Power of Scotland Dec 13_V2

Power ofScotland

A world of opportunityScotland’s oil and gas industry conquers new horizons

Power of Scotlandthe times | 2014 3

Impressive past, bright prospects

Welcome

Since the first oil and gas deposits were discovered in the North Sea over four decades ago, energy has become Scotland’s largest industry. It’s renowned across the world for

its innovation, workforce, academic sector and well-developed infrastructure. In fact, oil and gas is one of Scotland’s biggest success stories, supporting over 200,000 jobs and generating £8 billion worth of exports to 100 countries last year alone.

Aberdeen is home to more than 1000 international energy companies, from multi-national operators to large-scale service pro-viders and innovation-focused SMEs.

Across Scotland there are over 2000 companies in the oil and gas supply chain, supporting the entire oil NS gas upstream lifecycle through exploration, develop-ment, production and decommissioning.

Looking back over the past 40 years, it’s remarkable to see how far the indus-try has come, particularly as it’s not as if there was a ready-made pool of experienced companies ready to exploit the sector. But from the outset, Scottish companies saw and seized on the oppor-tunities it presented — getting involved in every aspect — from catering and sup-ply boats, to developing the harbours and bases needed to support offshore activity.

The company that built the first off-shore accommodation module, for exam-ple, had until then been making (among other things) chicken sheds. The same company ended up designing and build-ing seven-storey steel modules for the Ninian Field.

Even the Wood Group, now a giant in the field, started life as a ship repair and marine engineering firm servicing the fishing fleet.

It wasn’t until the 1970s that it shifted focus to the burgeoning oil and gas industry.

These early companies were ready to innovate and look for new opportunities outside their normal operations. Today we are challenging companies from other sectors to do the same; adopt a similar innovative attitude to tap into the signifi-cant plans for investment in the sector and the long-term opportunities it will offer in the decades to come.

Our recent report on future activity trends on the UK Continental Shelf, fore-cast a total of £44 billion capital expendi-ture into 86 new fields currently under development or due to begin operations by 2016. These include the £2.5 billion development of the Laggan and Tormore fields west of Shetland; and new invest-ments in 12 existing fields, like Forties and Schiehallion.

The opportunities offered by the con-tracts for these projects are of very real relevance to supply chain companies.

To help maximise these supply chain opportunities, we are running a pro-gramme of events and support, part of which is encouraging companies cur-rently operating in other sectors to con-sider getting into oil and gas.

Because, Scotland is home to many vibrant and innovative firms capable of both making a significant contribution to, and filling in key gaps in the supply chain. In areas like aerospace, defence and marine engineering; life and chemi-cal sciences; construction; advanced computing and manufacturing — there are companies with the potential to make the most of diversification opportunities.

Take Maritime Developments, which started out in 1999 supplying back-deck equipment to the Peterhead fishing fleet. After spotting an opportunity in the fast-growing subsea industry, the company has been able to expand into Aberdeen and double its workforce.

Last year we published our industry-led Oil and Gas Strategy for Scotland, through the Oil and Gas Industry Lead-

ership Group. The strategy reinforces the long-term importance of the oil and gas sector to Scotland, setting out a clear vision of a vibrant and prosperous sector with significant export ambitions.

One of its key recommendations is that Scotland continues to develop its supply chain to allow companies to take advan-tage of the opportunities we know still exist in the North Sea.

It’s been predicted there’s another 40 years of activity left, with reserves estimated in the region of 24 billion bar-rels of oil equivalent reserves worth a potential £1.5 trillion.

And looking to the longer term there will be significant opportunities in the decommissioning market. Expenditure in this area is forecast to be £3.7 billion in the five years from 2012 to 2016.

Together with capital expenditure of £44 billion mentioned earlier, operat-ing spend of £36 billion and exploration expenditure of £7 billion, this gives a total expenditure of £90.5 billion being spent in the UK contextual shelf sector during a five-year period. And that is before the international opportunities which are of course considerable.

That’s a lot of money — and a lot of opportunity for Scottish companies prepared to look beyond their normal boundaries and think creatively about how their expertise could give them a foothold in an industry that could change their fortunes forever.

There are plenty of rewards to be had for many Scottish companies if they are willing to diversify, meet the standards that will be required and get themselves into the supply chain.

Whether they’re already operating within the sector and looking for new business; or whether they’re seeking that initial entry point, they need to look at the bigger picture and explore every option if they are to take full advantage of all the opportunities out there.David Rennie is International Sector Head, Oil and Gas at Scottish Enterprise

Inside ...Going globalFrom Australia to Brazil, Aberdeen companies are making huge inroads Page 4

Forging the linksHow an effective supply chain ensures innovation and efficiency subsea Page 8

Cover storyInvigorating news of the investment that underpins the industry’s future Page 10

Views from the topLeading lights in the industry offer their conclusions on meeting the challenges Page 16

It’s remarkable how far Scotland’s oil and gas industry has come in the past 40 years – and it continues to look to the bigger picture, writes David Rennie

Promising future built on an impressive legacy

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Welcome to the latest Power of Scotland, a special issue which takes a pano-ramnic view of the oil and gas industry, one which continues to make an excpe-tional impact on the global marketplace, informed by innovation, far sightedness and sheer professionalism. Its achievements, though, are not always fully appreci-ated by the wider business community, where its serial successes are sometimes taken for granted. This issue aims to address that by highlighting the revenue and jobs generated: more than £1.5 trillion in revenue already and around 40,000 jobs sustained in Aberdeen and 450 ,000 asso-ciated jobs throughout the UK. Then there is a dynamic export drive in terms of skills and expertise, one which is highlighted by Peter Jones in his column on page 9. We round off with a series of comment pieces contributed by some of the most expe-rienced and authoritative voices in the industry. The future, they concur, is bright.

David Rennie is looking to long-term success

COVER MONTAGE: IAN CORCORAN

2014 | the times

Power of Scotland4

Innovation & internationalisation

Internationalisation and innova-tion are central to the fast growth of many smaller companies that won their spurs meeting the chal-lenges of oil and gas (O&G) explo-ration and production (E&P) on the United Kingdom Continental Shelf (UKCS) and the entire North Sea.

Growth and globalisation strat-egies among these small and medium sized enterprises (SMEs) have been sup-ported by development agency Scottish Enterprise and its international trade and inward investment arm Scottish Devel-opment International (SDI).

GlobalScot, a Scottish Enterprise pro-gramme of international business people helping Scottish businesses to access new markets and expand internationally fig-ures prominently in these case studies.

Aberdeen-headquartered TRAC Oil & Gas, providing engineering support services for inspection and maintenance of offshore and onshore assets, initiated global expansion in 2010, exports rising 26 per cent by 2012.

With hubs in Australia and Brazil, over-seas sales are on target to be 20 per cent higher again in 2013, said Daniel Haw-thorn, managing director. “I see growth overseas continuing over five years and beyond. We are building a reputation in Australia to address nearby markets later: South-east Asia, New Zealand and so on.”

These are the rewards of experience. “The North Sea taught us the importance of listening to customers,” Mr Hawthorn said. “We focus hard on delivery, getting it right, meeting customer requirements and building long-term relationships. It has allowed us to piggyback on existing international customers while also build-ing local markets.”

To generate funds for future projects, Brazil needs major investment to extend the life of existing infrastructure up to 40 years old. “These ageing assets are similar to those of the North Sea,” said Mr Haw-thorn. “Asset integrity and life-of-field extension are right up our street along with new-build projects.”

TRAC exports to Brazil and is estab-lishing facilities there. “We are making good progress,” Mr Hawthorn said. “We have received excellent support from Scottish Enterprise and SDI in achieving our global footprint.”

TRAC views Norway, Africa and Sin-gapore as potential hubs. “Norway could be next: there is huge investment in fields planned over eight years,” Mr Hawthorn said. TRAC’s growth is helped by inter-national demand for Elastopipe, flexible rubber piping that guarantees 30 years of

corrosion-free flow. TRAC has delivered 100 kilometres of Elastopipe in 10 coun-tries, clocking up 285,000 man hours of installation in an eight-year relation-ship with the Norwegian manufacturer, Trelleborg.

Aberdeen headquartered Bowtech Products supplies state-of-the-art vision systems to all subsea sectors internation-ally. Its technological advances, from standard to high definition surveys and LED lighting, have continued with a step into 3D vision, generating multiple sales and deployments in the Middle East in particular.

“We’re seeing heavy interest globally,” said sales director Mike Winstanley. “Having the perception of depth helps to save time and equipment downtime. It is much easier to sew a needle with two eyes on the job rather than one!”

Deriving 65 per cent to 70 per cent of sales from overseas has underpinned sustained annual sales growth of 19 per cent since 2009. Brazil, Norway and Asia-Pacific are strong sales areas.

Mr Winstanley expects turnover of around £7 million for 2013 as Bowtech moves into a new custom facility in Aber-deen. “We anticipate more than doubling the head count (from 47 now) within two

Establishing hubs in countries that range from Australia to Brazil, Aberdeen based companies are generating major sales, says Rob Stokes

Striding forward on a global stage

years,” he added. The company has global distribution agreements, while staff con-tinually fly overseas to attend trade shows, join trade missions, and to engage with current and prospective customers.

Bowtech has benefited from mentor-ing and training support through Scottish Enterprise, as well as through SDI trade missions and support. “The networking elements of this have been invaluable,” said Mr Winstanley. “GlobalScot is a cru-cial tool when entering a new market.”

Headquartered in Montrose, oilfield services company Intervention Rentals added an operating base in Ghana in 2012, seeing opportunities in West and East Africa for its rental measurement and pressure control systems.

These include, for example, hoses, pres-sure control equipment, flowline equip-ment and calibration services, backed by maintenance and repair. Many are fully portable, need no external power source and are easy to use.

“Ghana has only one rig working off-shore, and we have equipment on that,” said David Laing, managing director. “But this is about the future.”

Most West African activity is off Angola and Nigeria, but Ghana is more politically stable, more secure, and somewhat easier

to do business from. Ghana will pick up in 2014 when Tullow Oil starts developing the deepwater TEN field.

Mr Laing joined two SDI trade mis-sions. “The first left me thinking Ghana would be big in five or so years but won-dering if it was too soon for us,” Mr Laing said. Suitable, affordable space was scarce at Takoradi, the base for mining, cocoa and O&G industries in Ghana and a 40 minute flight from capital Accra.

Talking to companies there gave him confidence though. “We used GlobalScot, which was great for avoiding potential traps,” he said.

Setting up a joint venture with a small stake held by Ghanaian company RDFC helped to negotiate bureaucratic hurdles and to win business, a strategy learned from Aberdeen-headquartered Domin-ion Gas, which entered Ghana in 2009. “We are now settled with 10,000 square metres of space in Takoradi,” Mr Laing said.

Intervention Rentals’ equipment is then flown in from Scotland, distributed to the Ghanaian bases of contractors such as Schlumberger, Expro, Baker and Halliburton for use throughout Africa, and serviced by Intervention Rentals in Takoradi.

Aberdeen-headquartered TRAC Oil & Gas views Singapore as a potential hub, along with Norway and Africa

We’re seeing heavy interest globally – having the perception of depth helps to save time


“We plan to set up satellites — in Nige-ria, Ivory Coast and one in East Africa using Ghana as a hub,” Mr Laing said. His other overseas oilfield and industrial bases are in Doha, Qatar.

Aberdeenheadquartered Coretrax sells well abandonment services and wellbore clean up specialised services to the world, 60 per cent of turnover stemming from Saudi Arabia, Africa, Iraq and Europe, and 40 per cent from the UKCS. “We are saving clients/operators 30 hours and more per well,” said John Fraser, global business development manager.

The company’s new Inflation Support Tool improves placement of cement plugs or well barrier fluids when abandoning oil wells.

“With development of our new tech-nology to work with current technology, we and our customers estimate total rig time savings of 48 hours and more,” Mr Fraser said.

Strategy varies with market potential and ease of market penetration. “We use branch offices where possible and com-mercially viable,” said Mr Fraser. These are in Bahrain, Saudi Arabia and Egypt. “Agents are not the preferred route but are used on a small scale. Flying to loca-tions is a weekly requirement.”

Striding forward on a global stage

revenues of US$8.75 billion from 35,000 successful installations of its proprietary liner hanger packers over a decade, Mr Moyes estimates.

“We reckon they command maybe 35 per cent to 40 per cent of the market for that product. It will be tricky to make inroads into their share, but even 1 per cent to 2 per cent would be huge for a small company like mine.” He added: “We believe we can offer technical superiority, probably a higher pressure rate, and defi-nitely greater running clearance, better flow rates and circulation. And it is not just about providing a better seal. Meta-plex is thinner but has a bigger bore.”

Technology that creates advantage is a great calling card but the global E&P industry has traditionally been conserva-tive about it.

Which is where Aberdeen headquar-tered International Technology Facilita-tor (ITF), comes in. Since 1999, ITF has identified priority technologies in con-sulting with its owners, 32 major interna-tional oil and gas operators and service companies. Its offices in Abu Dhabi, Kuala Lumpur (Malaysia), Perth (Aus-tralia) and Houston (USA) keep its ear close to the ground.

Some of these needs and solutions will be on show on March 5 in Aberdeen at the Aberdeen Exhibition and Conference Centre at the 6th annual ITF Technol-ogy Showcase in collaboration with trade association Oil & Gas UK.

“We hope to have up to 60 small, entrepreneurial innovative companies presenting,” said ITF chief executive Dr Patrick O’Brien. “We’re working with the (UK) Technology Strategy Board to see if companies outside our industry can also bring innovation in.”

A high-powered conference alongside the showcase may include the announce-ment of a UK Technology Strategy, for which ITF is involved in discussions.

It is important that ITF helps to shape

UK technology policy, said Dr O’Brien. “Our international involvement will be of significant benefit to the UK. The UKCS is a mature basin, so world leading tech-nologies developed to extract the most from it represent an export opportunity.”

ITF has helped to launch 200 joint industry projects (JIPs) in 14 years and aims to raise £50 million for technologies over three to five years.

Current R&D areas for which the not-for-profit ITF sponsors JIPs include seismic resolution, complex reservoirs, cost-effective drilling and intervention, subsea, maximising production through techniques such as enhanced oil recovery (EOR), asset integrity management, and environmental performance.

Its most recent call for R&D propos-als to receive up to 100 per cent funding from ITF members was for new solu-tions to deal with produced water from oil reservoirs in Brazil. Themes for other calls in 2013 included: improving the control, production levels and examin-ing the technicalities of fracking; afford-able development of sour oil and gas; low salinity water for EOR; improved light oil recovery; and improved management of subsea blowout preventers.

ITF facilitates validation of innovation. “A JIP with seven or eight ITF member companies involved is a very effective way to showcase new technologies while letting investors sees there is demand,” said Dr O’Brien.

Looking forward, he added: “Gulf of Mexico deep water is something we plan to move into in 2015. This will require local presence and significant business development. We will use current major operators we are working for to help gain a foothold. We envisage Brazil becoming a target a couple of years on.”

Internationalisation is powering growth. Coretrax was on target for turno-ver of £3.25 million in 2013 and plans to increase sales, assets and personnel by 50 per cent annually for the next three years, Mr Fraser said. Head count is currently 23.

“Scottish Enterprise has been a big help in our international growth and R&D workings,” he added. “Their sup-port has allowed us to move into multiple markets quickly and to develop them to the extent we have.”

Downhole equipment specialist Xtreme Well Technology, based at Kin-tore near Aberdeen, sells an ultra-high-performance range of bridge plug, packer and straddle products under the Meta-plex brand and is claiming a significant technology breakthrough.

To prevent gas escaping up to the well-head and potentially causing a blowout, better ways of sealing the gap between the wall of the wellbore and the tubulars within a well are needed.

Rubber is commonly used for seals but conditions can swell and distort it so it may not recover shape or size and could plug the well, causing lost production. Rubber struggles to form a perfectly tight fit all of the time and in all conditions with the rough surface of the wellbore wall.

Xtreme Well’s Metaplex seals have a metal jacket that can be expanded and contracted in stepwise fashion around a rubber seal. The jacket forms a tighter

seal than rubber and can also compress the unit below its original size, allowing wells to be returned to production quickly and effectively, Xtreme Well’s chairman and founder Peter Moyes explained.

“Metaplex exceeded expectations dur-ing qualifying, showing consistent and repeatable performance under severe conditions,” said Mr Moyes. It beat required standards by letting no gas bub-bles through during a testing program mimicking the range of conditions in a well. “Metaplex is an absolute barrier,” My Moyes said.

Xtreme Well has refitted its state-of-art facilities to launch products globally. Meta-plex seals can be incorporated in down-hole tools including bridge plugs, packers, straddles, liner hangers and others. A liner hanger packer goes into every well.

On a conservative estimate of US$250,000 each for product and associ-ated services, oilfield services company Baker Hughes could have generated

We use branch offices where viable and flying to locations is a weekly requirement

Satisfaction generates growthAlba Power overhauls, upgrades, main-tains and repairs components globally for clients operating aeroderivative gas and power turbines in the oil and gas, energy and power markets.

Headquartered near Aberdeen, its sole focus is on extending the life of clients’ turbine ‘packages’, so that these critical, sophisticated assets always reach best operational efficiency and effectiveness while limiting downtime.

Turnover was €15.5million (£13 million) in 2012 and the independent company, currently employing 55, is forecasting €21 million (£17.6 million) for 2013. 50 per cent of sales are from overseas, mainly from the US and Canada, Middle East and Australia.

It has more than 140 gas turbine customers in 16 countries including Vietnam, Abu Dhabi, Singapore, Europe, India and Indonesia. Among its clients are EDF, Marathon Oil, Canadian Natural Resources and Fairfield Energy.

“We measure growth through client performance, satisfaction and loyalty,” said Terry Alderton, managing director. “Over the past 12 months we have over-hauled 200 turbines, had zero claims or warranties, clocked up 500,000-plus cumulative overhaul running hours, had zero safety or integrity issues, a zero accident/ incident frequency rate over more than a million hours operated, and client satisfaction sits at 95 per cent.”

Alba Power recently completed a major project in Houston, USA, which involved a completely new package, designed, built and supplied by Alba

Power from the ground up. “It resulted in a highly innovative and high perform-ing output for the customer,” said Campbell Archibald, sales director. “We worked closely with the client, with our own Houston field services team, and our design, project management and engineering team in Scotland who found highly creative solutions to a tough client requirement.”

Internationalisation has involved developing its base in Houston, expanding its field service team and building an international sales team. It has received Scottish Enterprise support for training, development and marketing and through the Scottish Manufacturing Advisory Service for SMEs.

Peter Moyes believes that Xtreme Well can offer technical superiority in seals

Dr Patrick O’Brien says it is important that ITF helps shape UK technology policy

Terry Alderton, MD of Alba Power

EDGAR SU/REUTERS

2014 | the times

Power of Scotland6

Industry Spotlight: Subsea sector

Subsea UK, the trade body tasked with championing the Brit-ish subsea sector both at home and abroad, has enjoyed a highly successful 2013 during which the importance of the industry to the UK economy has been

firmly reasserted. For Neil Gordon, chief executive of Subsea UK, the challenge is maintaining this strong growth in the face of increased over-seas competition.

“For years the North Sea has been viewed as the test bed for innovative technology and has gained an unri-valled reputation as a world-leader in subsea expertise,” he says. “Where there have been gaps in local knowl-edge, that skill set has frequently been called upon across the globe. Our strength lies in our inter-connected supply chain which is something that we have seen overseas markets attempt to replicate. As they continue to increase in both strength and capa-bility, we in the UK are forced to push ourselves even further to maintain our leading edge.”

When Subsea UK published its Busi-ness Activity Review earlier this year, it

showed that the British subsea sector was now valued at £8.9 billion, demon-strating a growth of 50 per cent since 2010 and representing a market share of 45 per cent. With the global market predicted to increase to £40 billion by 2017, Subsea UK believes that the inter-national market is there for the taking.

“Far from shrinking, we expect the global market to grow by a further 100 per cent,” explains Mr Gordon. “The export of subsea goods and services is valued at almost half the total subsea output at £4.3 billion. Just over 75 per cent of that is generated in the North-east of Scotland with exports from the region accounting for 70 per cent of its entire output. Due to the ongo-ing strong demand for our industry’s capabilities in emerging and existing territories, we believe that there is much scope to capitalise on the exist-ing export market and that will be our focus in the months ahead.”

When it comes to promoting the interests of the subsea sector over-seas, the organisation has a long his-tory of working in conjunction with bodies including Scottish Enterprise, UK Trade & Investment and Scot-tish Development International. “Our partnership with these bodies is vital if our members can hope to move into

new territories and further interna-tionalise their business,” explains Mr Gordon. “A key strand of the work undertaken by Subsea UK has been to encourage and support those mem-bers looking for new business oppor-tunities overseas,” he says. “We are stronger when we adopt a joined up approach to this work, with our sup-port reinforced through the capabili-ties of these external organisations.”

Subsea UK utilises local market intelligence and undertakes a num-ber of overseas missions which can increase both visibility and impact. “Through our attendance at events including Subsea Tieback Forum in the US, Australasian Oil & Gas and Subsea Asia, member companies have been able to showcase the strength and depth of their expertise to those countries where there is a strong demand for subsea technology and services,” he explains. “As we pass the half-way point of the life expectancy

of the UKCS, our members are look-ing for new avenues whether they be at home or abroad.”

It’s not just overseas where the subsea industry is now being called upon; focus is shifting to other areas of the oil & gas sector, affording subsea businesses a wealth of new opportu-nities. “Recent E&A and E&P activity underline that there is significant life left in the North Sea, however with the UKCS full of ageing assets, integ-rity management has been one area of growth where subsea services are increasingly utilised,” says Mr Gordon. “Ageing infrastructure is now being asked to operate well past its design life and the importance of being able to maintain and perform safely is where the subsea sector really does add value in ensuring this.

Similarly, with the remaining oil reserves located in deep water terri-tories at depths of up to 3000 metres below the ocean surface, subsea tech-

nology including Remotely Operated Vehicles and Autonomous Underwa-ter Vehicles are in high demand. “At present, almost 45 per cent of UKCS production comes from subsea wells and we expect this to rise to 70 per cent in the near future, says Mr Gor-don. “Given the nature of this extrac-tion, the sector can continue the growth which has seen it outperform any other industry in the country, even at the height of the recession.”

It is this ability to be innovative and creative, to diversify when required, that has set the industry apart. When Subsea UK first launched in 2003, a joint initiative between the Depart-ment of Trade and Industry (DTI) and Scottish Enterprise, it was due to an increased recognition of the sector’s importance to the British economy.

“There was a realisation that the North Sea market was changing,” explains Mr Gordon. “Coupled with increased overseas developments and international competition, we sought to draw together operators, contrac-tors and SME’s in order to build an enhanced profile for both the industry and its members. Through a pro-active approach, it was hoped that Subsea UK would create a single and cohesive voice to represent the entire UK sup-ply chain and its wealth of resources. We now have over 290 members drawn from across the supply chain, and can therefore truly claim to be the voice of the industry.”

Mr Gordon believes that there are real, long-term prospects for the subsea sector and the key to future sustainable growth in the UK subsea industry is to fully capitalise on the fast-evolving business opportunities emerging in new provinces around the world. “Almost half of all respondents to our Business Activity Review told us that they anticipated growth in excess of 20 per cent over the next three years with 28 per cent predicting to grow by between 10 and 20 per cent,” he says. “If those forecasts are achieved, the UK sector alone has the potential to grow to £11.1 billion by 2016. Although we are now in a period of economic growth, the fact remains that very few companies are able to make projec-tions on a similar scale to ours.”

2013 was undoubtedly one of the most successful and productive years for the organisation, and 2014 looks set to follow suit. Subsea UK recently announced that its flagship confer-ence and exhibition is to be rebranded as Subsea Expo, reflecting its impor-tance within the industry. The three day event in February draws together the subsea fraternity and is expected to attract up to 5,000 delegates and 150 exhibitors.

“Subsea Expo is the perfect launch for 2014’s activities,” explains Mr Gor-don. “It is vital that we look to secure the long term future and sustain-ability of this dynamic and flourishing industry; we must consider how we can exceed our market position, how we can tap into new opportunities in the UK and overseas, how we can continue to innovate and attract new talent and how we can maintain the world-leading reputation for which the British subsea industry is known.”

Market’s there for the taking

The chief executive of Subsea UK explains that after a successful year, the challenge of 2014 is to maintain the momentum of an innovative global approach

The demand for capabilities in

emerging and existing territories means scope

to capitalise on the existing export market

Neil Gordon says that Subsea Expo is the perfect launch for activities in 2014


In view of the nature of his busi-ness, you might not expect the managing director of Maritime Training and Competence Solutions (MTCS Ltd) to say: “No training course alone will make you competent.”

But Richard Warburton is merely stressing that, despite current high demand for rel-

evant offshore manpower, thoroughly assessed aptitude is essential among successful trainees and even experi-enced personnel in his subsea fi eld.

While the oil and gas industry is

vital to the UK economy and British companies are at the forefront of its global growth, recruitment diffi culties are at their worst since 2007, according to a report by Aberdeen and Gram-pian Chamber of Commerce.

If it is not to be held back, this expansion’s skills challenge — 98 per cent of contractors are looking to recruit next year — needs to be quickly met. What’s to be done? War-burton’s MTCS is attacking the chal-lenge on three fronts, represented by these specifi c programmes…

C-STATE

The title stands for quite a mouthful — the Centre for Subsea Technology Awareness, Training and Education – but it does what it says on the tin. A unique collaboration between industry and academia, C-STATE has been cre-ated to address the growing skills gap in subsea engineering and service sectors.

Going live at Darlington College next month and intended to ensure a supply of excellent personnel “ready to

hit the ground running”, developed in partnership with Modus, MTCS, Dar-lington College, Teesside University, Tees Valley Unlimited and Darlington Borough Council – a range of subsea courses from apprenticeships to fur-ther and higher education, and indus-try-recognised and accredited training.

Trainees will have access to a 200hp hydraulic remotely operated vehicle (ROV) in a safe, controlled environ-ment, combined with classroom-based training for all courses. Training is delivered by MTCS, whose global sales and marketing coordinator Gail Bartolf says that becoming an ROV pilot can suit game afi cionados. “It’s boys with toys really,” she says. “The more people play on such things as the XBox, the better their aptitude for this.”

MD Richard Warburton adds: “We also get people from the military such as airframe technicians and weapons engineers… who make good techni-cians and subsequently ROV pilots. Also those with trades like electrical engineers and car mechanics.”

MTCS, which runs monthly ROV

induction courses at Windermere and Aberdeen as well as Singapore and Houston, has the responsibility for marketing C-STATE courses, which are: work class technical, high-voltage skills, high-pressure hydraulics, umbili-cal reterm, and subsea client awareness. www.mtcs.info/cstate

ONSITE

Not the least of the “challenging issues” about getting new blood into this manpower-hungry industry, explains Richard Warburton, is the oil majors’ expectation that they can hire people with a minimum of three or four years’ experience. As there is a shortfall of such people, there is also something of a Catch 22 situation: “How do you then get new people into the industry? That is the problem our ONSITE initiative aims to alleviate.”

The ONSITE Industrial Training and Experience is designed to feed new people into real-world work on a short “try before you buy” basis — and, put-ting it plainly, Mr Warburton says that

if their hosting company likes them, “that’s good news with a probable job offer; but if the would-be employer doesn’t like them, it can send them back without any further obligation”.

MTCS trainees get the opportunity to sign up to ONSITE after a two-week induction course at Windermere.

If the client company takes on the candidate it also secures learning credits (£1500 for the 30 completed days which is a week’s training at the current MTCS rates) to further progress their candidate’s training. If the company does not take on the candidate the MTCS learning credits will belong to the person to use with MTCS or MTCS-approved training providers when they like.www.mtcs.info/onsite

MTCS Online

It is due to start on the fi rst day of the new year and early indications confi rm that the time has defi nitely come for MTCS Online. “This is a vir-tual learning environment built to aid companies and individuals spending a lot of time offshore on vessels or rigs,” explains the company’s Gail Bartolf.

“While we do send trainers when possible to them, their being all over the world or on changing shift patterns means extra issues with the training and getting-together of such people. A major issue is cost to the employer which can include fl ights, accom-modation and perhaps day rates. So MTCS Online is a distance-learning programme designed for the instant accessibility of the computer age.

“It’s basically taking what we do in the classroom out to the worksites. It makes our products available any-where, anytime, allowing individuals and companies to use one system to track and monitor learners’ progress throughout their offshore career.”

How does that work? Both candi-dates and their companies are given an ID number to be used throughout their training, which means the lat-ter can check the former’s progress to help in business decision-making. “It obviously has huge potential for com-panies, and the end-user gets a copy of the course certifi cate.”

Which is where MD Richard Warburton’s memorable observation comes in: “We like to emphasise that no training course alone will make you competent. A trainee’s competency has to be assessed in the workplace. So our certifi cate of training is only part of the overall competence package.”

Courses covered on MTCS Online are: high voltage, hydraulics, fi bre optic fault-fi nding, skills assessor for senior personnel working in ROV, marine backdeck, diving and survey, and in fact all offshore-related compe-tence schemes.www.mtcs.info/online

www.mtcs.info/[email protected]



+44 (0) 15394 40200MTCS, Windermere Business Centre,

Oldfield Court, LA23 2HJ

Industry Spotlight: Subsea sector

A three-pronged attack to tackle the skills crisisMCTS is attacking the challenge of a high demand for offshore manpower on different fronts, fi nds Rick Wilson

A C-State Remotely-operated Underwater

Operating Vehicle

2014 | the times

Power of Scotland8

Technology

overseas markets. Titan Torque employs 21 and projects turnover (undisclosed) to grow by about 30 per cent per year over the next three years.

Maritime Developments Ltd (MDL) started life servicing the fishing industry but with support from Scottish Enterprise diversified into the design, manufacture and delivery of back-deck equipment for O&G and for renewables worldwide. It has grown from less than £1 million turn-over in 2009 to almost £12 million in 2013

The recent addition of a lightweight and more flexible vertical lay system (VLS) to its capabilities completed a product range that also includes special-ist cable and pipe laying equipment such as tensioners, reel drive systems, level winders and overboarding chutes.

In 2013, Aberdeen headquartered MDL won its largest ever contract, to make and deliver a 400-tonne reel drive system with track to handle multiple reels for a client’s operations in the North Sea and Brazil. MDL’s manufacturing and services are based at Peterhead, where the deepwater port is a major logistics support hub for the North Sea subsea industry.

George Mackintosh, operations direc-tor, said it highlighted MDL’s capability to deliver large-scale subsea solutions and that the company, employing nearly 40 by late 2013, was growing through repeat business and expected to announce fur-ther new contracts in the near future.

Island GIS, a global information sys-

Supply chain confidence in the North Sea market remains strong with 16 to 24 billion barrels of oil still recoverable from the UKCS according to indus-try estimates, and at least 40 years of activity left.

As David Rennie on Page 2 and Sir Ian Wood

on Page 16 describe, supply chain compa-nies can expect decades of work at home and abroad.

A June 2013 update on Scotland’s industry-led Oil & Gas Strategy for the period 2012 to 2020, which is being pur-sued by the Scottish government with industry and the public sector, stressed how total supply chain sales rose 5.8 per cent in 2011/12 to reach £17.2 bil-lion against a 2020 target of £30 billion. International sales rose 8.4 per cent to £8.2 billion, highlighting success in over-seas markets, but the domestic market remains buoyant.

The reality of North Sea economics — a mature sector with high technical

standards required — drives innovation in products and processes to recover more from existing and smaller reser-voirs; inspect, repair and maintain ageing infrastructure; and to improve the identi-fying, characterisation and development of discoveries. Subsea and unmanned solutions will be increasingly favoured as the need to contain budgets becomes paramount.

In the 2012/13 financial year, £2.7 mil-lion in innovation funding from devel-opment agency Scottish Enterprise to support the O&G industry had already been allocated leveraging an additional £6.2 million of investment from the pri-vate sector.

Decommissioning of obsolete infra-structure will meanwhile see £10.4 billion spent on the safe dismantling and removal of platforms and pipelines between 2013 and 2022 while the total spend is esti-mated to exceed £30 billion, according to industry association Oil & Gas UK. Many of the skills for decommissioning already exist in the UKCS supply chain.

Some young supply chain companies

The outlook is positive for supply chain companies, who can expect decades of work both at home and abroad. Rob Stokes examines the strategies and services involved

Links that hold it all together

are highly dependent on the North Sea for sales and as a proving ground.

Aberdeen-based Titan Torque Ser-vices derives 95 per cent of its revenue from the UKCS, providing propitiatory Drill Bit protectors and make-up/break-out of oilfield equipment, particularly for drilling and well completion services.

“We enhance safe rig operations and reduce non-productive time (NPT) by up to 20 per cent,” said Keith Gaskin, managing director, while preparing to launch the company’s state-of-art Titan Torque Pro II torque machine. Scottish Enterprise is providing funding for Titan to prototype its technology and has sup-ported training.

Titan’s technology is used internation-ally, supporting operations in the Falk-lands, Brazil, Africa and Australia and, from January 2014, in the Mediterranean.

Mr Gaskin expects turnover from the UKCS to reduce to 60 per cent of the total over the coming years “But this will not be due to contraction of the North Sea market where we anticipate contin-ued growth” said Mr Gaskin. “The esti-mate is based on our planned expansion in international markets such as Brazil, we aim to capitalise on high rig costs as our technology can save operators days and therefore money.”

Scottish Development International has supported Titan through the Global-Scot network of business people willing to advise Scottish companies entering

Decommissioning by companies such as CNR International will see £10.4 billion spent in the North Sea on the safe dismantling and removal of platforms and pipelines

DAVID GOLD/CNR INTERNATIONAL


heavily in such equipment. “It gives us more fl exibility than many competitors because we have fi ve sets of kit that we can send offshore.” Mr Duncan said.

Overseas sales are rising too: in the past 12 months, Xtreme Business Solu-tions has worked in South Korea, South Africa, Nigeria, Gabon and USA. “More clients are dropping us into other parts of the world,” Mr Duncan said. “I have been on SDI trade missions and will go again in 2014, and we can see a lot of work in prospect, particularly in Brazil.”

“North Sea decommissioning, new infrastructure for subsea production, and deepwater drilling offer opportunities for us,” said Mike Winstanley, sales director at Aberdeen based Bowtech Products whose international plans for its under-water vision systems feature on Page 4. here. “We view subsea within the North Sea as a growing market.”

Innovation is continuing towards these ends. January 2014 sees the release of the second generation of Bowtech’s Anchor Retrieval Monitoring System (ARMS) offering time and money savings when moving semi-submersible rigs.

It monitors anchors being racked while a rig is at draft: for short fi eld moves there is no need to ballast up the rig to rack anchors, meaning fewer cargo operations and lost time.

Mr Winstanley said ARMS can save more than 24 hours per rig move, a con-siderable cost saving. ARMS also means anchors need not be stored on anchor-handling vessels, thus removing human contact and reducing risk. ARMS is used worldwide.

ing an Aberdeen data centre for driller Transocean. Further clients include Dia-mond Drilling, Genesis Energy, Chevron, Technip and communications specialist Harris CapRock, among others. Turnover in the year to end January 2013 was £2.2 million and Mr Duncan expects 30 per cent sales growth this time.

Upgrading local area networks’ ether-net cables (copper) to ultra-fast standard (Cat 7) is a common requirement for refurbishment. “They will also use marine grade (corrosion proofed) cable that is DNV-rated (matching an international classifi cation standard), something that we specialise in,” Mr Duncan said. “They also want top-end solutions because tel-ecoms and video have become vital not only for comms but for entertainment offshore.” The Ethernet can also run power over distances.

Increasingly then, clients ask for Cat 7 cable or for fi bre optics, the best way to link systems, he added.

The company is seeing increased demand for ‘blown’ fi bre optics, which involves installing a tube then blowing fi bre from one end to the other. “It is easy to upgrade in future by blowing old fi bre out and new fi bre in without having to rip cables out with all the associated cost, time and disruption that can involve,” Mr Duncan explained.

“Our skills are among the highest. We get a lot of work because of the poor quality of the initial installation in ship-yards and other places by people who lacked the right equipment, especially for fi bre work and testing.”

Extreme Business Solutions has invested

tem (GIS) company with a team of 10, derives 95 per cent of its undisclosed total turnover from the UK and is seek-ing to double sales in the next 12 months as it pursues growth opportunities in the O&G and energy sectors.

A GIS combines mapping technology and data management with applica-tions software, modelling and analytics so users can visualise, interrogate and interpret data to identify connections, patterns and trends.

Supported in its development by Scot-tish Enterprise and SDI, the Edinburgh based company’s O&G clients have included Cairn Energy and Maersk.

It supported Cairn Energy with an internal client portal to visualise and manage GIS mapping and mobile assets such as ships, planes and helicopters for a major offshore operation in real-time.

Paul Edmunds, CEO of Island GIS, sees plenty to play for in the North Sea.

“In an O&G industry short of senior experienced operations personnel, we provide access to multiple data layers, systems, processes and skill sets that can make the difference between operational and fi nancial success or failure,” he said. Energy clients include SSE (formerly Scottish & Southern Energy) and EDF (Électricité de France).

Edmunds has international aspira-tions. Island GIS has worked in Denmark and is investigating opportunities across Europe, the Middle East and Africa, having signed up for a number of SDI and UK Trade & Investment trade mis-sions in 2014.

Island GIS is working to combine its

technology with internet search and advertising giant Google’s GEO platform to take the latter into the corporate envi-ronment. This will create bespoke GIS solutions for international Energy and O&G companies, Mr Edmunds said.

Xtreme Business Solutions continu-ally expands staffi ng, currently 55, to meet rising demand for the design, sup-ply, installation and certifi cation of the latest IT and communications network infrastructure offshore and onshore. This involves technologically advanced fi bre optic and copper cabling, voice, data and IT solutions.

“North Sea expansion means some rigs will go on for another 20 years, so we anticipate many refurbishment and tech-nology upgrades apart from work on new installations and regular maintenance,” explained Graeme Duncan, managing director of the Westhill, Aberdeenshire, based company founded in 2003.

“It’s driving demand for fi bre and copper cabling work. We have done three refurbishments and see potential for another 15 to 20 by 2016.” Onshore, Xtreme Business Solutions is design-

North Sea expansion means some rigs will go on for another 20 years

When the oil and gas industry fi rst arrived in the North Sea half a century ago, so did lots of American oilmen.

Aberdonians marvelled at their big hats and even bigger talk. Nowadays, wherever there is an oil and gas cluster in the world, the locals are liable to be wondering at the proliferation of Scots amongst the oilmen.

Scotland has excelled at exporting talent which has gone on to make a mark on the world. It is still happening today, notably in the oil and gas industry. But do we, back in the old country, recognise it, understand it, and make use of it? The sad answer is no, we don’t, not fully at any rate. It could end up meaning that Scotland fails to make the most of a sig-nifi cant coming oil and gas opportunity.

Scots oilmen abroad include senior executives — men such as Neil Duffi n, president of ExxonMobil Development, or Peter Robertson, recently retired as vice-chairman of Chevron and now an oil and gas advisor to Deloitte LLP in Houston, Texas.

Among the more than 600 Scots holding senior positions in companies across the world that Scottish Enterprise have recruited for its GlobalScot network, no less than 84 are oil and gas industry leaders. The idea aims at building a resource which the up-and-coming Scot-

tish companies can use to help grow their business overseas, whether by expanding export sales, fi nding a joint venture partner, or making an acquisition.

Among the 35 GlobalScots in Houston is Derek Blackwood, once an apprentice with BP tankers, and now president of Wood Group PSN’s Americas operations. He fi nds time to help Scottish fi rms get a foothold in the US market, for which the annual Offshore Technology Conference in Houston, the world’s biggest oil and gas gathering, is a key event.

“Generally, about 15 to 30 Scottish companies will come and exhibit,” he says. “We [GlobalScots] do what we can to help, especially with setting up one-to-one meetings with managers, advising on how business is done in this part of the world as opposed to in Aberdeen or the UK, getting them connected with client contacts and getting feedback for them on whether their products or services are likely to be competitive in the local market.”

For those who think they can win a place in the US market, the GlobalScots will also help with fi rst forays into it. A frequent return visitor to Aberdeen, he has no doubt that Scottish oil and gas equipment and service suppliers have plenty of innovative and competitive products to offer.

Equally, he believes that the opportuni-ties in the US, particularly in the current

boom in fracking, are huge. When I say to him that drilling (fracking) oil and gas shales amounts to an “energy revolution”, he responds: “I don’t mean this in an impertinent way but, however big you think it is, it’s bigger.”

So he is dismayed at how few Scottish companies seem eager to expand sales beyond the domestic UK market. “There is big disappointment from many of us that a relatively small proportion of the companies we have engaged with turn out to be really interested in overseas expansion,” he says.

He thinks there are two problems. One is that beneath an apparently confi dent

For those that think they can win a place in the US market, GlobalScots will help

Peter JonesBravehearts needed to conquer the lucrative American market

Scottish industrial surface, there is still a residual “we cannae dae that” attitude and cynicism about successful people. The other is that the fracking industry is misunderstood – that it involves a lot of expensive, highly technical kit which Scottish companies mostly don’t have. It does at the start, he says, “But after that it is very simple engineering stuff — compressors, pumps — and that stuff we have competitive edges in.”

His hope for the future is in nurturing a new generation of can-do Scots execu-tives through the Saltire Foundation which in fi ve years has put 450 recent graduates with a bit of business experi-ence through a short intensive business executive course at Babson College, Boston, coupled with an internship on project development at a major company.

It works both ways, he says. Last year’s Wood Group PSN intern, Jordan Spittal, a Strathclyde graduate, tasked with fi nding the next hot US shale plays, devised a new way of using social media to locate opportunities before others had got there. It blew the board away, he says, and is already paying dividends.

There is a growing possibility that the shales in central Scotland, northern England,or more probably those under the North Sea, where these is already lots of industry infrastructure and no residents or landowners to object, could provide a second oil and gas frontier.

But who will exploit it? Will it be Scots companies which have learned shale know-how in the States and are bringing it back home? Or Saltire-trained Scots at the helm of US fi rms? Unless more companies are a bit braver and get into the US market, it will be a new wave of American executives and companies.

Paul Edmunds, CEO of Island GIS is seeking to double sales

The port of Houston, home of the world’s biggest oil and gas event

2014 | the times

Power of Scotland10

Scotland’s oil and gas was fi rst extracted from the North Sea 40 years ago, and it is the skills and expertise gained here, in one of the most demanding environ-ments on the planet, that are forging a dynamic future for the industry in the global marketplace.

Driven by innovation, and strong prices, the oil business in Scotland is booming. With a supply chain worth about £27 billion and a record estimated capital investment of £13.5 billion in 2013 in the UK’s oil & gas reserves, the indus-try continues to sustain around 40,000 jobs in Aberdeen with a total of 450,000 associated posts throughout the UK (45 per cent in Scotland). Oil and gas is the mainstay of the UK treasury: in the past year alone it paid £6.5 billion in tax on production, with the wider supply chain is estimated to have contributed another £5 billion in corporate and payroll taxes .

With up to 24 billion barrels of oil estimated to still be recoverable, with the prospective value of £1.5 trillion, the industry clearly has a major role to play in the economic and business develop-ment of the UK.

However, this is a success story that doesn’t always fi lter through to the wider business community in Scotland, and some negative perceptions of an indus-try ‘with no future’ still persist. Yet Scotland’s reputation for talent and technology are not only taking the oil and gas industry to a new level, with exports to more than 100 dif-ferent countries and international sales from the supply chain up 5.8 per cent to £17.2 billion in 2011/12, the development of new products, processes and systems are also creating exciting opportunities for other energy sectors and different industries.

“These are exhilarating times for the industry,” agrees Maggie McGinlay, Sector Portfolio Director for Energy

at Scottish Enterprise. “Oil and gas is the largest industrial sector in the UK, accounting for a third of all investments. In supporting 200,000 jobs it’s also the largest employer in Scotland.

From the overall international sales of £17.2 billion, almost half were direct sales, so absolutely, oil and gas is delivering to the Scottish economy, but exports also mean that in the long term, this is a sus-tainable industry.”

McGinlay insists this is a message that must reach a wider audience. It’s not an exercise in self-congratulation; the fact is the oil and gas industry has much to offer, and there may be many businesses, and talented individuals, who may not realise the opportunities it could present them.

“For people who are not within the industry, there can be an impression that it has no future, which is far from the case,” says McGinlay. “In the Scottish water of the UK Continental Shelf there is a real renaissance, with the life of existing North Sea fi elds being extended, and new fi elds also being discovered off the Shetland Islands. Next year will see an estimated £13.5 billion of investment in the North Sea alone, and that’s really signifi cant. Of course, we’re continuing to see more, with £100 billion of investment planned for the next few years. This is great news, with the industry truly reinvigorated.

“We’re also taking that expertise, which has been built up over the past 40 years, throughout the world. Companies based in Scotland are experiencing huge demand overseas, particularly in the area of subsea technology, with 30 per cent growth in that sector. We’re taking our technology and expertise and apply-ing that around the world, and we want to take full advantage of the increasing opportunities created by Scottish technol-ogy and engineering innovation.

“We have also developed a superb edu-cation, training and research network, with our strength of reputation in areas such as health and safety also creating a big demand. Aberdeen, at the centre of our oil and gas industry, is seen as a strong player globally, and this is hugely positive for Scotland.”

It’s an encouraging success story, but there’s no room for complacency. Many of these impressive statistics simply would not have been realised without a

strong partnership between the private and the public sectors, and that’s a

relationship that is central to the industry’s continuing development.

Cover Story

Home-grown success that’s being taken to a global level

The Oil and Gas Industry Leadership Group (O&G ILG) — top business people from across the private sector and senior fi gures from the public sector includ-ing Scottish Government and Scottish Enterprise — both informs and drives this dynamic.

The O&G ILG has created the Scot-tish Oil and Gas Strategy, with this joint approach from the industry and the Scottish government not only setting out the vision for the sector but also mapping the way ahead from 2012 until 2020. This means the strategy sets out what needs to happen, from both the public and private sector, to ensure the industry continues to thrive and to grow.

“There is a clear focus for the next seven years,” says McGinlay. “We are concentrating on building up the sup-ply chain both domestically, working particularly with SMEs to provide sup-port through innovation and strategy approaches, to help them develop. There is another strand of this and that is strengthening our international supply chain too, with SDI providing exper-tise as well as connections throughGlobalScot — our international network that has a high percentage of individu-als with extensive experience within the energy sector. Innovation is essential to support the industry’s ambitions. Quite simply, we need new technologies to help extract more from existing fi elds or to explore those areas that are harder to get to, and the demands are for ever more

sophisticated methods, so there is a big push on technological development.

“The strategy helps us identify the key areas and by getting these areas the right support, we can ensure the industry’s strength going forward. This is about taking the long-term view, and the mes-sage is the oil and gas industry is here for the long haul, for many decades more. We are currently looking at recoverable reserves of 12-25 billion barrels, which represents another 40 years. So that’s an important consideration. The strategy is also looking at £30 billion in annual sales by 2020, which only demonstrates what can be achieved longer term.

“This is a story we have to get out beyond the industry, as some people may still believe they cannot build a career in the oil and gas sector. We need to reinforce to the existing and the future workforce, that this industry can deliver a huge range of opportunities in a vari-

Driven by innovation, Scotland’s oil and gas business is thriving – but there is a need to spread the word to a wider audience. Ginny Clark discovers a good news story with still more to come

Maggie McGinlay says that Aberdeen is seen as strong player globally, which is “hugely positive” for Scotland

We need to reinforce the fact that this industry can deliver a huge range of opportunities


Industry (SCDI), shows global sales now account for 47.6 per cent of the industry’s total sales. In 2002, the figure was 31 per cent, and this 10-year high demonstrates just how important the international activity is to the industry’s future. It’s also interesting to note that 11 per cent of the £8.2 billion international sales were actu-ally delivered direct via SMEs, companies that have less than 250 employees.

The strongest growth in 2011 came from the Middle East, with the African region a strong second, while the new and growing markets included Brazil, the US and Australia, where flourishing sales were up by 9.4 per cent. North America though, remains the top region for exports. While these figures are remark-able in themselves, what makes them so significant is the difficult economic cli-mate in which they have been achieved.

Clearly, with Scotland’s oil and gas industry in the ascendancy, this is no time for anyone to be standing still. In the past year, Scottish Enterprise’s international development arm, Scottish Development International (SDI), has opened seven new international offices, raising the total to 30. Some of these — such as Accra in Ghana, Rio de Janeiro in Brazil, Stavan-ger in Norway, and Calgary in Canada — point very specifically to increasing oil and gas potential.

With Scotland now leading the way in the global oil and gas business, we have to make sure we are ready to take advantage

of the major opportunities this unique position presents.

“Oil and gas built up Aberdeen into such a strong and successful centre that one of things the industry is now competing for is talent,” adds McGinlay. “However, what more people need to recognise is that this is not simply a local industry, and with our people working around the world including Australia, Canada and Brazil, we’re now a global energy hub for Europe, so to main-tain our place and our competitive edge, we need strong businesses and talented people.”

ety of disciplines, with great potential in terms of progression. From accounts to human resources, to engineers and geo-physicists, there is a broad range of skills and talent required in this industry. There is also the perception that most of the oil and gas jobs are based offshore, and that is simply not the case, with off-shore posts representing only around 10 per cent of the work done in this sector. Oil and gas offers so many opportunities, and it’s here for the long-term.

“We need to help our young people in particular to understand this, from school pupils through to university students, and also to develop more in terms of transi-tional careers, just as is done in linking up to help with the training and develop-ment of former military personnel. The fact is there are lots of jobs available here and now.

With new activity in the North Sea we’re also looking to see how Scotland’s economy can benefit, looking at gaps in the supply chain as there may be com-panies here with the potential to fill that. So we’re working to help businesses understand the industry, to access those opportunities and to see how other sec-torsmight benefit from the huge growth in oil and gas.”

The most recent assessment of inter-national activity in the oil and gas sec-tor, from the annual survey produced by Scottish Enterprise together with the Scottish Council for Development and

12-25bn Recoverable barrels

remaining in the North Sea

30Overseas offices operated by Scottish Development

Interational

£17.2bnExports and sales from the

Scottish supply chain in 2011/2012

Take innovation to new marketsMelfort Campbell, pictured below-chairman and CEO of Imes, brings a wealth of experience, dating back to the Aberdeen-based offshore business he set-up in the early 1980s, to his role as joint chairman of the Oil and Gas Industry Leadership Group. The way forward for the industry, he says, is rooted in the export of our talent and technology.

“There is a twin imperative here,” he said. “The agenda is innovation, and we quite simply need to look at what we are doing well here, then take it overseas.”

The Oil and Gas Industry Leader-ship Group exists to provide strategic advice to the industry, and to the Scottish government, as they work together to achieve higher long-term recovery rates, increasing exports – and the target of £30 billion annual sales by 2020. Campbell says it’s vital that Scotland capitalises on what has already been learned over 40 years in the North Sea, together with promoting the exciting advances in homegrown technology that are now revolutionising the industry in the North Sea.

“The fact is the best place to look for oil is in an oil well,” he says. “What many people don’t understand is that fields were originally operating on the basis of 20-30 per cent recovery, where we’re now getting around 50 per cent. The technology we have developed here in Scotland has made the difference to what was difficult to achieve 20 years ago, and we can take that technology anywhere. We might have developed a new way of doing things here, but this really opens up the world. There is very little that is unique to the North Sea.

“In some respects we’ve had things a little bit easy, but that’s changed now with people chasing inward investment. We need to get smarter. We have to focus on creating and developing more new technologies so we can stay ahead of the game. T

That means making sure we make the most of our existing opportuni-ties, but to maintain our international position, that legacy of a pioneering spirit, it’s now all about enhanced recovery. The historical statures are long gone, the future is all about exploiting the right technology to do things better here in the North Sea – and then to export it.”

Melfort Campbell of IMES says there is a need to get smarter and continue to develop new technologies

With Scotland a leader in the global oil and gas business,

markets such as Brazil point very specifically to potential

2014 | the times

Power of Scotland12

Industry Spotlight: the Skills Challenge

The oil and gas indus-try is a global pow-erhouse. Across all corners of the globe, thousands of com-panies are engaged in a diverse range of activities all geared towards supporting the growing demand

for energy. The skills issue cuts to the very core of the industry. Whatever sec-tor, whatever part an individual company plays in the wider mix, having a skilled, competent and safe workforce is at the heart of what they do.

OPITO is the industry’s focal point for skills, learning and workforce devel-opment. Operating both in the UK and internationally, the unique not-for-profit organisation has initiated some major developments over the last six months and is gearing up for a step change in how the industry will address the current and future skills needs.

In the UK, in what could lead to the biggest shake-up of skills provision in the North Sea’s history, OPITO is responding to the urgent need for a less fragmented approach to the skills issue by leading on the largest ever Labour Market Intel-ligence (LMI) study into North Sea skills provision.

Targeting over 1,000 organisations, OPITO is managing the initiative on behalf of industry and in partnership with the Aberdeen & Grampian Chamber of Commerce, Decom North Sea, ECITB, Energy North, IADC – North Sea Chap-ter, the OCA, Oil & Gas UK and Subsea UK.

“We are evolving as an organisation and adapting our response in line with the changing demand across all sectors of the industry,” said John McDonald, man-aging director of OPITO UK.

“This is an exciting time in our devel-opment as we embark on a new era in terms of how we engage with industry, government and education. Exceptional results can only be achieved when we all pull together in the same direction and channel our expertise into one solution.

“The LMI survey will provide the

definitive source of industry recognised information on the size and demograph-ics of the labour market from across the sector and partner organisations to ensure better understanding of the work-force profile. It will also give greater clar-ity to specific gaps and allow the industry to target activities to address these short-ages and meet the long term demand for a skilled workforce.”

In line with this, OPITO is working with the department for Business Inno-vation and Skills (BIS) at Westminster on the industrial strategy paper which sets out the Government’s vision for a new partnership with business to drive eco-nomic growth.

The organisation will lead on five key action points: Leading the development of a skills gateway, improving workforce skills, developing a skills gap analysis, encouraging diversity and attracting and retaining ex-military personnel.

This approach will ensure that each strategy is firmly evidence-based and provides a clear view of the challenges that Government and industry need to tackle in partnership in order for UK businesses of all sizes to compete successfully in domestic and overseas markets.

“The most obvious way of meeting the skills needs of the UK economy in the short term is to invest in training the cur-rent workforce,” said Mr McDonald.

“Employers invest approximately £49 billion a year in training and skills in the UK and whilst this figure is impressive, the industry is aware that to meet future skills needs it must broaden its appeal beyond the traditional recruitment routes as a means of increasing the tal-ent pool.” Among those projects already under way is OPITO’s Transition Train-ing Programme (TTP) which has been refocused following a series of pilots in 2012 and 2013.

In line with the Government’s drive to channel former service personnel into the oil and gas sector, the revised TTP will proactively target ex-servicemen and women to make them aware of the opportunities and the entry routes availa-ble to them. Through direct contact with

upwards of 300 Armed Service leavers at bases across the UK who have the right mix of transferable skills and qualifica-tions, it will provide a ready-to-work pool of talent that individual companies can dip into and train to their specific needs.

“Sometimes a CV doesn’t clearly highlight valuable transferable skills and therefore many employers discount highly trained candidates who have the potential to go far within the industry,” explained Mr McDonald.

“The pilot programmes worked well and provided a solid test platform from which we have been able to refine and refocus in order to best meet the needs of the industry. OPITO is working hard to help oil and gas firms recognise the benefits of hiring and cross-training ex-military personnel who have a broad range of skills and international experience.”

Indeed, when it comes to the interna-tional arena, OPITO is just as active on behalf of the industry with the overseas arm now the trusted adviser to Gov-

ernments, international and national oil companies in their quest to develop indigenous oil and gas workforces.

Founded in 2009 to lead the drive for common global oil and gas safety train-ing standards, OPITO International has doubled the size of its offices in Dubai and increased its international workforce there and at bases in Kuala Lumpur and Houston, USA.

David Doig, OPITO Group chief executive, said: “The trust placed in us by governments, independent and national oil companies around the world is truly transforming OPITO International’s business model. We take huge pride in the fact that OPITO safety and competency standards are now being recognised and desired by oil and gas provinces the world over.”

OPITO is involved in some groundbreaking partner-ships and projects. Following a landmark agreement with the Iraqi Ministry for Oil in

2011, it is now supporting the develop-ment of training for workers on projects to improve vocational training centres in Basra.

In addition, the organisation is work-ing with international oil companies in Iraq to design a framework for delivering suitably qualified Iraqi oil and gas work-ers to help the country fully exploit its emerging oil industry and transform the economy of the war torn country.

A similar agreement with Petronas in Malaysia will see OPITO’s Basic Offshore Safety Induction and Emergency Train-ing (BOSIET) standard become part of the national oil company’s mandatory safety training programme in the same way as it is compulsory in the North Sea.

“It is all about people,” said Mr Doig. “One of the most pioneering and hi-tech industries in the world, the oil and gas industry operates in hostile environ-ments and often hazardous conditions. OPITO aims to make it one of the safest.

“Every worker, on every helicopter trip, on every marine transfer, on every dive support vessel on every rig, on every drilling floor, has the fundamental right to know that the people around him, or her, are trained to the highest standards.

“OPITO is that standard. There is no other like it and, through the adoption of these standards globally, we can help ensure every worker gets to work safely, works safely and comes home safely.”

More than 250,000 people per year across the globe from New Zealand to the Gulf of Mexico train to OPITO stand-ards. While this makes the industry safer OPITO is campaigning for a common approach to safety through the adoption of one common global standard.

“Employers should adopt OPITO standards: workers must demand them and training providers must train to these standards,” said Mr Doig.

“Together, with one common global standard, we can make this industry even safer. OPITO means safety, security and ultimately saves lives.”

OPITO is responding to the need for a less fragmented approach to the changing skills requirements in the North Sea by leading one of largest ever studies into their provision

John McDonald, below, points to exciting times and a new era as expertise is channelled into one solution

Bold action that will tackle the skills gap

The trust placed in us by governments and companies around the world is transforming our business model


can now do this in a short, residential, nine-week course that gives all the focused training they’ll require; then we can put them in on- or offshore roles immediately.”

That promises a big future with a big company. They will join 18,000 employees world-wide. Petrofac oper-ates out of seven operational centres – in Aberdeen, Sharjah, Abu Dhabi, Woking, Chennai, Mumbai and Kuala Lumpur — and has a further 24 far-flung offices. It designs and builds oil and gas facilities; operates, maintains and manages facilities, and — particu-larly relevant here — trains personnel.

Courses for the first ex-forces train-ees will begin in the New Year, with opportunities planned for 16 instru-mentation and electrical technicians. “That’s 16 definite posts for which we’re in the process of identifying the best-suited people right now,” says Thain.

While these technicians will take the nine-week course to be offshore-ready, plans are also being developed to recruit project engineers, who

would get a five-month sandwich course involving elements of training and on-the-job learning. Both disci-plines will ultimately gain an accred-ited qualification, either an SVQ or an Association of Project Management qualification.

“We already have many employees offshore from forces backgrounds and they have proved to be successful and popular,” adds Thain, “but we wanted a more strategic, coherent way to bring them on board and in greater numbers. Ex-forces personnel have skills that transfer very well to offshore industries, particularly in the technical disciplines we are focusing on.”

Paul Hamlet, from Manchester, is a case in point. He is an ex-RAF tech-nician — formerly employed on the new-but-aborted generation of Nim-rods at Kinloss — who joined Petro-fac two years ago. Now a production technician on Marathon Oil’s Brae Bravo North Sea platform, for which Petrofac supplies operations teams, he says he found the lifestyle change “relatively easy” but doesn’t deny that

“learning the new job itself proved to be quite challenging”.

“You bring a lot of your soft skills with you — interpersonal and pres-entational skills, time-keeping, what you would call the basics. And then of course there are the on-the-job skills you have accrued — in my case, work-ing as an operations manager then instructor on the new Nimrod aircraft.

“I needed a lever to get the Petrofac job in the first place, of course — and the Nimrod experience was part of that; but I had also made pro-active moves to get involved in the City and Guilds petroleum technology course-

Industry Spotlight: the Skills Challenge

A one door closes, another opens, they say; and for dozens of skilled ex-forces person-nel now facing a change of working life under the

MoD’s resettlement programme. There is an exciting future on the

horizon — with Petrofac, the leading international service provider to the oil and gas industry.

The advantage promises to be mutual, of course, for the company is only too conscious of the industry’s yawning skills gap which needs to be quickly filled to keep the wheels of its business rolling apace.

“With a skills shortage right across the industry and major projects on the horizon, we have had to look for new sources and smarter ways of recruit-ing at all levels — but particularly for offshore technical disciplines,” says Walter Thain, senior vice-president Europe, Petrofac Offshore Projects & Operations.

How urgent is it? Experts have estimated that the sector in Aberdeen alone will need 120,000 more people in the next ten years, while a recent study by Stirling University has pointed to a specific gap emerging in the 35-49 year-old age group with between eight and 15 years’ experience.

So who are the potential candidates? They are being identified through the MoD-established Career Transition Partnership and Petrofac itself which is initially recruiting offshore techni-cians, typically ex-Army, Navy or RAF personnel with transferable mechani-cal, electrical or instrumentation skills..

The company calls its part the Forces Transition Programme and it draws on Energy Skills Challenge funding made available by the ECITB and Skills Development Scotland to create training courses with guaran-teed positions at the end: trainees are employed from the day they begin their course, and on completing it, go into permanent employment with Thain’s Aberdeen-based division.

“Our course basically takes already-skilled military technicians and steeps them in the oil-and-gas industry,” says Thain. “And employing them from the moment they start is a first for us. No other major contractor has developed this type of programme with its own internal training provider.

“We believe it’s the best way to go — rather than hire them, put them into a position, and then … well, it might take two years to train them on all aspects of the job; whereas we

It’s a military operationPetrofac is finding talent among former Armed Forces personnel – and is promising them a new future

Paul Hamlet found the lifestyle change from

the RAF relatively easy but emphasises being

pro-active and positive

Walter Thain says that ex-forces personnel have important transferable skills

work through distance learning; I did ten modules of this and it was 12 months of hard work to get the Level 3 qualification.”

Paul’s mid-career change under his own steam preceded Petrofac’s new philosophy. It’s not quite the same now, as — once candidates are iden-tified — the Forces Transition Pro-gramme creates more direct internal assessment. While Paul’s advice to someone hoping to enter from the forces would always be helpful – “to be similarly pro-active and positive, mak-ing sure the employer is well aware of the skills you’re offering” – the nine-week training course is specifically designed to ease transition.

It features detailed technical train-ing, including a classroom-based mod-ule offering an “Introduction to Oil and Gas” to give trainees a broader appreciation of their new industry, its challenges and opportunities. This is complemented by offshore survival training, which is mandatory for any-one wishing to work offshore.

So what are the qualities that make ex-forces personnel so attractive to the industry? “They’re well educated in terms of their skills, very good in tech-nical disciplines,” says Thain. “They’re also pretty mobile, used to working away from home, and often up for a new challenge. They are all technically well qualified; our course is all about making them oil-and-gas specific. They’ve also got that helpful mentality of following processes and procedures. All of which is a perfect combination for the qualities we require.

“We see this as giving them an excel-lent second career opportunity in our industry. And the advantage is mutual. It’s also a fantastic opportunity for us to tap into a skilled, mobile, versatile workforce. With that short training course we can help them bridge the gap between military skills and off-shore skills and ensure that when they arrive offshore they are competent and confident to start working right away.”

Immediately pertinent to filling such roles is the fact that many major projects are coming to fruition, such as GdF SUEZ’s Cygnus field, in the Southern North Sea; the ‘Floating Production Facility 1’ currently being refurbished by Petrofac and due to be deployed on Ithaca Energy’s Greater Stella field next year; and the EnQuest Producer, another floating production facility set for deployment in the Cen-tral North Sea imminently.

“These are all big platforms needing complete new core teams and what tends to happen is that more senior workers on the older platforms want to go and work on the new ones, so we’ve got to back-fill with trained and competent people,” says Thain.

“That’s why this new unique pro-gramme is fundamental right now, because we’re getting skilled people and don’t have to spend a lot of time developing their basic technical skills.”

However, he adds cautiously: “We don’t expect this one mechanism to plug the whole skills gap. But we do know it will make a valuable contribution.”www.petrofac.com


It’s a question of timing and the time, argues Professor Stuart Haszeldine, is now. As professor of carbon capture and storage (CCS) at the University of Edinburgh, Professor Haszeldine is adamant that there can be no more stalling on the development of CCS, an industry with enormous environ-mental, technological and finan-

cial potential.“CCS needs to be developed now,

industrial economies are changing only slowly away from gas, oil and coal and emissions from combustion of fossil carbon are a clear threat to cause global change, sea-level rise and agriculture fail-ure,” argues Professor Haszeldine. “CCS needs secure storage in deeply buried rocks beneath the North Sea.

Our calculations show that the UK owns storage for all its own CO2 emis-sions for hundreds of years. Those esti-mates can be confirmed by practical tests of CO2 injection and monitoring. The right time to start is now, about five to 10 years ahead of when power plants will need guaranteed storage sites.”

Put simply, CCS is three-tiered process: capturing the carbon dioxide emissions from various sources, including power stations and industrial emitters, trans-porting the carbon dioxide offshore and permanently storing the carbon dioxide in deep underwater rock formations. “Our electricity generating power sta-tions, both gas and coal-fired, all emit carbon dioxide as part of the combustion process,” explains Christopher Bryceland, at Scottish Enterprise. “Carbon capture and storage is the only technology capa-ble of capturing and permanently storing the CO2 produced by power stations and industrial sources”

“We already know that the offshore geography of the Central North Sea means that CCS offers huge economic potential for Scotland. This coupled with our existing oil and gas capabilities, ready supply chain and existing infrastructure means there is a real opportunity for Scotland to be at the forefront of devel-oping CCS capabilities in Europe.”

A recent report published by Scot-tish Carbon Capture and Storage (SCCS) highlighted the potential of developing this technology. The report stated that Europe can meet its climate change tar-gets and achieve a low-carbon economy by unlocking the North Sea’s huge poten-tial as a shared CO2 storage resource. The report recommended a combination of practical actions and policy incen-tives for the next five years. If taken, the report argued, these efforts will validate many gigatonnes of CO2 storage capacity needed by Europe’s power and industry

As a technology with huge potential, carbon capture storage (CCS) could transform the Scottish energy market, reports Barry McDonald

sectors, and build a strong business case for attracting investment in a CCS indus-try. In particular, governments around the North Sea were urged to develop a shared CO2 storage infrastructure.

At present the industry is awaiting a final decision from the UK government over the sighting of the first CCS facility in the UK.

The £1 billion funding competition has been narrowed down to two sites in the UK — the White Rose CCS project in South Yorkshire and Peterhead. Two years ago a plan to build the country’s first carbon capture and storage demon-strator at the Longannet power station in Fife was scrapped.

The publication also highlights the potential for Peterhead Port as a key location for the shipment of captured CO2 from other parts of the UK and Europe, and onward transportation to the vast storage sites of the Central North Sea.

If Peterhead is developed as an import facility, says Christopher Bryceland, it has the potential to receive 4 million tonnes of CO2 per year, leading to the creation of over 500 jobs and additional GVA of more than £140 million. The poten-tial to the Scottish economy is huge as we’re uniquely positioned because of our heritage in the oil and gas industry and already have a lot of the offshore and onshore infrastructure in place.

The European Commission recently publicly stated the importance of CCS

in reducing global temperatures. A com-munication from the Commission to the European Parliament, the Council, the European Economic and Social Commit-tee and the Committee of the Regions on the Future of Carbon Capture and Stor-age in Europe stated: “Globally CCS is likely to be a necessity in order to keep the average global temperature rise below 2 degrees. CCS is also vital for meeting the Union’s greenhouse gas reduction targets and it offers potential for a low-carbon re-industrialisation of Europe’s declining industries.

“The deployment of CCS in industrial processes may also help to increase pub-lic understanding and acceptance of the technology given the very visible link between jobs in local communities and continued industrial production.”

Developing CCS has to be a priority, argues Professor Haszeldine,

“CCS is not just about power plant. Many industrial processes release CO2, from making steel, petrochemicals, refineries and cement. To stop our car-bon stock increasing in the atmosphere those CO2 releases have to be captured and stored, not emitted. By developing CCS, Europe can safeguard 7 per cent of European GDP and $900 billion per year

of turnover from highly-skilled jobs.”Developing CCS is expensive for the

first projects as they need to build or adapt pipes to transport the CO2 off-shore, and test and monitor the deep geological storage reservoirs to show the predictions are correct.

“Large costs to develop the first CCS projects can be met by the taxpayer spending money, or some of the first CCS projects can use CO2 to make money for the UK by CO2-EOR (carbon diox-ide enhanced oil recovery) which pro-duces extra oil from existing fields more efficiently,” says Professor Haszeldine. “CO2-EOR means efficient production from many existing oilfields, with less need to explore for oil in new areas.

That CO2 injection also leaves a leg-acy paid-for pipelines and storage sites proven to be reliable. The UK can also make billions from tax on the extra oil produced — which otherwise will stay in the ground.”

But CO2 enhanced oil recovery only has a limited window of opportunity as a number of potentially suitable oil fields near the decision making point for decommissioning. This technology has the potential to extend the field’s life-time and delay the large decommission-ing costs for the operators. Christopher Bryceland explains: “Once injected into the oil field the CO2 makes the oil easier to get out of the ground.

CO2 is miscible and becomes soluble in the oil enabling it to displace the oil in the pore spaces. It also decreases the viscos-ity of the oil making it more mobile and easier to extract. This is common practice in the US where they’ve used naturally occurring CO2 to extract more oil from onshore fields for years.”

As for the North Sea, 19 oil fields have been identified as potential candidates for CO2 enhanced oil recovery. And the financial rewards could be huge, adds Christopher Bryceland. “The potential revenues could be worth £2.7 billion to the Scottish economy.”

Time to capture the moment

A model of the CCS source, capture and transport cycle

Why do we need CCS?“If the world is to have a reasonable chance of limiting the global average temperature increase to 2°C ... less than one-third of proven reserves of fossil fuels can be consumed prior to 2050, unless CCS technology is widely deployed.” World Energy Outlook 2012, Interna-tional Energy Agency (IEA)

What is CCS?Carbon Capture Storage (CCS) is the process of collect-ing waste carbon dioxide (CO2) from industrial facilities including fossil fuel power stations, transporting it to a storage site and depositing it where it will be unable to enter the atmosphere.The North Sea has an array of suitable storage sites with an estimated total CO2 capacity of 160 gigatonnes.

These include saline aquifers, depleted hydrocarbon fields that are well characterised, and the potential for CO2 storage as part of enhanced oil recovery projects.Saline aquifers alone represent gigatonnes of CO2 storage potential.The North Sea’s suitability as a storage hub is enhanced by an existing oil and gas sector infrastructure – ports, pipelines and platforms – that can be modified for CCS operations serving, at the very least, the North Sea states but with the potential to widen the net to other EU Member States. Depleted hydrocarbon fields offer an accessible and well-characterised range of storage sites, which are due to shut down operations – and so become available for CO2 storage – over the next decade.

Professor Stuart Haszeldine argues that developing CCS has to be a priority

New frontiers

GRAPHIC COURTESY OF SCCS

Through CCS, Europe can safeguard $900bn per year of turnover from highly-paid jobs

2014 | the times

Power of Scotland16

Views from the top

Sir Ian Wood, the former chairman of international oil services group Wood Group, Aberdeen, is looking forward to the publication in Janu-ary 2014 of the fi nal report of

the independent review he has led into UK offshore oil and gas production and regulation.

Commissioned in June 2013 by Edward Davey, the UK Secretary of State for en-ergy and climate change, Sir Ian worked quickly over the summer with only a small team to deliver an interim report and recommendations in early November.

He spoke to more than 40 North Sea companies as well as UK and Scottish government fi gures. The review also looked at oil and gas regulatory regimes in Norway, Netherlands, Denmark, USA, Canada and Australia.

“The message was consistent,” he recalls. “With the right business and regulatory environment, there remains a strong future for the North Sea, but active co-operation will be crucial to get the most from the Basin in the years ahead. As maturity advances, there will be much more to gain by taking a constructive co-operative approach than by working in isolation.”

This will demand fundamental changes in UKCS operators’ behaviour, as well as a new approach to regulation, which are the basic principles underlying the interim recommendations, he says.

“In our view, Government, the Depart-ment of Energy and Climate Change

(DECC) and industry must sign up to a new tripartite strategy to maximise eco-nomic recovery for the UK, which we are calling MER UK (Maximising Economic Recovery for the UK). The goal should be how to make the cake bigger while ensur-ing its fair division.”

He continues: “We’ve seen many examples where companies could recover more oil and gas, perhaps by developing small clusters together, by co-operating on more effi cient use of support services, or working together to identify new developments to boost production and extend the life of critical infrastructure.”

Sir Ian acknowledges that DECC, the industry regulator, is doing a demanding job with limited resources.

“However, the regulatory model and resource need to grow signifi cantly to prepare us for the next 20 to 30 years,” he maintains. “We need a regulator with a broader range of resources, and the pow-ers to support them, in order to promote the right approach to maximise oil and gas recovery. We are proposing a new, arm’s length economic regulator, closer in style and infl uence to our neighbouring North Sea regulators, to ensure rigour in the stewardship of our remaining natural oil and gas resources and to facilitate and catalyse collaboration in line with the MER UK principles.

Regulator with broader resources needed

There remains a strong future for the North Sea but active co-operation will be crucial in the years ahead

– Sir Ian Wood,former Chairman

Wood Group

This is not a sunset industry, quite the reverse, Sir Ian says: “The industry esti-mates up to 24 billion barrels of oil and gas remain to be recovered. The Govern-ment’s award at the end of November of a further 52 oil and gas licences as part of the record breaking 27th offshore licens-ing round only emphasises the strength of the continued interest in the potential for fi nding new reserves off our coastline.”

The UKCS industry, he says, is in its “middle years”, with a range of attractive investment opportunities, from new plays to mature asset redevelopment.

“But we have to make the most of these opportunities before the infrastructure that could support this activity deterio-rates beyond repair or is removed through the decommissioning of end-of-life as-sets,” he warns.

“These are exciting times for the UKCS. We believe our proposals could help recover a further three to four billion barrels of oil and gas over and above what is already planned by the industry.

“This would bring more than £200 billion additional value to the economy, equipping the UK to do so much more. What we are advocating is signifi cant evolution which will require radical behaviour and a mind-set change in industry and government to ensure the continuing success of our sector in the next 40 years.” n

The huge and diverse sector that is the North Sea oil and gas industry calls for a similarly broad range

of talent and expertise. Supply chain companies in Aberdeen and the Highlands and Islands underpin the innovative and often hazardous work under-

taken by the subsea operators; ever more creative methods are employed to extract the pre-cious resources below the sea while platforms and pipes that have been in use for decades now must be decommissioned and renewed.

Regulatory regimes are vital to the smooth and safe running

of the industry while umbrella organisations invest in research and events that allow it to speak with an informed, collec-tive voice.

Here, some of the leading fi gures in the business, repre-senting companies, industry organisations and the public sector offer their authoritative

comment to Power of Scotland on regulatory, employment and infrastructure issues, among others.

Their views are distilled from expertise and expertise and reveal an industry with a keen sense of the challenges to be faced — and the determination to address them.

Many voices but shared objective


Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its growing membership now numbers more than 400. www.oilandgasuk.co.uk

Aberdeen City Council is at the heart of a thriving energy city, striving to promote economic growth and development at home and abroad. www.aberdeencity.gov.uk

This has been a memorable year, one in which our sec-tor had good support from both the UK and Scottish Governments and attracted a record £13.5 billion

investment in the UK Continental Shelf (UKCS). I am happy to say this year we also welcomed our 400th member to Oil & Gas UK – the engineering company Haden Freeman – a reflection of our strong association with great companies right across the UK.

Britain’s oil and gas sector is a remark-able industrial asset and the launch of the Industrial Strategy earlier this year demonstrated Government’s commitment to working with us to create the right conditions to maximise opportunity and investment, benefiting the whole UK economy. A key aim of the strategy is to focus on supporting a dynamic supply chain, sustaining high quality jobs in the UK for decades to come.

To provide a deeper understanding of the economic contribution of Britain’s oil and gas supply chain, Oil & Gas UK appointed EY to carry out further research into this area of our industry. Launched in October 2013, the study will use data from over 1,000 companies to provide an industry map or economic snapshot of 42 sub-sectors and an insight into factors in-cluding skills and exports. The outcomes will be published in March 2014, marking the one year anniversary of the Govern-ment’s Industrial Strategy, outlining the opportunities available to businesses of all

sizes in Britain, and pinpointing the value of these companies to the UK economy.

Further evidence of Government sup-port for the industry came in June when the Secretary of State for the Department of Energy and Climate Change (DECC), Rt Hon Edward Davey MP, commissioned Sir Ian Wood to conduct an independent-ly-led review into UK offshore oil and gas recovery and regulation.

This review is very timely. While com-panies are planning to invest £100 billion on the UKCS over the next decade, the industry has changed considerably over the past twenty years. The environment we operate in is increasingly complex and the range of companies active in the North Sea is growing in diversity. The number of fields in operation has climbed from 90 to over 300 since the 1990s, while the average size of new discoveries and daily production rates are becoming smaller. The UKCS is one of the most mature offshore basins in the world, and therefore faces unprecedented challenges that require new thinking and collabora-tive effort across the industry.

In November 2013 the sector welcomed the interim recommendations outlined by Sir Ian, in which he proposed a more rigor-ous stewardship of UK oil and gas resources through strong tripartite collaboration between DECC, HM Treasury and the industry and the creation of a new well-resourced, arm’s length regulator. While we await publication of the full report in Janu-ary 2014, there exists within the industry a strong support for Sir Ian’s recommenda-

With its booming economy, the strongest jobs market in Britain and huge levels of national and

international investment, Aberdeen is the envy of cities across the UK. It is an ambitious city with an ambitious council, businesses and people. Last year more than half of Scotland’s profits were produced by the 900+ oil and gas-related companies in North-east Scotland. The capacity to grow the Aberdeen economy is tremendous and unmatched anywhere in the UK outside central London.

The Granite City is Scotland’s first and the UK’s second most attractive city for good growth, according to PWC and is second only to Cambridge as the most competitive city in Britain for industry. It shows no signs of slowing and there’s huge optimism about Aberdeen’s future.

The North Sea oil and gas industry is still flourishing. It makes a 13 per cent contribution to the Treasury, has a sup-ply chain worth £27 billion and secured £13.5 billion in capital investment this year, on top of a total industry spend of more than £20 billion last year. Aberdeen accents can be heard across the world because our companies have such a global presence.

Like other western oil and gas cities, Aberdeen continues to attract the inward migration of skilled professionals and has a growing international community. We are proud to support that internationalism

and are building on that as home-grown companies continue to expand, while increasing numbers of international busi-nesses establish bases here.

We are determined to harness the fantastic level of investment and develop-ment the city is experiencing compared to the rest of the UK and to ensure continu-ing investment and growth.

Investment in the city, which has the smallest public sector of any around the North Sea, continues to grow apace. Aberdeen City Council is enabling that growth to happen. We held an intensive visualisation exercise, attended by key players in the private sector, to determine the area’s priority infrastructure needs. That exercise is now being emulated by some partners in the Scottish Cities Alliance.

Aberdeen’s huge housing shortage was identified as a key area which required to be addressed and as a council we are set-ting about providing 2,000 affordable new homes. This is encouraging other public and private sector bodies to follow suit and will make the city an even more attractive place in which to live, invest and visit.

We are committed to building a new Aberdeen Exhibition and Conference Centre, which is the showpiece for the energy industry and the only exhibition centre in Europe underpinned by one local authority. This city already attracts some of the biggest exhibitions and shows in the world, and our new AECC will in-crease and improve that offering, allowing our already very well-established shows

Unprecedented challenge and potential

Proud to support internationalisation

Aberdeen accents can be heard across the world because our companies have such a global presence

– Barney Crockett Leader

Aberdeen City Council

A key aim is to focus on supporting a dynamic supply chain, sustaining jobs for decades to come

– Malcolm WebbChief Executive Oil and Gas UK

tions, an appetite to examine how we do business here and recognition of the need for a fundamental change in approach.

Alongside these ground-breaking reviews and intensive studies, Oil & Gas UK continues to invest time and energy to organise events that address the needs and challenges of the industry. This year’s growth in investment and jobs led to a very busy calendar of events. A major milestone was the Piper 25 conference – a thought-provoking event which attracted 1,500 people over three days to reflect on the lessons learnt from the tragedy and review how far offshore safety has evolved – reinforcing industry commitment to continuous improvement.

Oil & Gas UK’s Share Fair has grown from strength to strength, attracting over 1,300 people who came to learn about the latest UK oil and gas business develop-ment opportunities. In December, our breakfast briefing focusing on maximis-ing recovery from the UKCS attracted a record 580 delegates all interested in ensuring the UKCS remains productive beyond 2050.

As I look to the future, I feel 2014 could be as transformational and I look forward to working with our members as we collectively rise to the challenge of unlocking the full potential of our natural resources for the long term benefit of our economy. n

like Offshore Europe, to continue to grow.Transport continues to be difficult, but

Aberdeen City Council is fully commit-ted to making a capital investment of £20 million on roads and infrastructure over the next five years and is looking for commitment from government at differ-ent levels, including seeking a City Deal potentially with the UK Government, based on the strength of our economy and development.

We have committed to widening our energy offering to become one of the main centres in Europe for delivering renewables. We are leading the way on hydrogen but are also a prominent force on wind power, with the Offshore Wind Deployment Centre in the pipeline.

With the growth in the economy and international businesses setting up here, there is a clear need for a more diverse leisure offering.

“There’s a continual flow of high-quality hotel rooms coming on-stream but it makes little difference to the huge rate of demand that still pertains. Planning applications for business parks, office de-velopments and hotels are received regu-larly and work on the ground is beginning rapidly where consent is granted.

It seems that there is no stopping Europe’s energy capital. It truly is a boom town and we are making the most of that to ensure the best future for Aberdeen. n

2014 | the times

Power of Scotland18

The devolved government for Scotland is responsible for most of the issues of day-to-day concern to the people of Scotland, including health, education, justice, rural affairs, and transport. www.scotland.gov.uk

Highlands and Islands Enterprise is a key player in developing sustainable economic conditions which make the Highlands and Islands a globally competitive place. www.hie.co.uk

Scotland has been blessed with unrivalled natural resources, and our oil and gas reserves are a premium advantage. The wealth it brings, if properly managed, can make a real dif-

ference to the people of Scotland; with all communities around the country benefit-ing from them.

There are around 24 billion barrels of recoverable oil and gas remaining in the North Sea with a potential wholesale val-ue of up to £1.5 trillion. This means that more than half the value of North Sea oil is still to be extracted, which affords Scotland greater choices and chances to strengthen its diverse economy.

This Government is committed to positive engagement with the sector, and if we are to realise the ultimate prize then we have to work in collaboration with industry.

Our commitment to work in col-laboration with industry was shown in 2013 through the successes detailed in Scotland’s Oil and Gas Strategy Progress Report, closely followed by the Scottish Government’s Maximising the Return from Oil and Gas in an Independent Scotland.

This paper set out the key principles we believe should underpin the policy framework as the industry in the North Sea enters a new era, and clearly sets out the Scottish Government’s commitment to provide long-term stability for the offshore industry.

Following the launch of the paper, we appointed Melfort Campbell as the chair of an Independent Expert Commission. The commission will look to build upon the high level principles set out in that paper and to make recommendations in relation to the fiscal, regulatory and licensing regimes applicable to the North Sea. I am confident that the work of this Commission will provide vital advice and recommendations on the technical appli-cation of current and future policies.

We also heard from Sir Ian Wood, who suggested that a new regulatory body is needed in order to achieve the massive prize of maximising economic recovery of oil and gas. Sir Ian’s interim report estimated that the prize from increased and effective collaboration could be an additional 3-4 billion barrels of oil equivalent over 20 years, which could be worth £200 billion.

By addressing the challenges facing the industry and harnessing the opportuni-ties, enormous benefits can be reaped by the industry and in tax revenues. The Scottish Government are supportive of Sir Ian’s interim findings, and our expert panel will consider these in more detail.

In Scotland’s Future we set out that in an independent Scotland careful management of Scotland’s oil and gas reserves will be a key priority. Unlike successive Westminster Governments, the Scottish Government recognises that an independent Scotland should provide industry with the necessary fiscal and regulatory stability and predict-ability for it to innovate and thrive in a globally competitive environment.

If you ever take the train from Inverness to Aberdeen, as I do from time to time, it is always hearten-ing to see the number of small, thriving SMEs that have set up stall in industrial parks in places such as

Inverurie and Dyce. In many cases these are indigenous firms with 10, 20 or even 50 staff, performing very clever, extremely specialised functions for the oil and gas industry, and exporting their expertise not just to the northern North Sea, but around the world.

It is easy to forget that in the past 50 years, Scotland has built up an incredibly diverse ‘innovation ecosystem’ as I like to call it — servicing our world-leading oil and gas sector. Aberdeen will always be at the heart of this, but now, as the industry faces increasing challenges for skills and space, business leaders need to capitalise on all of Scotland’s natural assets — physical as well as intellectual — so the industry can continue to thrive and grow.

Ports are an obvious example. Unfortu-nately I am old enough to remember the very first oil boom, when the then High-lands and Islands Development Board put the support in place to enable Nigg, Kishorn, Ardersier and Arnish to become capable of building some of the most mas-sive structures the world has ever seen.

These places were chosen because they have natural advantages, and now as we look to decommission these same offshore structures in the years ahead, these loca-tions, alongside tremendous facilities in Shetland, will come to the fore once

more. Ports are important, and HIE has already invested more than £90 million in port infrastructure in the Highlands and Islands which has purposefully enabled ports to develop facilities for oil, gas and renewables.

Nigg Energy Park which was, only a few years ago, mired in mothballs, is now — thanks in part to HIE — owned and operated by Global Energy Group, an indigenous Scottish firm with obvious ambition. The thriving facility has just completed the refurbishment of a floating production, storage and offloading facility — the first time this has been done by a UK company in more than a decade.

This shows Scotland has the facilities and the know-how, but can we produce enough skilled people to turn business plans into reality?

Again, I think Scotland is showing that yes, it can. The Nigg Skills Academy has been set up specifically to turn out the skilled workers — welders, pipe fitters and fabricators — that we need. But this is just one of many examples of innovative up-skilling being pioneered under the na-tionwide Energy Skills Investment Plan. HIE and all agencies are now working in concert with industry to train the kind of people the energy sector will need in the years ahead.

Harness opportunities and reap benefits

‘Innovation ecosystem’ supports industry

If we are to realise the ultimate prize then we have to work in collaboration with industry

– Fergus Ewing, MSP Minister for Energy,

Enterprise and TourismScottish Government

Ports are important and HIE has already invested more than £90 million in port infrastructure

– Calum Davidison Drector of Energy and Low Carbon

Highlands and Islands Enterprise

We will consider how the existing fiscal regime can be enhanced to maximise oil and gas recovery, and to encourage development in the most technically challenging oil and gas fields. In the paper, we also make clear that we have no plans to increase the overall tax burden on the industry and we make a commit-ment to formal consultation before any changes are made to the fiscal regime. A commitment the UK Government have unfortunately not made.

Throughout the world many offshore companies are facing tough times in chal-lenging climates and waters. Scotland is leading the way in the world with strong reputation in working in these challeng-ing conditions – we have a global reputa-tion for excellence.

The skills, knowledge, products and services developed in this country can be found all over the world. This Govern-ment is committed to ensuring that the competitive advantages we have are retained and enhanced, so that we realise the opportunities that remain in the North Sea and that we play a central role in the development of new opportunities in other markets. n

Industry and the public sector are hav-ing to think innovatively, and this may mean looking outside Aberdeen. Many of the thriving SMEs I referred to earlier are located outwith the oil capital — some because the city is already becoming constrained, but others because it is an active choice.

Places such Enterprise Park Forres have already brought in new tenants such as monitoring and instrumentation special-ists EFC Group, who were attracted not just by good facilities, but also by an affordable town with a good quality of life — vital if a business wishes to attract a stable workforce that will still be around in five years.

The same factors appealed to French multinational consultancy Capgemini, which has chosen Inverness as one of its prime global centres of excellence for advanced IT. The deal, announced in spring 2013 and supported by HIE, will bring up 500 skilled jobs to the city, and shows what a combination of a skilled workforce, a pleasant environment and good IT infrastructure can bring.

I think the oil companies headquar-tered in Aberdeen can build a very bright future by utilising this model. Outsourcing some of their core functions to key locations beyond the oil capital’s constrained heartland is surely a win-win for Scotland and the industry. n


Serving Aberdeenshire from mountain to sea – the very best of Scotland. www.aberdeenshire.gov.uk

Simmons & Company are corporate finance advisers to the energy industry. www.simmonsco-intl.com

Hailing as he does from golden-beached Mon-trose, just south of his current working patch, Stephen Archer could never be accused of

disrespecting the area’s precious environ-ment. Nevertheless, he performs a daily balancing act in helping to facilitate buoyant industrial growth in the most environment-friendly way possible.

While he knows that is not the worst of problems an area can have, he often uses the word “challenge” with some justifica-tion. So, while Aberdeenshire positively blooms as a rich garden of dynamic oil and gas businesses — bringing new accommo-dations that calls for invasive infrastruc-tural changes — what does the County Council’s Director of Infrastructure services see as his major challenge?

“Perception,” he says, neatly summing up one side of his balancing task symbol-ised by transportation; and by which he means making sure people – particularly business-generating professionals – ap-preciate just how near and accessible the county is, with its quarter of a million population only a couple of driving hours from Edinburgh and an hour and a half flying from London.

“There has long been a mistaken percep-tion that we are impossibly far North,” he says, “and not just among people south of the border; many Central Belt Scots are guilty of it too. Of course, we’re winning the battle to maintain strong transport links, as evidenced by our rapid growth; but we must always be alert to it, promot-

ing for instance – and at the very least protecting — our air companies’ slots into and out of Heathrow. Then it’s a matter of also protecting our natural assets.”

Closer to home, there are places that aptly illustrate that balancing point — notably the one-time village of Westhill whose population has swollen to a town-like 11,000 with a steady influx of subsea companies’ operational headquarters.

“On the one hand, we have a sensitive community of residents, on the other a fast-growing number of businesses in an exciting and rapidly growing part of the energy sector ” says Mr Archer. “There is clearly a challenge in managing one against the other and ensuring we support industry but don’t upset the community. They understand what the vibrancy means – nearly £3 billion worth of subsea activity (or 15 per cent of the global market) centred on their community — and it’s a real economic asset to be promoted and celebrated; but they don’t want to be stuck in traffic jams at certain times of the day.”

The latest good news, he says, is that the long-talked-of Aberdeen Western Peripheral Route to allow faster transit to and from the North is on track to open relatively soon, probably 2018, and prom-ises to bring much relief to Westhill.

Also representing the future is Energet-ica Corridor, the 32-mile “business strip” between Peterhead and north Aberdeen that’s a focus for the oil and gas industry’s technological developments and boasts no fewer than seven business parks.

“Energetica was scheduled to be a 15- to 20-year project,” says Mr Archer, “and at

One of the big questions in 2012 was what the impact of the ramp-up in shale oil produc-tion would have on the supply/demand balance.

Most forecasters are now predicting that oil prices will be range bound over the next few years with Brent between $90 and $120 a barrel.

The logic for this is that increased production from oil shales are likely to be offset by declining conventional produc-tion from older fields and better OPEC discipline, whilst demand will grow on the back of better OECD demand and the continuing resilience of the develop-ing economics in China. In the Middle-east, instability and conflict continue to shut-in supply in Syria and Yemen and, despite some political progress, there is still uncertainty over Iran’s ability to lift production from existing fields which have been starved of investment.

The challenge for exploration and pro-duction (E&P) companies is to determine which projects to allocate capital to in a world where service costs continue to rise, but commodity prices remain rela-tively fixed. Marathon’s recent decision to sell its declining North Sea assets and deploy its resources into its growing US land shale business serves, unfortunately, as a good example of this.

This should act as a red flag to the UK Government in terms of taking action to ensure that as many major international oil companies remain in the region as

possible, otherwise it will be hard to max-imise the potential for the region over the long-term.

The good news is that range bound oil prices provide a constructive frame-work for global economic growth which is positive for the UK and for the oil industry because it reinforces medium term demand and oil & gas prices. That ought to make E&P investment decisions easier but, having been beaten up by the booms and busts of the past 40 years, the industry is conditioned to expect another downturn. It will take a long time to change that perception.

Last year in excess of 45,000 land wells were drilled and unconventional oil now represents a material part of the overall supply mix. If crude prices were to fall this would result in the immediate lay-down of land rigs in the US which would reduce supply and rebalance the market. Meanwhile, in the offshore arena projects are becoming increasingly complex and in higher risk, higher cost environments requiring more sophisticated technical solutions.

While the Investment Banks, the International Energy Agency, the US Energy Information Agency and other communicators pontificate about future commodity prices, the oilfield service sec-tor continues to flourish as the industry becomes even more service intensive.

In 2013 the US Oil Service Index (OSX), which measures the stock price performance of the US listed oil service companies, has risen by an impressive

A mission to grow – and also to protect

A strong reputation that must prevail

Peterhead is being increasingly used by the renewable and subsea sectors following expansion

– Stephen Archer Director, Infrastructure Services

Aberdeenshire Council

The bull case for the industry rests on geopolitics. The bulk of oil comes from politically unstable parts of the world

– Colin Welsh Chief Executive Officer

Simmons & Company International

its finishing point we expect it to be pretty well anchored at either end.”

In what way? “Bridge of Don, at the lower end, will have developed signifi-cantly with big investments coming in now; and at the top end Peterhead looks set to record a real UK achievement with the world’s first gas-powered power station capable of carbon capture and storage, building on strong growth in Peterhead Port, the region’s leading deep water harbour being uncreasingly used by the subsea and renewables sectors following recent expansion of berthing capacity and lay down space In the middle, Ellon will be a key town, after another ten years of evolution and investment in the corridor.”

He points out that all this includes an enviable leisure environment of glorious beaches, coastal routes, wildlife, fishing, surfing, rambling, historical sites and some of the world’s best golf courses — one thanks, of course, to a certain Mr Trump. “Whatever you think about that,” he says, “you’ve still got the open space there — and the dolphins.”

Inevitably, such intense activity must generate lots of employment opportuni-ties. But with the county’s unemployment hovering just above one per cent, where will the people come from to fill many specialist roles? That surely confirms Mr Archer’s imperative points about percep-tion and transportation challenges. n

26 per cent. With the large service companies forecasting top line growth of approximately 10 per cent in both North America and internationally, 2014 should be another strong year for that segment of the industry.

The bull case for the industry as a whole rests mainly on geopolitics. There is no getting away from the fact that the bulk of oil comes from politically unstable parts of the world where supply disrup-tions are commonplace.

Hopefully 2014 will prove benign in that regard. The bear case is that the global economy hits another speed bump and demand heads for the hills. Hopefully neither of these scenarios will prevail. My hope and expectation is that demand will continue to surprise to the upside, largely because of the growth in China, but not to the extent that the crude price runs outside the forecast range.

The UK is firmly established as a meaningful province in terms of oil and gas reserves and production, and while there is a recognition that this is in decline, the country has a very strong reputation for technology, services, qual-ity and safety that are being deployed all around the world.

The challenge is to make sure this prevails long after the last drop of oil has been recovered from the North Sea. n

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