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Secretary of State for Scotland presents Oil & Gas UK Awards

wireline newsletter Issue 7.indd 1 17/12/08 14:48:01

Page 2

ContentsWelcomeNo-one can dispute that at the end of 2008 we find ourselves in tough and turbulent mes. Capital markets are frozen. Crude oil prices and demand have slumped rapidly as the world falls deeper into recession. The ques on on our minds is what this means for the future of the North Sea. Clearly the industry is not immune and there is already disturbing evidence of the malign impact the downturn is having on businesses within the sector.

We are an industry that, by defini on, must take the long term view, measuring investment in terms of decades, not months or even years. The industry is expert at managing risk and the economic cycle. But our immediate success could well be hampered by taking the wrong decisions today, leading in turn to more serious consequences in the longer term.

Fiscal instability, soaring global cost infla on and the failure of UK regulators to give the right signals and the unequivocal support this industry needs have all contributed to the basin’s faster than an cipated decline since 2000. The danger is that recovering oil and gas from the mature North Sea will become even more challenging as prices fall and investment decisions are delayed. If the current underlying 7.5% decline rate is allowed to con nue, there is a risk that indigenous produc on could be largely over by 2020 and Britain will have to import virtually all its oil and gas – which even by then, based on the Government’s own calcula ons, could s ll represent at least 70% of the country’s overall primary energy requirement. We cannot imagine this being allowed to happen.

The UK con nental shelf s ll promises rich reserves of oil and gas in sufficient volumes to provide this country with a significant source of primary energy for decades to come. This was a point well understood by Prime Minister Gordon Brown and the Chancellor when they met the Oil & Gas UK Board in May and the crude oil price was heading towards its peak of $147 a barrel. It is a point the Government now cannot afford to overlook, just over six months on, with prices around $45. What the industry needs today is a strong signal from Government that it is prepared to take the necessary steps to protect this hugely successful industry, boost investment in the UKCS and help reduce its rate of decline.

Oil & Gas UK was therefore encouraged to hear what the Chancellor had to say about the need to incen vise developments in the UK offshore. We will certainly be working purposely with the Treasury on its consulta on regarding value allowances for new field developments, with the outcome an cipated eagerly in the spring Budget. In addi on, we will also be lobbying on behalf of the industry against the specific threats posed by the third phase of the EU Emissions Trading Scheme and ensuring that the sector’s interests con nue to be represented throughout the passage of the Marine and Coastal Access Bill. 2009 will be a challenging year for us all, on many different levels. We do indeed live in interes ng mes.

Trisha O’ReillyCommunica ons Director

NEWS AND VIEWS PAGE

• New year, new system for the Supply Chain Code of Prac ce 3 The Oil & Gas UK Supply Chain Forum introduces a new ered compliance scheme

• Oil & Gas UK demographic report defies image 3 of ageing offshore workers Second report highlights the industry’s worker profile

• Oil & Gas UK’s new guidelines are electric 4 New guidelines aim to minimise offshore electrical risks

• Educa on pathway provides career development for 4 supply chain prac oners The launch of an online educa on pathway for oil and gas industry supply chain prac oners

• Report on the UK marine economy 5 House of Commons report launch a racts coastal poli cians

• Scotoil reprieve 5 NORM scale waste management developments

PARLIAMENTARY UPDATE

• Westminster and Holyrood update 6 A round-up of the latest poli cal developments

FEATURE ARTICLES

• A beacon for technology development 7 An insight into the ac vi es of the Industry’s Technology Facilitator (ITF)

• Oil & Gas UK Awards ‘08 8 The winners of the 2008 Oil & Gas UK Awards

• FLTC celebrates a successful first anniversary 10 A look at what the FLTC has been doing over the past year

• Gas markets, high oil prices and low poli cs 11 A summary of Patrick Heren’s presenta on on the state of the gas market

• On the road to change 12 Aberdeen taxi driver Charlie Smith on how the industry has changed over the last 20 years

• OPITO – The Oil & Gas Academy celebrates successful 14 first year How OPITO – The Oil & Gas Academy has become the industry’s focal point for skills, learning and development

• PILOT Share Fair 10 is a sell out success 15 A report on the biggest PILOT Share Fair yet

• Secretary of State for Scotland makes Aberdeen 15 debut at Supply Chain Conference Oil & Gas UK’s first Supply Chain Conference

• Oil & Gas UK dates for your diary 16

Wireline is published by Oil & Gas UK, the leading representa ve organisa on for the UK offshore oil and gas industry. Oil & Gas UK’s members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industry’s supply chain.

We want to hear your views on our newsle er so please send us your feedback as well as ideas for future ar cles. We would also welcome le ers to the editor which we would aim to publish in future edi ons.

Contact: Helen Richardson in the Oil & Gas UK communica ons directorate Email: [email protected] Tel: 020 7802 2412


Wireline | issue 7 Dec 2008

Page 3

News and Views

The Supply Chain Code of Prac ce, a set of best prac ce guidelines which aim to standardise and simplify commercial arrangements between companies, has seen a notable relaxa on in compliance. The 2008 Oil & Gas UK / BERR code of prac ce compliance survey suggests that some companies may not be applying the Supply Chain Code of Prac ce as rigorously as they did in the past. To improve compliance and make it easier for companies to meet the code’s requirements, the Oil & Gas UK Supply Chain Forum is introducing a new, ered compliance mechanism to encourage be er applica on of the code across the supply chain.

New year, new system for the Supply Chain Code of Prac ce

The new scheme provides a structured system for con nuous progression towards full compliance, allowing companies to take compliance as far as is prac cally possible and achievable within corporate constraints. The Forum recognises that some organisa ons may never be able to comply fully with all aspects of the code and the new ered system will allow those companies to comply with the code at a level that they feel most comfortable with.

The level a company achieves depends on the feedback it receives from the three Code of Prac ce compliance ques ons

in First Point Assessment (FPAL), and the company’s comple on of the annual Code of Prac ce compliance survey. New signatories will be classed under the entry stage and can work towards bronze, silver or gold level. To reach gold level, companies must not only get high scores in the FPAL feedback and complete the annual compliance survey, but must also regularly present at Share Fair (at least every second year).

The first set of er ra ngs achieved by code signatories will be announced towards the end of 2009.

Oil & Gas UK’s second demographic report con nues to provide a much more op mis c picture of the industry’s worker profile than is commonly thought. The report confirms that the average offshore worker is 41 years old, which shows no change from the first report and is the expected average age for any UK sector with a workforce aged between 20 - 60 years.

The report also shows a 7.2% increase in the number of female workers offshore. Although the majority of these are s ll employed in the catering sector, there has been a slightly larger increase (8.4%) in the number of females going into non-catering or technical roles.

Chris Allen, health, safety, social and environment director with Oil & Gas UK, explained: “The average age of the offshore workforce has remained unchanged from 2006, which implies

a steady intake of younger workers to match the ageing of the core workforce or a ri on due to re rement. We are par cularly encouraged by the steady increase of female employees in the lower age brackets (24-34), indica ng the ongoing recruitment of young female science and technology graduates into the industry. These posi ve trends highlight the changing face of the UKCS, and the good work that organisa ons within the industry are doing to a ract a young, highly skilled and diverse workforce.”

The report also points to specific areas which will require the industry’s a en on. A dip in the number of employees in the 30-34 age group compared with other age groups may lead to a shortage of supervisory staff in future years. Likewise, lower representa on in the under-24 age group could also indicate poten al issues ahead for the industry.

Chris Allen added: “For recruitment incen ves to be as effec ve as possible, the industry needs to iden fy more closely the issues affec ng personnel levels in the UKCS. Oversubscribed applica ons for training and graduate schemes run by operators and industry bodies such as OPITO – The Oil & Gas Academy, suggest the issue may not be the a rac veness of the industry, despite opinions to the contrary.”

Oil & Gas UK demographic report defies image of ageing offshore workers

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News and Views

Oil & Gas UK has published new guidelines to minimise risks linked to electrical opera ons on offshore pla orms.

To avoid important points being overlooked when responsibili es are shared between owners, operators and contractors, the document iden fies the full range of electrical opera ons encountered offshore. This approach applies to all phases in an installa on’s life cycle - from design through to decommissioning - and all related ac vi es and equipment. While the guidelines are aimed primarily at mobile and fixed offshore installa ons, they are also relevant to onshore terminals.

Robert Paterson, safety issues manager with Oil & Gas UK, explained: “Electricity

is a significant hazard which can lead to serious injury. However, most injuries from electrical opera ons are preventable and hence the new guidelines focus on minimising risk and improving safety standards. It is important that everyone involved in electrical opera ons, from workers through to supervisors and senior management, understands that these entail important safety considera ons and must be carried out by personnel with the appropriate skills, experience and knowledge.”

The Guidelines for Management of Electrical Opera ons are available on CD-Rom for £30.00 (members) and £60.00 (non-members). Further informa on can be found at: www.oilandgas.org.uk/ukooa/newpublica ons/index.cfm

Oil & Gas UK’s new guidelines are electric

Oil & Gas UK in conjunc on with OPITO - The Oil & Gas Academy and the Chartered Ins tute of Purchasing and Supply (CIPS) have launched an online educa on pathway for supply chain prac oners in the oil and gas industry.

The web-based Supply Chain Gateway has been developed to help oil and gas professionals to broaden their exis ng skills. It will also provide a route into the profession for people wan ng to pursue a career in this discipline.

It uses CIPS’s established mul ple entry point, structured educa on pathway, which leads to professional qualifica ons from founda on level through to chartered status and an execu ve diploma. The oil and gas pathway has been tailored to industry needs. People can follow three

different routes, depending on their ability, experience and ambi ons.

Norman McLennan, supply chain manager with Oil & Gas UK, said: “Supply chain management is a truly dynamic profession which sits at the heart of our sector’s ac vity. The UK is a high cost basin; therefore a rac ng and retaining highly skilled supply chain prac oners is vital to the future success of our industry. They are the ones who create value, improve business performance and drive waste out of the supply chain. The UK oil and gas sector also competes in an interna onal arena, and supply chain business experts are therefore highly sought a er. The new pathway will be a valuable tool to ensure we have access to the best people.”

Educa on pathway provides career development for supply chain prac oners

Further informa on can be found at www.opito.com/supplychaingateway



Page 5

News and Views

As part of its ongoing lobbying ac vity on the Marine Bill, Oil & Gas UK joined forces with the Associa on of Bri sh Ports (ABP) to support the Crown Estate’s report, Socio-economic indicators of marine-related ac vi es in the UK economy.

The launch, hosted by Linda Gilroy MP, was held at the House of Commons on 5 November and a racted interest from poli cians with coastal cons tuencies. The report provides a review of the economic data and informa on available on marine-related ac vi es in the UK and is intended to be a reference source for marine spa al planning. In addi on

to the offshore oil and gas industry, other sectors covered in the report include ship and boat building, aggregates, cables, defence, fishing, ports and renewable energy. As such, it will prove a useful tool when presen ng arguments to government during the passage of the Marine and Coastal Access Bill next year.

The Bill will start its progress through Parliament shortly, having been announced in the Queen’s Speech on 3

Report on the UK marine economy

December. Oil & Gas UK will con nue its lobbying work through the Seabed User and Developer Group (SUDG) during its passage to help ensure that sustainable commercial ac vi es in the UKCS can con nue within a workable regulatory regime.

Online copies of the report can be downloaded from the Oil & Gas UK website: www.oilandgasuk.co.uk/issues/environment/reports.cfm

A er a lengthy appeal, the Sco sh Government has announced that Scotoil, which provides NORM (naturally occurring radioac ve material) decontamina on services to the industry, can con nue its discharge opera ons through its current disposal route into the sea un l 2011.

In December 2006, the Sco sh Environmental Protec on Agency (SEPA) changed Scotoil’s authorisa on to allow discharge via this route un l 15 December 2008 only, despite concluding in their own studies that the poten al health and environmental impacts of the discharge were extremely low.

The only current means to dispose of NORM scale onshore is via Scotoil, which

macerates the scale and releases it through a pipeline to the sea. Without a viable alterna ve, SEPA’s original decision - had it gone ahead - would have le the industry with a cri cal gap in its waste disposal chain. The reprieve will now give the industry more me to find alterna ve disposal routes which can minimise the environmental and long term liability risks. In the mean me, Oil & Gas UK’s NORM Scale Waste Management Plan is focussing on the ul mate aim of completely hal ng

Scotoil reprieve

discharges of solid NORM scale to the near-shore marine environment and is currently considering the feasibility of landfill disposal. Several studies have been carried out, with a number of poten al vendors of decontamina on and disposal services voicing interest. Oil & Gas UK will con nue to pursue the management plan and is working more closely with SEPA to develop a be er mutual understanding of the industry and regulatory needs.

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Parliamentary Update

Oil & Gas UK has set up a series of mee ngs with the new Ministers appointed in the recent government re-shuffle. The associa on will meet The Rt Hon Ed Miliband MP, Secretary of State for the newly formed Department of Energy and Climate Change (DECC) on 21 January 2009. On 7 October Oil & Gas UK met Mike O’Brien MP who returns as Energy Minister – a post he last held from September 2004 to May 2005. Malcolm Wicks MP con nues his par cipa on in energy ma ers as an energy adviser to the Prime Minister.

The newly appointed Secretary of State for Scotland, the Rt Hon Jim Murphy MP, spoke at the Oil & Gas UK Supply Chain conference in Aberdeen on 12 November, sponsored by Shell UK Limited and supported by Technip. Addressing an audience of over 600 at the Oil & Gas UK Annual Awards Dinner, sponsored by Maersk Oil, that same evening the Minister spoke about the 25th Licensing Round and how he was looking forward to par cipa ng in the PILOT forum. The Minister congratulated OPITO – The Oil & Gas Academy on its success to date and announced an ini a ve to iden fy skills shortages in Scotland’s oil and gas industry

which will be undertaken by Oil & Gas UK and the Sco sh Council for Development and Industry (SCDI). Talking about security of energy supply and the impact of the current economic downturn, the Minister said: “the UKCS has been resilient in the past and has risen to many challenges both economic and technical. We believe that it will con nue to face these challenges.”

The Energy Minister, Jim Mather MSP, was the guest speaker at the annual Oil and Gas Cross Party Group recep on in October. The Minister highlighted the importance of the industry to the Sco sh economy, as well as the importance of the jobs and export opportuni es it creates. Talking about the long term transi on towards a low carbon economy, he acknowledged the con nuing role of the oil and gas industry in providing a balanced energy supply mix. The Minister also talked about the opportuni es for carbon capture and storage and the transfer of skills from the oil and gas sector into other areas over the long term.

The Oil and Gas groups at both Westminster and Holyrood have busy schedules with mee ngs planned for the MPs and MSPs on sub sea super grids,

solar energy ac vity within a renewable energy policy, decommissioning and peak oil. The annual All Party Oil and Gas recep on, hosted by Anne Begg MP, will take place at the House of Commons on Monday, 9 February 2009.

In mid October, Oil & Gas UK chief execu ve Malcolm Webb gave oral evidence in Edinburgh to the Commission on Sco sh Devolu on. The commission is an independent body chaired by Professor Sir Kenneth Calman and was set up in March to review and consider the case for changes to the current cons tu onal arrangements.

In a session las ng just under an hour, Malcolm explained that while the industry had not encountered any specific problems with devolu on so far, any future moves that produced regulatory complexity or an addi onal tax burden would be of concern. He also took the opportunity to emphasise the importance and extent of the challenge to maximise recovery of the remaining 25 billion boe of reserves from the mature UK basin, as well as the significance of the supply chain to the Sco sh and UK economies.

Parliamentary update from Westminster and Holyrood

Sco sh Energy Minister, Jim Mather MSP (le ), with Oil & Gas UK Chief Execu ve, Malcolm Webb



Page 7

Feature Article

The Industry’s Technology Facilitator (ITF) is an interna onally recognised champion for technology innova on within the

oil and gas sector. The not for profit organisa on, based in Aberdeen, was established in 1999 and today boasts a membership of 22 major global operator and service companies.

Iden fying the industry’s technology needs, fostering innova on and facilita ng the development and implementa on of new technologies, ITF focuses on adding value through partnership interac on with its members to understand their business driven technology needs.

Industry led and demand driven, the ITF process for technology development is a systema c process that strategically seeks out technology solu ons and innova ons to meet the needs of its global members.

Theme days and workshops open up opportuni es for collabora on between industry, academia, Small and Medium Sized Enterprises (SMEs), researchers and the development community, and ul mately lead to the development of joint industry projects (JIPs), field trials and technology implementa on.

To date, ITF has been responsible for delivering 120 new collabora ve and revolu onary oilfield technology projects

to the market, and securing direct ITF membership funding of more than £35 million.

Just this year, ITF has successfully established seven technology themes that range from decommissioning to HPHT challenges from a subsurface perspec ve. The organisa on has implemented an impressive 15 new technologies in the last 18 months. Fourteen JIPs have also been launched, and ITF expects to have progressed a further 16 to contract stage by the end of 2008. The total funding secured by ITF for technology deployment this year has reached £4.9 million, with another £4.4 million at or approaching contract stage.

One way in which ITF has played a key role in implemen ng technology into the oilfield is a project to improve seismic resolu on by a factor of at least four and fully integrate seismic and electromagne c data. This was developed by OHM and Imperial College, and is set to improve significantly the industry’s ability to locate hydrocarbons and accurately target reserves.

Another example is a project to develop an off-the-shelf method of reducing the con ngency costs of re-connec ng two pieces of casing downhole. READ Well Services designed the ISO Qualified Hydraulically Expandable Tubular System External Casing Patch (HETS-EP) to replace damaged casing, or for slot recovery in seriously corroded outer casings. Following implementa on by ITF, the HETS-EP has solved two serious casing problems for North Sea operators. So what challenges does ITF face in facilita ng the development and implementa on of technologies? While securing the required funding for technology development isn’t necessarily an issue, ensuring proposed technological solu ons meet the needs of the organisa on’s members is impera ve to genera ng interest in projects.

David Liddle, ITF’s technology manager, (pictured) explains: “Our members will pay good money for the right technologies. These technologies have to be interes ng

A beacon for technology development and novel for us to recommend projects that meet our membership’s needs. We also encourage development projects that require operator trials to demonstrate a route to implemen ng a technology.”

In order to overcome these issues, ITF employs a due diligence process to allow the screening of the technology proposals as they are received. ITF takes a broad overview of all technological proposals received and their posi on within the industry, and then makes recommenda ons accordingly.

Con nuing, David said: “Our due diligence process also looks at the ability of the developer to undertake the work, project manage the development process and follow a path through to final implementa on; all of which are important in a rac ng the right level of support.

“We are always on the lookout for innova ve ideas and game-changing technologies. ITF has an open door policy and it is recommended that any developer comes and talks to us about their ideas so that we can provide some guidance.

“Areas of future interest are driven by the need to maximise the reserves we already know about, discover new reserves, improve cost efficiency and make sure we do it safely and in an environmentally friendly manner,” David added.

“As the oil and gas industry moves forward it faces many challenges associated with finding new ways of mee ng the energy demand, and in doing so the industry is exploring more difficult environments.

“Not only will the industry increasingly look towards the difficult and unconven onal offshore environments, but it is always looking for ways to enhance and improve the oil recovery of known reserves.

“Above all, we must not be insular as an industry. We must look outside our own enclave to other industries, as they may offer solu ons to some of our challenges,” concluded David.

For more informa on on ITF please visit www.oil-i .com


Page 8

Feature Article

There was plenty to celebrate at Oil & Gas UK’s pres gious awards dinner this year.

Held on 12 November at the Aberdeen Exhibi on and Conference Centre and sponsored by Maersk Oil, around 600 people enjoyed a gli ering evening to honour the depth and breadth of talent to be found across the sector. The awards were presented by guest of honour, the Rt Hon Jim Murphy MP, Secretary of State for Scotland, and the winners each received a specially commissioned trophy designed by Swedish glass sculptor Elin Isaksson.

This year saw the inclusion of two new corporate categories. The Oil & Gas UK Joint Award for Supply Chain Business Innova on, recognising the implementa on of novel contrac ng strategies between operator and contractor with the poten al for wider applica on across the industry, was won by Venture Produc on and Subsea 7, while Subsea 7 also scooped the inaugural prize in the new Supply Chain Professional Development award category.

The individual categories saw Caroline Gill of Shell UK Limited win the Oil & Gas UK

Award for Overall Excellence, while Kevin Sinclair of Wood Group Engineering (North Sea) Ltd took the Oil & Gas UK Award for Young Technician of the Year, and Steve Bedford of BP the Oil & Gas UK Award for Mentoring.

Malcolm Webb, Oil & Gas UK’s chief execu ve said: “The awards recognise the contribu on being made today by a new genera on of young people and their mentors, as well as the benefits of effec ve working rela onships between operators and contrac ng companies.”

Oil & Gas UK Awards ‘08

The Rt Hon Jim Murphy MP, Secretary of State for Scotland

Caroline Gill, Overall ExcellenceThe coveted awards take centre stage



Page 9

Feature Article

Kevin Sinclair (centre right), Young Technician of the Year Bob Dunsmore, Subsea 7 (le ) and Greg McKenna, Venture Produc on

Guests enjoyed a sparkling recep on Siren provided the entertainment

Ian Ra ray, Subsea 7 Steve Bedford (centre right), Award for Mentoring


Page 10

Feature Article

The UK Fisheries Offshore Oil and Gas Legacy Trust Fund Limited, known as the FLTC, is celebra ng a successful first year, repor ng significant progress in several key areas of ac vity.

The Fund’s chairman Niall Sco , (pictured) explains the push behind its launch in September 2007. “The industry wanted to build on the co-opera on and mutual support that has long existed between the fishing and oil and gas industries. It needed to put in place sustainable arrangements to capture and circulate informa on about industry related seabed hazards which would allow fishermen to con nue opera ng safely in UK waters in the future.”

“The FLTC is a world first, and since there is no model to follow, our priority was simply to get the company up and running and make sure the Board members, two directors from the fishing industry, two from the oil and gas industry plus myself, were working together effec vely. The FLTC’s status as a registered Sco sh charity was secured early on so that we could proceed immediately to dealing with substan ve issues.”

Ini al finance came from Oil & Gas UK in the form of a loan, but ul mately the FLTC will be wholly funded by contribu ons from oil and gas companies who receive approval for deroga ons in their decommissioning programmes. The first of these is expected

next year with BP’s decommissioning of North West Hu on, followed by Total’s decommissioning of Frigg later in 2009.

Groups of industry experts needed to support the Board’s strategic decision-making have also been established. The technical commi ee, which meets five

mes a year, now comprises nine people with a technical background in either the fishing or oil and gas industries. The commi ee provides detailed input into FLTC projects to ensure the informa on systems being developed and maintained are fit for purpose.

Alongside the Board and technical commi ee, a technical advisory group has also been formed to allow engagement with a wide range of stakeholders. Its 17 members are the fisheries liaison officers of oil and gas companies with representa ves of the fishing industry, Common Data Access (CDA), Aberdeenshire Council and the Sco sh Government. Their role is to guide as well as to challenge the work of the company, and act as ambassadors of the FLTC within their organisa ons. “Our next task was to address the currency and accessibility of data on industry seabed hazards,” says Niall. “The FishSAFE monitor, which was ini ally developed in 1998 as a hazard warning system for fishermen to use on their vessels, is no longer consistently supported by the producers of the device and has become increasingly dysfunc onal. The FLTC is now working towards its replacement and plans to have an updated version available next spring. For example, the graphics will be improved to make the new devices clearer and easier to use. And in response to a specific request from the technical commi ee, the monitor casings will be more robust, which will also help to improve performance.”

Niall hopes to hear in December whether a bid to the European Fisheries Fund has been successful. If the funding is granted, the contract to get the new monitors into tes ng and produc on will be issued shortly a erwards.

Long-term access to the data used by FishSAFE is also being addressed. Kingfisher, a division of the Seafish Industry Authority, currently works with Oil & Gas UK subsidiary CDA and the Bri sh Geological Survey (BGS) to capture, process and disseminate detailed informa on on the loca on and status of pipelines, suspended wellheads, rig moves, temporary seabed obstruc ons, seismic surveying and cable laying ac vi es in the UKCS. From 2009 FLTC will take over the responsibility to procure the services for this system - known as Kingfisher Informa on Systems – UK Con nental Shelf or KIS-UKCS – and to develop it specifically for fishermen.

The loca on of oil and gas infrastructure will also be available to fishermen through Kingfisher on a website which is being produced with financial support from Shell.

“The new website should be up and running in the first quarter of 2009 and will allow oil and gas operators to highlight par cular risks associated with their infrastructure,” says Niall. “An added benefit is that informa on on the website will be translated into several languages for use by fishermen of different na onali es.”

“If we deliver these projects successfully, then we will be helping the safety of fishermen in UK waters. We hope the FLTC will become a model for collabora on between the fishing and oil and gas industries world-wide.”

FLTC celebrates a successful first anniversary



Page 11

Feature Article

Oil & Gas UK’s late summer breakfast was held at the Herbert Smith office in London on 9 September and Patrick Heren (pictured) gave an a en ve audience a characteris cally robust view of the current state of the gas market, under the above, thought provoking tle.

He reflected on the evolu on of a compe ve market in the UK, where almost all gas is priced at the NBP (Na onal Balancing Point, a fic onal loca on where the system is no onally in balance). This is in marked contrast to the vast majority of gas in mainland Europe which is supplied under long term contracts and priced largely by reference to oil products. Although some gas is now being traded on spot markets as compe on slowly emerges, this trend is being resisted by incumbents who stymie third party access to their pipeline systems (the EU’s so-called ‘Third Energy Package’ of legisla ve measures is aimed at breaking such an -compe ve prac ces).

However, the emergence of world trading in LNG (Liquefied Natural Gas) has started to crack open the linkage of gas prices to oil, with opportuni es for arbitrage between the main markets of Europe, USA and East Asia. In recent months, the NBP has replaced Henry Hub in the USA as the marker price for the Atlan c LNG market.

The strength of NBP prices seen in the past year has two main causes:

• a reluctance by Norway’s producers to sell gas in Britain at less than oil linked (i.e. European) prices

• fears of a shor all in UKCS supplies and pipeline imports, leading to compe on for LNG with Asian buyers (the Japanese have been paying £1 per therm).

Increasingly, LNG cargoes are heading for the best market, with new contracts being flexibly priced using a gas index. Some of the earlier des na on clauses restric ng where cargoes could be delivered are being li ed or re-nego ated and the re-export of previously delivered cargoes is star ng to happen, although Asian buyers s ll rule LNG markets because of their willingness to pay high prices.

Russia has always been a reliable gas supplier and is as concerned about security of demand as the EU is about security of supply. Reforms within Russia should improve investment and conserva on, and allow independents to export gas, but in reality Gazprom will con nue to dominate exports, albeit using some new contractual deals. The rows with Ukraine and Belarus are about safeguarding export routes, while Georgia is about controlling others’

exports. Russia (Gazprom) has always had a proprietorial interest in Central Asia, so the new oil and gas pipelines through Georgia challenge the old order where all pipelines to Europe had to transit Russia.

Nonetheless, barring a war over Georgia, Russia will con nue to supply the EU as they need the money and we need the gas. In the longer term, though, it is me to start dealing seriously with Iran, which has 16% of world gas reserves; the second largest amount a er Russia.

In summary, short term prices are likely to remain high, along with oil, but in the medium term prices should fall as demand is curtailed and compe on increases in Europe. In the longer term, a public debate and reckoning are required in order to reconcile green aspira ons and the desire to protect consumers from high energy costs – the greater the reliance on renewable energy, the higher the cost. As Patrick Heren says: “We ain’t seen nothing yet!”

Editor’s note: Three months have elapsed since this talk was given and prices have fallen sharply, of course. However, this does not detract from the main points made in the talk.

Gas markets, high oil prices and low poli cs


Page 12

While the UK oil and gas industry has a 260,000-strong workforce, there is another group of 90,000 people across the country whose jobs depend on the sector’s ac vi es in the wider economy.

One such person is Charlie Smith, a taxi driver in Aberdeen. But Charlie is not just any taxi driver because he is also Oil & Gas UK’s longest serving contractor, having celebrated his 20th anniversary of working with Oil & Gas UK this summer. Over that period he has seen oil prices slump below $10 per barrel and peak at $147 and North Sea produc on climb from 200,000 barrels a day to 4.5 million bpd and back again to 3 million bpd. He has seen UKOOA change into Oil & Gas UK and worked with three different Director Generals and one CEO. He witnessed the despair of Piper Alpha and the birth of CRINE, Step Change, CDA and PILOT. Charlie has seen a lot of change! We caught up with him to hear his personal reflec ons on the past 20 years.

What are the strongest memories you have from when you started working for Oil and Gas UK?

I started working for UKOOA, as it was then, in 1988, literally a couple of days before the Piper Alpha disaster. They were very sad days, and extremely busy, as I was constantly taking people dealing with the incident to various loca ons across the city for mee ngs. It really brought the tragedy home to me.

How has Aberdeen changed over the past 20 years?

There’s been a massive change. Many more people have moved into Aberdeen with the oil and gas industry and there’s been a huge growth in shops, hotels, B&Bs and other services and facili es. The city has expanded into the countryside too, with people living and working in the new housing developments in surrounding towns and villages and out-of-town industrial estates. The airport and heliport is busier too. The main effect for me has been the journey mes. They’re a lot longer than they used to be. Rush hours have stretched and there is generally much more traffic on the roads today, with hold-ups even on the minor rural roads.

What other improvements have you no ced?

The industry clearly has had an impact on the local standard of living. It’s been excellent for the local economy. Before oil, the main industries used to include paper, fishing and granite quarrying. Aberdeen was simply a nice, quiet town. That’s all changed now with more money going around, more businesses and generally a more cosmopolitan feel about the place.

In recent years, oil and gas prices have always been in the headlines, but you must have seen the effects of all the different stages of the price cycle?

The cost of fuel is the biggest change that I’ve no ced personally. When I first started out as a taxi driver fuel was 47p a litre and I’ve seen diesel go as high as £1.32 a litre. Now it’s £1.04 a litre and you can see how the price of fuel affects prices across the board. As a taxi driver when prices are high it simply means that your pay packet is smaller, as higher fuel prices mean higher running costs. The council also raise their fare rates in line with fuel prices. The higher vehicle repair charges have also made a difference, as employers pay higher wages to retain good mechanics and stop them moving into the oil and gas industry.

How has Oil & Gas UK changed over the past two decades?

When I started there were only two people in the Aberdeen office, which was housed on Albyn Terrace. The office was small and a bit old fashioned compared to the current Oil & Gas UK office on Market Street, which is different altogether as it’s open-plan and modern. There’s a great view of the docks too, so the office feels like it’s right in the heart of the industry as you can see the supply boats and what’s going on in the harbour.Now there’s a team of around 20, including the people working for the Oil & Gas UK subsidiaries Step Change, CDA and Logic.

The big shi came about five years ago, and it was partly in response to oil companies

On the road to change

Feature Article

Malcolm Webb, Chief Execu ve of Oil & Gas UK with Charlie Smith (right)



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moving their opera ons up to Aberdeen, and partly to take in-house a lot of the work formerly done by commi ees.

What’s it like being a taxi driver during Offshore Europe?

It’s extremely busy. They’re long working days, but fairly profitable too.

Aberdeen is full of visitors from all over the world. There’s lots going on and there’s a real hustle and bustle across the city – from the hotels and shops to the nightlife which is good during Offshore Europe, as there are lots of recep ons, dinners and special events taking place. It’s great that it a racts so many people to Aberdeen, and it’s good for the city as they’re all spending money in the local economy.

Throughout the rest of the year, I work for a number of clients, but in Offshore Europe week I work for Oil & Gas UK for the whole week. I’m kept on the roads from dawn un l dusk and beyond. I pick up and drop off staff at the airport, deliver packages and take staff and guests to mee ngs, events and the exhibi on itself of course. Oil & Gas UK book me for the en re week so that they can be sure that they’ve got a car. It can be very hard to get hold of taxis during Offshore Europe. So, all in all Offshore Europe is non-stop and different from my usual working week.

Taxi drivers always have ‘the knowledge’ on their town, so what do you recommend in Aberdeen?

If people want to know about what there is to do and see in Aberdeen I generally recommend the Winter Gardens. King’s College, which is part of the University of Aberdeen, is also worth a look.

If people are looking for a good restaurant there are lots of good ones in Aberdeen, such as The Albyn, No1, Dizzys, Howies and Cinnamon, to name a few. For nightlife there are also new clubs and bars opening on Union Street. There are also a few casinos in the city now, which are proving to be popular and are open un l 5am, which is late for Aberdeen.

The good places haven’t closed down, but have changed their names over the years instead. However, it would be good if Union Street got a face li . I think it needs one as lots of the shops have moved out to new shopping centres leaving the city centre looking a bit empty.

Approximately what percentage of the people you know depend on the oil and gas industry for their livelihoods?

Of the people I know definitely the majority. I would think that most people in Aberdeen are likely to have some connec on either directly or indirectly.

People that I know have all kinds of jobs thanks to the industry. Even school teachers teaching the children of people employed in the sector. Other people work in the hotels and shops that are in such demand. I also know people who work at the airport and heliport, as well as in the various safety services.

Lots of other taxi drivers I know have worked offshore themselves. In my line of work I haven’t made a fortune but the industry has definitely helped to make my life comfortable.

Why do you think we should make the most of the UK’s oil and gas?

UK oil and gas is a very important asset and we should make the most of it because it’s good for the country in so many ways. It creates employment and makes sure that we’re a centre of exper se and technological development.

We should also make the most of the UK’s oil and gas because so many people’s livelihoods depend on it. The oil and gas industry is the main thing here in Aberdeen. It’s also very important that we promote working in the oil and gas industry to young people – either directly or in associated areas such as docking, supply boats or hotels.

What do you think Aberdeen and the surrounding area would look like if the industry wasn’t here?

It’s difficult to tell, but I would imagine that the area would be completely different. Investment and development in the area has been phenomenal because of the industry, so we’d definitely be worse off without it.

I don’t think people are worried about there being no more oil or gas le in the North Sea as lots of young people are s ll coming in to the industry. Everyone thinks that it’s important to keep the industry going as there’s a lot more oil and gas to come out of the sea, and I think that most people in Aberdeen share my opinion as their livelihoods depend on it, from lorry drivers to school teachers. I’ve enjoyed working with the industry and know who’s who. I like to be a recognisable face when picking people up from the airport and at func ons. If there was no more oil Aberdeen would be a ghost town - un l they find something else in the sea.

Finally, as a taxi driver, have you ever picked up any passengers that we may know?

I’ve been lucky to have had all types of people in the back of my cab, including poli cians and celebri es, and I could be picking up famous passengers all the me. The problem is that I don’t always know who they are!

I have picked up actors who are in the plays and musicals that are on in Aberdeen, o en taking them to restaurants in the city a er performances, and I do remember having Cliff Richard’s backing group as passengers, as they were very keen to see Aberdeen. I do know that I’ve driven Sir Robert Smith, Frank Doran and Alex Salmond though.

But the most recognisable face I’ve driven was Tony Blair, before he became Prime Minister.

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One year on from its launch, OPITO – The Oil & Gas Academy has become the industry’s focal point for skills, learning and workforce development, and is commi ed to developing and sustaining the supply of qualified people. It achieves this by working with industry employers, training providers, educa onal ins tu ons and partnership organisa ons where collabora on is mutually beneficial. The Academy’s key objec ves are to understand the industry’s current and future skills needs, support all sectors of the industry, both onshore and offshore, ensure learning and training supply is in place to meet iden fied needs and a ract and facilitate the entry of poten al talent. In order to achieve these, the Academy has established a series of rela onships and ac vi es during 2008.

An illustra on of the Academy’s commitment to its objec ves is the organisa on’s understanding of and ac on upon feedback received through the industry’s 2007 ‘Boots on for Safety’ campaign, where competency was iden fied as one of the top ten issues for the workforce.

The Academy worked with Step Change in Safety in crea ng a new set of minimum safety training standards for employees working on installa ons in the UKCS, covering the core topics of risk assessment and permit to work, but also introducing new key safety awareness centred on mechanical li ing and pla orm integrity.

“Among the biggest ini a ves for

employers has been the development of new minimum industry safety training standards for the offshore workforce,” said Academy chief execu ve David Doig.

As well as taking pan-industry ac on, the Academy is responsive to the specific demands for skills of different parts of the industry. For example, it worked with the Offshore Survey and Posi oning Group to raise awareness of this part of the business and develop new technician level entry standards. Together with Oil & Gas UK’s Supply Chain Forum, it has also established a partnership with the Chartered Ins tute of Purchasing and Supply and developed an online gateway to professional development for supply chain prac oners.

The Academy has also been very busy pu ng several mechanisms in place to a ract and facilitate the entry of poten al talent into the industry.

Firstly, in a bid to raise awareness of career opportuni es in the oil and gas industry among young people, it established a new alliance with the Department for Energy and Climate Change (then Department for Business and Enterprise) to target schools in the Western Isles. Secondly, its crea on of ‘Energise Your Future’, a careers and lifestyle event showcasing oil and gas opportuni es to young people via interac ve ac vi es, also saw 500 senior pupils gather in Aberdeen to explore the world of oil and gas.

“Indeed, it is perhaps with young people that the Academy has had its greatest impact,” said David.

Thirdly, the Academy and its partners are working hard to make sure that what the industry needs in terms of skills and what it has to offer in terms of exci ng career prospects are understood by teachers across the UK and conveyed within the

exis ng curriculum.

Projects like ‘Maths in Pipeline’, geophysics within A level physics and the Earth Science Educa on Unit mean that young people will learn about the people and processes that make up the oil and gas industry as part of their curriculum. The industry is playing its part in giving relevance and bringing science, technology and maths to life. Also, in recogni on of the Academy’s role in facilita ng the entry of poten al talent into the industry, the organisa on is responding to employers’ requests for a more effec ve, collec ve rela onship with Higher Educa on. The Academy is facilita ng this joint ac on by organising an annual innova ve agenda-se ng event, the first of which will focus on the ‘employability skills’ of graduates. The event, which was held on 7 November in Aberdeen, gave senior industry and academic par cipants the opportunity to agree a 12-month ac on plan based on previous debate and research.

Looking further afield, the Academy is also developing the UK’s burgeoning business in export and oilfield goods and services, with the establishment of new offices in Kuala Lumpur and Abu Dhabi to target the key Middle East and Asia Pacific markets.

David added: “An important role for the Academy is ac ng as the focal point to bring together a number of organisa ons for the common good. The UK has established a reputa on as a global centre of excellence in terms of the export of our people, services and products. Each of the projects the Academy has been involved in this year emphasises our posi on as a vitally important channel through which the industry can work collabora vely to develop a workforce capable of providing a sustainable future for both the UK industry and the interna onal supply chain that it supports.”

OPITO – The Oil & Gas Academy celebrates successful first year

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A record breaking 700 delegates from across the UK and overseas a ended this year’s PILOT Share Fair 10, on 11 November 2008. Between them they listened to over 100 presenta ons and a ended more than 600 one-to-one sessions.

Throughout the day, which was sponsored by CAN, 13 companies presented their strategies for the North Sea, as well as providing key company contact details. These planned ac vi es, which are all scheduled to take place over the next 18 months, are es mated to represent poten al new business in the region of £4 billion.

Malcolm Webb, Oil & Gas UK’s chief execu ve, said: “For the first me in the event’s history, we have seen a complete sell-out, which underlines the con nuing importance that the industry’s supply chain places on Share Fair and the value businesses derive from it.

“This record a endance also reflects the growing significance of our industry’s supply chain.

“I know of no other industry that stages an event quite like Share Fair; it provides an excellent opportunity for suppliers in the UK to keep abreast of business developments and for industry to gauge suppliers’ appe te for staying commi ed to and focused on inves ng and developing the UK con nental shelf.”

PILOT Share Fair 10 is a sell out success

Oil & Gas UK hosted the first ever Supply Chain Conference at the Aberdeen Exhibi on and Conference Centre on 12 November, sponsored by Shell UK Limited. Principal speaker at the one day event was The Secretary of State for Scotland, the Rt Hon Jim Murphy MP (pictured right), in his first public engagement in the city.

Delegates enjoyed a busy programme which focussed on three key topics, business perspec ves, supply chain sustainability and cross industry learning.

Secretary of State for Scotland makes Aberdeen debut at Supply Chain Conference

Bob Keiller, Oil & Gas UK’s Co-Chair (le ) Deirdre Michie, Shell Explora on & Produc on, Europe

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Contact Oil & Gas UK

Editor: Trisha O’Reilly, Oil & Gas UK Assistant Editor: Helen Richardson, Oil & Gas UKDesigned by: Foyer GraphicsPrinted by: Chiltern Printers (Slough) Limited on recyled paperCopyright © The United Kingdom Offshore Oil and Gas Industry Associa on Limited trading as Oil & Gas UK September 2008

Oil & Gas UK Aberdeen3rd FloorThe Exchange 262 Market StreetAberdeen AB11 5PJTel: +44 (0)1224 577250Fax: +44 (0)1224 577251

Oil & Gas UK London2nd Floor 232-242 Vauxhall Bridge RoadLondon SW1V 1AUTel: +44 (0)20 7802 2400Fax: +44 (0)20 7802 2401

Email: [email protected]: www.oilandgasuk.co.uk

11 February: London Breakfast Briefing - The Ac vity Survey 2008Herbert Smith, Exchange House, Primrose Street, London, EC2A 2HS8.00am – 10.00am

12 February: Aberdeen Breakfast Briefing - The Ac vity Survey 2008Beach Ballroom, Beach Promenade, Aberdeen, AB24 5NR7.00am – 9.00am

4 March: Occupa onal Health SeminarAberdeen Exhibi on & Conference Centre, Aberdeen, AB23 8BL9.00am – 5.00pm

31 March: New Entrants & Business Models SeminarAberdeen Exhibi on & Conference Centre, Aberdeen, AB23 8BL9.00am – 5.00pm

22 April: Next Genera on Conference ‘09 Aberdeen Exhibi on & Conference Centre, Aberdeen, AB23 8BL9.00am – 5.00pm

4 November: PILOT Share Fair 11 Aberdeen Exhibi on & Conference Centre, Aberdeen, AB23 8BL7.00am – 4.00pm

5 November: Oil & Gas UK Awards ‘09 Aberdeen Exhibi on & Conference Centre, Aberdeen, AB23 8BL7.00pm – 1.00am

For further informa on on events or for sponsorship opportuni es, please contact Stacey Hopkin or Louise WoodTel: 01224 577 250 or visit www.oilandgasuk.co.uk/new/events

Dates for your diary

And finally...

Oil & Gas UK joined forces with Marathon Oil, Total and Falck Nutec to give 14 na onal, regional and trade journalists, including Tim Cross from The Economist (pictured), not only a taste of life offshore, but also the unforge able experience of training in underwater helicopter escape. Thanks go to the companies’ training and offshore teams for providing such a warm (and in the case of Falck Nutec, wet) welcome.

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in this issue - Oil & Gas UKoilandgasuk.co.uk/wp-content/uploads/2015/04/wireline_dec_2008.pdfin this issue Uif!gjstu!Pjm!'!Hbt!VL!Tvqqmz ... • FLTC celebrates a successful ﬁrst