East and he compered last week’s conference.

He said: “The North East is the technology hub of the UK subsea industry. In the future the industry will need greater collaboration and we are the one region in the country that can do that and add value.”

Gordon told Journal Energy: “The North East is traditionally seen as manufacturing and fabrication location, but that is changing. The costs are high in Aberdeen and businesses are looking further afield. They now realise it’s possible to run project management from elsewhere.

“The North East is now being seen as a location for project management, engineering and operational activities. The growth in the North East is impressive and is proving more attractive to firms from Aberdeen.”

Delegates at the conference
Delegates at the conference
 

Question time debate

Renewable energy, climate change, glacial retreat and energy security will be the focus of a panel discussion in Durham City later this week.

Organised by Durham University Geographical Society the ‘Climate Change Question Time’ event provides an opportunity for the public to question experts on the science of climate change and glacier melt to tackling climate change in the North East at a business and individual level. The event in Durham Town Hall follows a public screening in the Market Place of the film Chasing Ice, between 4:15 and 6pm. The documentary highlights the melting of some of the world’s glaciers.

The panel discussion, which takes place between 6.30pm and 7.30pm, is hosted by David Saddington, vice-president, of Durham University Geographical Society. The panel will feature:

  • Professor Antony Long, head of Durham University Geography Department, ‘Tipping Points’ researcher and editor in chief of the Journal of Quaternary Science.

  • Dr Chris Stoke, glaciologist specialising in ice sheet dynamics at Durham University.

  • Dr Arvin Zolfaghari, head of exposure management at global insurer Liberty Syndicates.

  • Peter McCusker, energy writer for The Journal and founder of Mamjam Media, a publicity and media relations business based in County Durham.

The event is run by Durham University Geographical Society and supported by Durham University, Durham County Council, Natural Environment Research Council and Liberty Syndicates. For further information visit: www.visitdurham.com

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