ABERDEENNew Horizons for the UK North Sea

This special report has been produced by Elite Special Sections for distribution with Oil & Gas JOurnal

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I t has been a period of strong achievement for the UK upstream and supply chain, with a rise in annual production from the UKCS now

imminent. But it’s no time for resting on laurels. Costs remain a considerable barrier to investment. The basin is maturing fast, facilities are ageing, and maximizing recovery will require new approaches from all quarters. In particular, there needs to be a major increase in exploration and appraisal drilling from today’s levels, and a renewed focus on seismic and new technologies, if current levels of activity are to be sustained and today’s hubs are to remain viable. The lesson of the last two years is clear; now more than ever, operators, suppliers and the Government need to work together to regenerate the portfolio and secure a long-term future for the UK North Sea.

In collaboration with

Against the backdrop of new found fiscal stability and improved levels of engagement with the Government, investment in the UK

North Sea has reached record highs and production is set to rise in 2014. The industry’s focus on enhancing recovery and improving production efficiency has been the key to these achievements. Recovering the remaining 24 billion barrels in the basin poses a daunting engineering and commercial challenge, and provides a significant opportunity for developing new expertise and working practices.

“The rise in investment in the North Sea is a statement of confidence by investors in what we are doing, but we still have to up our game,” says Melfort Campbell, co-chair of the Scottish Government’s Oil and Gas Industry Leadership Group.This report will showcase Aberdeen, the host city for the Offshore Europe Conference and analyze just some of the many ways in which the UK oil and gas industry and the Government are working to extend the future of the North Sea well into the 2040s.

Exploring for the FutureThe industry needs to cooperate more in exploration and infrastructure

I n the last eighteen months, the Aberdeen-based energy sector has undergone a remarkable transformation

as industry and Government come together to maximize the recovery of reserves from a mature basin that is absolutely critical to the health of the UK economy.

The surge in investment is testimony to a new level of engagement between policymakers and operators and is set to deliver a historic achievement in 2014, when production in the UK North Sea is expected to rise for the first time in fifteen years.

The UK Government’s landmark tax reforms in 2012 have been complemented by the launch of new long-term industrial strategies for the oil and gas sector from the Scottish and UK Governments. These action plans commit industry and Government to work together to extend the life of the North Sea basin by maximizing production, supporting the growth of the local supply chain and addressing problem areas such as access to skills, technology and finance.

“We are already seeing progress towards the Strategy’s outcomes,” Fergus Ewing, Scotland’s Minister for Energy says. “I am pleased with the progress made so far, but not complacent. There is still much to do and we will continue to be guided in our efforts through the Oil & Gas Strategy. ”Few would have predicted the turnaround in the industry’s relationship with Government back in March 2011, when to general dismay

“The rise in investment in the North Sea is a statement of confidence from investors in what we are doing”

Mr. MelforT CaMPbell, IMeS GrouP obe, Chairman & Ceo, oIl aNd GaS INduSTry leaderShIP GrouP Co-chair

Tax allowances and improved engagement between industry and Government have reinvigorated the sector

Policy reforms unlock the way to a competitive UK North Sea

UK finance minister George Osborne raised the supplementary charge on corporation tax from 20% to 32%, increased marginal tax rates to 62% and 81%, and restricted tax relief on decommissioning. Those measures triggered a record 19% drop in production and slashed exploration drilling in half in

2011, with only 15 wells drilled across the basin all year. However, the 2011 budget, which resulted in a lower than expected tax take and a rise in energy imports, proved to be the darkest hour before

dawn. Following extended talks between the industry and the Treasury, just one year later Osborne announced a series of measures which have made the UK Continental Shelf the most attractive place to invest in the North Sea. In 2012, the Government doubled the small field allowance, established a £3 billion new field allowance for large and deep fields to open up the West of Shet-land area, unveiled a brownfield tax allowance to stimulate investment in mature fields, and made a major commitment to guarantee tax relief on decommissioning. The Government also established a Fiscal Forum to engage more closely with the oil and gas industry about tax issues. The result: capital investment by operators in 2012 of £11.4 billion in new developments and existing assets and infrastructure, the highest level for 30 years.

“March 2011 was something of a watershed for the sector,” Malcolm Webb,

Chief Executive of Oil and Gas UK says. “For the first ten or eleven years of this millennium we were subjected to repeated fiscal uncertainty and fiscal change. Now we have much better fiscal predictability, something the North Sea has not always enjoyed. This is a capital-hungry basin and we need the capital to flow, fiscal predictability is crucial.”

“The new developments have been extremely well received and have re-established some confidence in the fiscal regime for the next ten years at least,” Philippe Guys, managing director at Total E&P UK says.

In a basin where costs are high and reserves are relatively modest, international operators say that for the first time in a generation the UK North Sea enjoys a long-term fiscal regime that is truly competitive for their capital. “Without the introduction of the brownfield allowance, our $2.5 billion redevelopment of Montrose simply wouldn’t have been sanctioned,” Geoff

Holmes, CEO of Talisman Sinopec UK Limited says. “It has been an important catalyst for unlocking opportunities.”

“This Government has recognized the contribution that oil and gas can make to jobs and the wider economy and is also looking more creatively at some of the problems,” Phil Kirk, chief executive and founder of independent operator Chrysaor says. “They have listened to the industry more than any I have known in 20 years.”

“We have much better fiscal predictability, something the North Sea has not always enjoyed. This is a capital-hungry basin and we need the capital to flow.”

Mr. MalColM Webb oIl & GaS uK Chief executive

With nearly 50 years’ experience in the UKand a £5 billion investment programme in placeover the next 5 years, Total is committed to the UKfor decades to come.

TOTAL E&P UK Limited (Pictured) The new Shetland Gas Plant, being constructed for the Laggan-Tormore project – part of Total’s signifi cant portfolio of explorationand development interestsWest of Shetland.

www.conocophillips.com

© ConocoPhillips Company. 2013. All rights reserved.

Since becoming an independent exploration and production (E&P) company in May 2012, we have been focused solely on our core business of finding and producing oil and gas globally.

Our vision is to be the E&P company of choice by pioneering a new standard of excellence. This applies to our financial and operational performance and also to the way we do business. ConocoPhillips has a time-honored tradition of placing safety, health and environmental stewardship at the top of our operating priorities. Our technical capability, asset quality and scale, and financial strength are unmatched among independent E&P companies and uniquely position us to compete anywhere in the world. Our production includes light oil, heavy oil, oil sands, natural gas liquids, conventional natural gas, coal seam gas, tight oil and gas, and liquefied natural gas (LNG).

Headquartered in Houston, Texas, ConocoPhillips employs more than 17,000 people around the world.

ExclusivelyE&P.

Focused onExcellence.

Offshore activities

A record level of investment is going into greenfield and brownfield projects

Upstream investment hits new heights in the UKCS

F rom giant development projects West of the Shetlands, to smaller scale brownfield work in the eastern

waters of the North Sea, the UK Continental Shelf is experiencing an unprecedented surge in upstream investment.

In total, Oil and Gas UK forecasts that in 2013 investment in the UK’s oil and gas reserves will rise by 14% to a record level of £13 billion.

Much of this investment is being absorbed by giant projects in the West of Shet-land area, where the Department of Energy and Climate Change (DECC) estimates that approximately 17% of the remaining UK oil and gas reserves are located. These projects include Total’s £3.3 billion Laggan-Tormore project, the largest development in the UKCS, which is on track for first gas in mid-2014.

Philippe Guys at Total E&P UK says the complex of nine subsea wells and an onshore gas plant will serve as a hub for Total and also for third parties exploring in the region; the installations have been purposefully oversized to enable any new discoveries in the region to be tied into Total’s infrastructure. Total itself aims to connect its nearby Edradour discovery to the hub by 2017.

“We are investing more in the UK than in any other country in the world,” Guys says. “This year alone we are spending £1.3 billion in the UK in capital expenditure and we are planning another £5 billion over the next five years.”

Capacity in the 234km pipeline that Total is building from the Shetlands to the mainland has also been earmarked for gas from other developments in the area,

including Rosebank, operated by Chevron and due to start production in 2017, and Clair Ridge, operated by BP and due for production in late 2016.

The £4.5 billion Clair Ridge project represents the second phase of the development of Clair, which is the largest field in the UKCS. Clair holds around

8 billion barrels of oil equivalent and began production in 2005. Earlier this year, BP and its partners, including Shell, launched a £326 million appraisal program to look at the possibility of developing a third phase.

“Clair Ridge is probably the single most intriguing development on the UK continental shelf,” Glen Cayley, Vice President of Shell’s upstream business in the

UK and Ireland, says. “The facilities that we are building there are designed for at least 40 years of operations.”

At the same time as majors invest in developing new reservoirs West of Shetland, they are redeveloping their existing hubs in the more established part of the North Sea, Total at Elgin/Franklin and BP at Andrew, Magnus and ETAP, allowing older assets to last longer and recovery factors to increase. In 2012, Shell also significantly increased its equity in the Beryl area fields north-east of Aberdeen, where it plans to invest substantially and extend the production life, for potentially a further 20 years.

Although less dramatic than the developments West of Shetland, it is brownfield investments such as these that hold the key to squeezing as much oil as possible out of the North Sea.

“There are many opportunities within the Beryl field and we think it has a long life,” Cayley says. “We have adopted a strategy of trying to sustain the UK business over the long term and that takes the form of both investment in new projects and in existing fields.”

“We have adopted a strategy of trying to sustain the uK business over the long term and that takes the form of both investments in new projects and in existing fields.”

Mr. GleN Cayley, Shell uK Vice President – Technical

TRANSOCEAN:PROGRESS

IN THE NORTH SEA

Ever since launching the first jackup to work in the U.K. North Sea in 1965, Transocean has helped our customers to achieve their offshore drilling objectives with a keen focus on an incident-free workplace.

Being our customers’ preferred partner has led us to several firsts in the North Sea, including the first jackup designed to work year-round, and the first semi-submbersible rig to work west of the Shetland Islands, year-round.

We were also the first to provide full scale well construction training in our dedicated training centre and the first to receive acceptance of an Installation Safety Case.

Our progress continues in recent years, as our rigs have run the first concentric injection completions and utilized a riserless mud return system.

So whether it’s harsh-environment drilling by a high-specification semisubmersible rig or shallow-water drilling by our four high-spec jackups, Transocean brings the right rig and the right people to get the job done, efficiently and safely.

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Long the world’s leading test bed for upstream innovations such as 4D seismic and technologies for

High-Pressure/High-Temperature fields, the UK North Sea is now facing perhaps its greatest technological challenge – maximizing recovery and improving production efficiency.

“The oil and gas is there, and we can recover more of it if we can successfully employ technology to nurture our reservoirs and extend the life of our facilities,” Trevor Garlick, BP’s regional president for the North Sea, says. “We can do better than 20-40% recovery. We should be aiming to increase recovery factors for all our reservoirs and we should look to work together to make that happen.”

Working together on technology is increasingly important as smaller players without the financial and technical resources of the majors operate fields that are more technically and commercially challenging. At the same time, government agencies are providing increased support for innovation. Scottish Enterprise has leveraged a total £8.9 million in investment in technology in the last financial year, including awards made for the first two of six innovation calls, for asset reliability and well integrity.

Paul Warwick, Executive Vice-President for Europe-Atlantic at Talisman, is the leader of the technology workgroup at PILOT, the UK Government’s oil and gas

taskforce, which is developing a technology strategy that aims to increase total spending on R&D in the UKCS.

“Smaller companies without the know-how of the global majors are going to need to access technology in a different way,” he explains. “To develop the remaining reserves, we need to have a different level of thinking around technology.” In response to this challenge, the industry in the UK is beginning to apply the latest techniques for maximizing recovery while minimizing costs, and to share them across the sector. At the massive Clair Ridge development West of Shetland, BP will be deploying its LoSal enhanced oil recovery technology

from day one, lowering the salinity of the water used to flood the reservoir in order to release more oil. It’s the first time that a low salinity project has been approved

for use offshore, and BP estimates that it will produce another 40 million barrels from Clair Ridge, as much as many new field developments in total.

Also West of Shetland, at the

redevelopment of the Schiehallion field, BP and partner Shell are planning to improve recovery by building facilities on the new FPSO for storing and injecting polymers.

“I’m hopeful that some of the mid-size and smaller companies that are buying mature assets pick up some of our techniques in collaboration, particularly around LoSal and polymer techniques,” Garlick says.

Maximizing hydrocarbon recovery is also a priority in the gas fields. At the Britannia natural gas field, operated by a joint venture between ConocoPhillips and Chevron, final work is now being carried out on a project that will increase Britannia’s gas production by approximately 90 MMCFD.

“One of the ways to get more of the reserves from the field is to lower the surface pressure in some wells,” David Chenier, UK president at ConocoPhillips says. “To achieve this we sanctioned the Britannia long-term compression project. In the spring of this year, the first big component of this project, the mono-column, was installed offshore. The mono-column is a very innovative patent-pending design and its use is a first in the North Sea.”

The industry is adopting an increasingly collaborative approach to enhancing oil recovery and increasing production efficiency

Working together to push the envelope

“The mono-column is a very innovative patent-pending design and its use is a first in the North Sea.”

Mr. daVId CheNIer CoNoCoPhIllIPS uK President

Balmoral Skills Academy

One of the UK North Sea’s greatest advantages when it comes to competing for capital in upstream

investment is the presence of a world-beating supply chain. It’s a supply chain that is increasingly internationalized but one that is also firmly anchored in Aberdeen, where it is playing a critical part in maximizing the recovery of resources and maintaining the reliability of ageing assets.

“We want the supply chain to be increasingly focused on the big picture of recovering the optimum resources out of the North Sea,” says Melfort Campbell, joint-chair of the Scottish Government’s Oil and Gas Industry Leadership Group and a board member of Scottish Enterprise. Because of the current surge in demand, human and technical resources in the supply

chain are stretched and cost pressures are rising. However, contractors across the UK North Sea are rapidly increasing their capacities in response. “We’re building a

new base in Aberdeen in recognition of the growth of the business and we are going to increase our resources,” Kenny Dey, UK Managing Director of Archer says.

“It is good for the industry to see a company like us who are leaders in platform drilling and well services making a statement that we are here for the long haul.”

At the same time, the supply chain is investing heavily in research and innovation, to provide operators with the cost- effective technologies they need to maximize recovery and production efficiency in today’s challenging greenfield and brownfield

developments. “We have got to work together to keep our costs under control,” Adrian Rose, Vice President for Europe at Transocean says. “It is our job to be safe and efficient and get the production

back up, and I think there is a lot of innovation still to come. The technology needs to continue to develop in order to exploit the basin to its fullest.”

The sector’s investments in technology have also won it a leading role in the fast growing export market. Although its high cost base has eroded its competitiveness as a location for fabrication, Scotland’s supply chain has world-leading capabilities in areas such as subsea engineering and health and safety. Exports now account for 47% of the supply chain’s total sales, up from 31% in 2002.

At the same time as helping the supply chain to expand in key markets such as Canada, Norway and Brazil, the Scottish Government is also supporting the sector’s continued investments in research and innovation. “For the western world, a good, sustainable supply chain requires differentiation based on added value and technology because we probably won’t be the cheapest at doing anything,” John Pearson, Group President, Europe at AMEC and co-chairman of Oil and Gas UK, says. “Technology is very important to your long term sustainability.”

Archer was formed by the coming together of several experienced oilfield services companies in February 2011. It’s not only the current shape of the organization that is young. Although there is a wealth of experience throughout the company, Archer’s youthful, skilled and passionate workforce of 8,300 people is perhaps what differentiates it most in a very competitive market.

“Clients say that what they like about Archer is that we are a young, energetic, and enthusiastic team,” says Kenny Dey,

Committed to the long-term

Archer’s UK Managing Director. “We have strong, long-term relationships with each of our clients.”

Over the course of the last year, the strength and depth of Archer’s workforce has helped secure the fast growing company a number of contract extensions and new wins in the UK North Sea. “A stable workforce is very important when you are trying to gain new contracts,” Dey says. “Our clients are very happy with the service and commitment that we provide.”

Ad_BetterWells_OGJ_072013_FP_197X267mm.indd 1 22/07/2013 15:41

The UK Supply Chain The supply chain is responding to the rise in demand by investing in new capacity

“The technology needs to continue to develop in order to exploit the basin to its fullest.”

Mr. adrIaN P. roSe TraNSoCeaN NorTh Sea Managing director

“We’re building a new base in aberdeen in recognition of the growth of the business and we are going to increase our resources.”

Mr. KeNNeTh dey, arCher uK Managing director

W hile oil majors focus many of their massive resources on new developments West of

Shetland, the job of maximizing oil and gas production from smaller discoveries and mature fields is increasingly the responsibility of a new breed of smaller, lower cost operator.

“As the basin matures, the size of the remaining opportunities both in existing and remaining prospects and underdeveloped fields tends to get smaller,” says Nigel Hares, co-founder of independent producer EnQuest. “They tend to be of less interest to the super majors, who need big opportunities to make a difference. For a company our size, they remain very material and interesting.”

The business models of smaller operators such as Chrysaor and EnQuest depend on maximizing recovery by applying new approaches and new technology to field and well management That is EnQuest’s strategy for recovering an additional 35 million barrels of oil from the ageing Thistle field, which was being managed with a view to production ceasing when EnQuest acquired the field in 2010.

If the industry is going to recover as much as possible of the remaining 24 billion barrels from the basin, access to finance for independent operators is critical. With today’s debt-averse banks and volatile financial markets, it is not always easy for smaller explorers to raise the funds needed for their activities.

“With the benefit of new seismic we upgraded and renovated the drilling rig and drilled five new wells,” Hares says. “We are now investing in simplifying the process and bringing in new up-to-date control systems, which allows us to increase uptime and decrease operating costs per barrel. Before we were involved, Thistle produced as little as 2,000 barrels per day. Last year its average production was 8,000 barrels a day.”

“One of the challenges for the North Sea is that we are seeing less available capital and everything costs much more than it used to,” Phil Kirk at Chrysaor says.

Chrysaor itself has just secured £81 million of new equity, which Kirk says it will use to build its portfolio in the UK and Ireland and to take existing projects into development and production. These include the Phoenix field, which holds just under 15 million barrels of equivalent oil, gas and condensate in the Moray Firth Basin.

Last year’s tax incentives have improved the economics of developing small fields such as Thistle and Phoenix. Increased clarity on decommissioning relief will also help put ageing assets into the hands of smaller operators who were previously concerned by the cost of shutting down old operations.

However, independents say more measures are now needed to make it easier for them to access third party infrastructure, including existing platforms which can be used to tie in new production, as well as pipelines and terminals.

PILOT’s infrastructure workgroup is currently looking at ways of improving access to infrastructure, to ensure that new and smaller players can develop and bring onstream discoveries, especially from otherwise stranded resources.

“There is infrastructure near Phoenix that could technically take the volumes and process the gas and liquids but trying to get to a commercial solution that works for all parties is tough,” Kirk says. “We are pretty close to a solution but it has taken creative thinking. The industry is beginning to change its mindset but it needs to move more quickly in the future.”

As UK North Sea fields mature, independent operators are picking up the production baton from the majors

The changing face of production

“Trying to get to a commercial solution that works for all parties is tough. The industry is beginning to change its mindset but it needs to move more quickly in the future”

Mr. PhIl KIrK, ChrySaor Managing director & Ceo

TOTAL platforms

balmoraloffshore.com

Local knowledgeGlobal understanding

ABErdEEn HOME TO MANYOF THE WORLD’S GREATESTOIL AND GAS INNOVATORS

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wants to claim a position as an energy capital, and Aberdeen is investing in im-proving its connectivity with the rest of the world. Aberdeen International Airport has extended its runway, added new airlines and routes, and plans to invest around £100 million in providing more capacity and improving its facilities for passengers.

Aberdeen City and Shire also have ambitious plans for enhancing the region’s local transport infrastructure. Long in the planning, the City Council is now taking forward much needed work on the Aberdeen Western Peripheral Route (AWPR). This project should be underway in 2014 and complete by the spring of 2018, improving links to the airport and cutting congestion in the city itself. “Aberdeen is getting very, very busy at peak travel times, so hopefully the AWPR will help alleviate the problem,” the Lord Provost of Aberdeen, Councillor George Adam says.

In addition to improvements to phy-sical infrastructure, ongoing investments in Aberdeen’s educational facilities are consolidating its global appeal. David Chenier at ConocoPhillips says the city’s International School, which in 2010

moved to a new, purpose-built campus, has now become a major draw for expatriates with children. Chenier is Chairman of the school’s Board of Trustees.

Higher up the education ladder, Aberdeen is also successfully building on its reputation as a center for excellence in oil and gas and is bringing students and professionals from Brazil and beyond to live and study in the the city. Professor Albert Rodger, Vice Principal at the University of Aberdeen, says the university has forged

international relationships and agreements with leading universities worldwide in the oil and gas area. This year, in partnership with local higher education institutions Robert Gordon University, Heriot Watt University, Forth Valley College, Aberdeen College, and Banff and Buchan College, the University has also established the Oil and Gas Academy (OGAS), to provide comprehensive skills, education and training for the oil and gas sector in Scotland, the UK and internationally.

“It is a partnership for the delivery of teaching programs from technician training through to the doctoral training of students,” Professor Rodger says. “It is basically a one-stop-shop for undergraduate, post-graduate and for Continuing Professional Development.” OGAS is set to encourage an ever increasing influx of students and professionals from around the world, helping accelerate Aberdeen’s transformation into a truly global city.

“Education is an important part of Aberdeen’s success story,” the Lord Provost says, “and it is changing Aberdeen into a more interesting, diverse and outward looking place in which to live and work.”

It’s a long way from the windswept waters of the North Sea to the tropical shoreline of Brazil, but for Balmoral Group it’s just the latest stage in a journey that’s seen it become one of the UK supply chain’s biggest international hitters.

Jim Milne, Chairman and Managing Director, says that a new manufacturing facility in Vitoria, which should be ready early next year, marks the culmination of a period of rapid international growth for the deep-water specialists. But it is Aberdeen that Balmoral will always call home, and it is its investments in R&D, manufacturing and training facilities here that have been the key to the company’s growth.

“We are one of the few Aberdeen-based manufacturers that can install, design, produce, and project-manage worldwide,” Mr Milne says. “You have to have experience in order to manufacture effectively but you also need a passion for delivering the best of the best and that is what we do.”

Local Hero Goes Global

T he city of Aberdeen is gearing up to welcome a new and perhaps unlikely set of visitors; thousands

of Brazilian students are set to descend on Europe’s energy capital as part of a Brazilian Government program to provide them with world-class training in oil and gas.

To judge by the experience of the many foreigners who have recently begun working in Aberdeen’s burgeoning energy sector, the warmth of the welcome they receive will more than make up for the abrupt change in weather conditions.

“Professionally speaking, you are collaborating with the most competent people in their field and it is a real pleasure to work with them,” Philippe Guys at Total

says. “The people are charming and helpful and the countryside is beautiful – and as a golfer where else would I want to be? Air France also flies to Paris three times a day so I can leave in the morning, have my meeting in Paris and be back in the evening. It is very easy to travel.”

“We are very lucky in this part of the world,” says Geoff Holmes, Talisman Sinopec UK CEO and an ambassador for Aberdeenshire. “We have some of the most stun-ning coastline in

the UK and the highest concentration of castles in Europe. We have the Braemar Highland Games which are attended by the Queen every year. We have a myri-ad of distilleries making the finest malt whisky that man could ever dream of.” Good air links are crucial to any city that

Investments in infrastructure and education increase Aberdeen’s appeal to the global industry

Going Global: Aberdeen opens its arms to the world

JIM MIlNe, balMoral Chairman and

Managing director

Aberdeen harbour view

“Professionally speaking, you are collaborating with the most competent people in their field and it is a real pleasure to work with them.”

Mr. PhIlIPPe GuyS, ToTal e&P uK ltd. Managing director

Our services cover the entire asset lifecycle, including:

T he energy industry of Aberdeen today is almost unrecognizable to what it was some 15 years ago, when

the oil price crashed to almost $10 a barrel and the majors and the supply chain alike let many experienced staff go and slammed the brakes on their local hiring programs.

Despite today’s vibrant investment conditions, the scars of that episode still linger. Perhaps the single greatest constraint on the growth of the sector now is a shortage of skills and experience, a long-term legacy of the downturn at the end of the 1990s.

Lessons have been learnt from the past; when the global financial crisis hit five years ago, companies in Aberdeen made a point of keeping their workforces intact and maintaining their recruitment efforts. But because of the shortage of experienced mid-career employees, who are in demand not only in the North Sea but all over the world, the industry is finding it hard to retain their skilled staff.

“Unfortunately, there is a very short term approach to skills in the energy industry which we don’t find in other sectors and

increase the skill pool rather than just simply pay more for the few that are left. ”

Gordon Ballard, co-chair of Oil and Gas UK and Chairman of skills body OPITO International, says that this year OPITO has begun working in partnership with Ministry of Defence to encourage personnel to put the skills they learnt in the armed forces to good use in the oil industry. There is a significant opportunity for the sector to benefit as Britain downsizes its military, says Ballard, who leads PILOT’s workforce resources group.

The industry is also looking at ways for attracting the new generation to the industry. In May, the Scottish Government launched Energy Skills Scotland, specifically to encourage and support more women, young people and mid-career professionals to join the industry. As well as devoting funds to providing 1,000 new transitional training places, Energy Skills Scotland will establish a one-stop-shop for energy training and courses in colleges and universities across Scotland

“You have to get more people into the industry,” says David Rennie, Intl. Sector Head for Oil and Gas at Scottish

there is lot of poaching that goes on,” Melfort Campbell says. “The culture in the oil business needs to change.”

“At the end of the day, our competitive advantage is going to be based on two things—the innovation and technology that we can offer and the skilled people that can make a difference.”

As well as investing in training, companies in the supply chain are exploring creative options for providing customers with the skills they need. Wood Group PSN, which traces its roots back to a ship repair firm founded in Aberdeen in the early 1900s, has begun to invest in remote

Enterprise. “The key solution is really to grow the size of the cake.”

With the same goal of attracting youngsters into the industry, OPITO is also expanding its modern apprenticeship scheme. “People need to change their mindset to take on young people or newly trained people rather than just going out and stealing from their neighbours,” Ballard says.

Meanwhile, OPITO plans to create the first ever UK-wide National Oil & Gas Skills Week to raise the profile of the industry. Industry leaders across the sector say that it is essential to increase awareness in schools and colleges of the opportunities that the industry offers to young men and women looking for employment.

“We need to do more to tell young people about just how important the industry is to the country, and just how much life it has left in it,” Trevor Garlick at BP adds. “Although we have been here

offices and technology to support business needs in the North Sea; “if the skills aren’t where the work is, we’ll take the work

to the people,” the company’s UK Managing Director Dave Stewart says.

The industry is also focused on bringing people from outside the sector into the oil and gas business. “We need to think

beyond Aberdeen and think beyond this industry,” Glen Cayley at Shell says. “We are fishing in an ever diminishing pool of experienced oil and gas professionals, and yet there are many people with very similar skills, from the military, construction, petrochemicals and manufacturing.

There are many areas where we could really start to attract new entrants from what is generally a poor job market in the main economy into the oil and gas industry, which is a hot job market. We need to

for 40 years or so, we’re designing platforms that will be around for another 40 years. There are very exciting careers that most school children have no idea about unless we tell them. We need to really increase the profile of this industry.”

The industry looks for a sustainable supply of skilled labour

Widening the labor pool and appealing to youth

“If the skills aren’t where the work is, we’ll take the work to the people”

Mr. daVe STeWarT Wood GrouP PSN Managing director uK

Scottish oil and gas workers

“We need to do more to tell people about just how important the industry is to the country, and just how much life it has left in it. We need to increase the profile of this industry.”

Mr. TreVor GarlICK, bP NorTh Sea regional President

Oil and Gas UK has launched a campaign to raise recognition of the industry’s achievements

Showcasing the industry and raising awareness

T he UK’s oil and gas industry is reaping the rewards of a new level of engagement with Government.

But to ensure that the UK continues to provide a welcoming environment for investment in the oil and gas sector in the long term, the industry also needs to deepen its engagement with the public. Ultimately, it is public opinion that informs public policy and in this area the industry has been lagging.

In order to create awareness Oil and Gas UK has launched a program called Energising the Nation’s Future, that aims to demonstrate the role that the industry plays through innovation, job creation and its economic contribution, both

direct and indirect. As a result, it should help secure more consistent support for the sector from governments, as well as more interest from the general public in the opportunities for skilled jobs in the industry.

“The oil and gas sector is the single largest industrial contributor to the UK economy. However, as an industry, we have perhaps not consistently engaged and explained the role that we play,” Webb said at the launch of the program. “The sector is still labouring under several misconceptions about our reach and relevance and we need to improve awareness and recognition of the important value we add to people’s lives.

“The “Energising the Nation’s Future” campaign aims to ensure that our industry and our members’ contributions are recognised fully for just what they are: a true success story for the nation.”

This autumn, the campaign will host a major event entitled ‘Innovation Nation’ on the importance of scientific, technological, engineering and business innovation to Britain’s economic future. This will be hosted and sponsored by Oil & Gas UK and will be held at and in conjunction with The Royal Academy of Engineering.

Anyone who works in the industry can register to join the campaign, at http://energisingthenationsfuture.co.uk/joinus

Malcolm Webb, OIL & GAS UK Chief Executive and SPE OFFSHOrE EUrOPE 2013 Executive Chairman

Gordon Ballard, OIL & GAS INdUSTry COUNCIL Chairman and OIL & GAS UK Co-chair

Q: In addition to the Offshore Europe event hosted in Aberdeen, how would you say that Oil & Gas UK is raising the international profile of the UK offshore industry?A: We are keen to be present wherever we can in order to promote our supply chain to international audiences. In addition to that, we are also working to raise the awareness of our industry within this country. What we find from polls is that apparently, a large portion of the British population think that we import almost all of our oil and gas. And they are

not aware of the major success story in our supply chain. So actually, the main agenda that we have this year is to seek to raise awareness within Britain of this great industry. Q: What needs to be done to sustain the rise in investment that we are seeing in the UK North Sea?A: The first thing that we need is a consistent, predict-able, business environment. Secondly, we also need to stay abreast of the latest technology, which has a big part to play. We are going into deeper waters. Thirdly, we need the people to do all of this. You can have all of the right technology in the

world, but if you don’t have the right people, then you will be suffering. Q: What is Oil and Gas UK doing to attract skilled workers to the industry?A: We are working very hard alongside our trading organization to come up with new standards and arrangements whereby we can do transition training for other people, especially with relative engineering experience, in other sectors who might not be enjoying the boom that we are experiencing. Q: How can Oil and Gas UK help the uptake of new technologies?

A: To date, our Government’s support for technology has not been huge for our industry. We are looking for increased collaboration between our industry and the Government. The Scottish Government has already put in place a 10 million pound fund to encourage further technology. We will be looking to work with the UK Government as well with new technologies, and looking within the industry to see what we can do to increase the take-up of new technologies when they are available.

Q: What lessons have been learnt from the 2011 budget?A: It was a huge blow but since then the Government has done a lot, including all the various fiscal changes to rectify it. There is a lot more attention now to fiscal matters, such as the Fiscal Forum, where the Government and treasury are more engaged. It is a shame that it took all of this to get a reaction and involvement. On the positive side, it really brought everyone together and kick-started a few things.

Q: How satisfied are you with the current fiscal regime?A: I think we still need to come up with a better long-term fiscal structure as we become more and more mature as an area. We have talked to Government about this and we would like to see a more “fit for purpose” fiscal regime that really does encourage us to get all the oil out. It is notabout paying less, necessarily, it is about encouraging peopleto extract more.Q: How is the Government performing its stewardship role?A: I think it is important that we have a well-resourced

and competent regulator or steward. We have had the same stewardship for a long time, but we have a lot more operators now, a lot more different people coming in, and we are in a different phase. The stewardship needs to be different. I am really looking forward to hearing the ideas and seeing what comes up from Sir Ian Wood’s review of this area for the Government. Q: What do you think the UK North Sea has contributed to improving offshore safety, especially since Piper Alpha?A: Piper Alpha was horren-dous, but it set up a safety regime that is now a global

exemplar and this is the reputation that we now have worldwide. Also, everyone who has come here from other parts of the world and seen it has always been impressed by Step Change in Safety and tried to take the idea away to set up something similar. Step Change in Safety does a fantastic job of the practical side of safety. It involves all stakeholders and has been successful in involving the workforce.People look to these kinds of standards in other oil producing countries. OPITO

International has taken those standards into over 20 countries worldwide.

This industry is important for all parts of the British Isles

The stewardship needs to be different One year on from the publication of the Oil and Gas Strategy that it developed for Scotland’s Oil & Gas Industry Leadership Group, Scottish Enterprise says it is satisfied with the progress made, not only in specific target areas but also more generally in the improved level of engagement it has led to with the industry.

“We are now in a position where the industry understands and appreciates what the role of government can be in a positive sense,” David Rennie, Scottish Enterprise’s International Sector Head for Oil and Gas, says. “It is not just about tax. There are lots of other things that government can do to help.”

In terms of delivering on its action plans for the strategy’s six priority areas, Scottish Enterprise has already allocated £2.7 million of a three-year £10 million fund

delivering Scotland’s Oil & Gas Strategyfor innovation in oil and gas that it established last year. Rennie says the £10 million level does not represent a cap and the organization would be happy to go beyond that amount. “If we end up supporting £12 million of investment over three years, from my perspective, that is not a problem, as long as the support is right and it is done in the right areas.”

Another priority area is supporting the internationalization of the supply chain. To help achieve this goal, Scottish Enterprise has opened new offices in key growth markets, including Calgary and Rio de Janeiro, and published business guides for Australia and Brazil. Rennie says the organization is also looking to establish a presence in Perth in Australia and in Ghana and to publish a guide for West Africa. “Both the domestic market and the international market have continued to grow, but the international market has grown more

quickly,” Rennie says. “In the last financial year, we have helped over 200 companies to do international business. They tell us that over the next few years, that will lead to sales of over £800 million.”

The Scottish supply chain has clear competitive advantages in particular in the subsea sector, where companies in Aberdeen now account for about one third of all global expenditure, Rennie says. Education and health and safety are other growth areas.

Geoff Holmes, TALISMAN SINOPEC ENErGy UK CEO

Bill Morrice TECHNIP UK Managing director Jack Winton, KCA dEUTAG Senior Vice President

Ken Feather, ArCHEr Vice President Marketing & Sales, Emerging Markets & Technologies

Q: What does Sinopec’s entry into the UK North Sea mean for the basin?A: In terms of investment, the joint-venture company will be investing significantly more as a joint-venture than Talisman would have on its own. The UK business is not core for Talisman, therefore the opportunity to bring in a partner who was keen to invest heavily in the business was attractive to Talisman. It is great news for the UK business and for the

UK supply chain because it has given us an injection of funding that we would not have had otherwise.Q: What plans do you have for exploration?A: For Talisman Sinopec it is a priority to invest in finding undiscovered oil. That is an area where we have not quite yet got the right level of incentives in play. If I look at the Norwegian model where there are heavy incentives from the Norwegian Government

for operators to invest in exploration, we do not have the same level of incentives available in the UK. I am concerned that the UK sector is not investing enough in exploration in the UKCS.Q: How satisfied are you with the supply chain?A: We have a very strong supply chain here in the UK with a deep level of competency in the workforce. It is clearly a challenge when the industry gets busy.

Because demand is so high, the pressure on costs is significant. But the industry has a number of strategies to address the shortage of people and there is a lot of depth in terms of capability and competency that we can call on to execute the work that we are committing to.

Q: How is your business in Aberdeen expanding? A: Technip has increased its headcount in Aberdeen by around 40 % in the past 18 months to two years. And we continue to see that growing. Aberdeen is at the heart of subsea development in a

burgeoning market both in the short and the long term. It is an exciting place to be.Q: How is the arrival of smaller operators changing the demands on your business?A: You expect these smaller operators to look for the cheapest deal, because they are trying to operate on a lower cost and margin basis. In reality they are looking for a stronger contractor who is able to avert the risk that they foresee as a business, because these projects are so significant that they can’t afford to see these projects go wrong.

Q: How important is the UK North Sea to KCA Deutag? A: Our offshore business grew up out of the North Sea. A lot of our systems, processes and skills came from there. For us, it is really important for our offshore operations, in that we use a large number of people from the UK North Sea, and take the skills and knowledge we’ve built up and export them internationally. Q: What has the North Sea contributed to your reputation for safety?A: Safety is our number one priority. That is ultimately our ‘license to operate’. We

have been the best in our field for many years, and a lot of that comes from the evolution of the safety culture and safety regime in the UK North Sea. And many of our tools and processes at rig sites as well as in terms of safety management systems have come out of the North Sea.

Q: What increase in demand are you seeing for your products and services in the UK North Sea? A: We are seeing a significant increase in demand as a result of operators extending the life of their fields and their wells. That requires a greater attention to detail in the way that new wells are constructed and how old wells are maintained, especially in the context of well integrity. The fact of the matter is the global well infrastructure is getting older. A large percentage of existing wells are more than 10 years old and the industry is adding more than a 1,000 new wells every year outside of the US. Third party

research shows that almost 20% of all global wells are shut in because of well integrity issues. Imagine how much more efficient the industry would be if these issues could be prevented or repaired. Across the industry, operators are focusing on getting more from existing wells and making sure that new wells last longer and perform better—and this means a greater emphasis on well integrity. The technologies and services we bring in the North Sea and further afield are aimed at helping our customers achieve that goal.Q: Why is the industry so focused on well integrity? A: A well integrity issue can range from a small internal

system leak to something much more extreme – the impact of an integrity failure can range from an underperforming well, benign to the environment, to something much more serious. In the best case that means these wells are not performing as well as they could be. In the worst case it means they are exposing people and the environment to risk. From Archer’s perspective, we recognize this is a serious issue. That is one of the reasons why we developed a specialized toolbox with a host of technologies that can address these challenges.Q: How easy is it to find specialist employees?A: It is never easy to find and

attract new employees when you are an emerging brand because there is a level of uncertainty in terms of what that brand stands for and what people can expect when they join you. My perception is that we are doing quite well in terms of attracting new talent. Archer is an exciting company to work for and we have cutting-edge technology. People see that on the surface through our communications and through our exhibits. I think they see us as a vibrant and interesting company to work for.

Q: What do you think are the keys to maximizing recovery from the UK North Sea?A: The next phase of development in the UK Continental Shelf, which is a mature province, will rely on collaboration between industry, Government, uni-versities and colleges. The

Scottish and UK Governments have recognized the need to pull together. They have come together to develop an oil and gas strategy with a strong focus on effectively maximizing production in the region.Q: How is Centrica Energy investing in innovation?A: Innovation will be key to the sector’s future. That’s what it will take to get us to the next chapter. There are some good examples of where we, as Centrica Energy,

have implemented concepts from other regions with great success. For example, we drilled some of the first horizontal fracked wells in the North Sea and operate the largest self-installing platform in the North Sea, the F3FA. Having the supply-chain here is a massive benefit because there are a lot of good ideas out there and having it at your doorstep is a huge advantage.Q: How concerned are you by rising costs?A: The North Sea has to be

competitive. The costs are increasing and the pressure is on. Every day we look at key issues such as: “What is our production efficiency? How do we spend our money in the best possible way? How do we set up our supply chain in the best possible way? How do we collaborate with like-minded companies towards achieving production success?” We want to take our entrepreneurial approach to production and apply it to our management of cost.

The pressure on costs is significant

Aberdeen is at the heart of subsea development

Safety is our number one priority

Almost 20% of all global wells are shut in

Innovation will be key to the sector’s futurePaul de Leeuw, CENTrICA ENErGy director of Strategy Upstream div.

Operators and contractors discuss preparations for the next chapter of the UK North Sea

Industry leaders look to the future