Over 300 energy leaders debated the challenges of a sustainable future for the North Sea and explored the potential development of the subsea market over the next 10 years at November's Subsea Europe conference in London. Meg Chesshyre reports.
Europe remains a key area for subsea business, Alistair Birnie, chief executive of Subsea UK told the recent Subsea Europe conference. 'It is already the biggest region using subsea systems and has accounted for 30% of all subsea wells completed in the last 10 years, he said, adding: 'From the conference, it is becoming increasingly clear that the subsea market is changing in terms of both the technologies that we will have to implement for the future and the relationships we need to build within the supply chain.
'We are increasingly seeing an emerging energy supply from the diverse market. This forms an overall strategic energy policy which takes into account gas supply, renewables and other energy sources. Energy is becoming very strategic with security a key driver for the future. Subsea has a fundamental role to play in securing energy sources in these diverse areas.'
Malcolm Webb, CEO of Oil & Gas UK, commented: 'In terms of the subsea industry's contribution to the UK economy, there are certainly two sides to the coin. Firstly, subsea technology has allowed our oil and gas reserves to be extracted much more cost effectively; currently 43% of production is accounted for by subsea wells and this number will only grow in future.
'Secondly, the sale of our wealth of expertise and technology overseas is earning valuable export revenues for the UK and rising demand around the world offers significant business opportunities. It's important to consider, however, what the industry and Government need to do together, and individually, to ensure the industry's potential is achieved.' He expressed the hope that the UK supply chain, including subsea, would eventually outshine the UK production story.
Peter Blake (pictured), with Chevron Energy Technology Co, said that his colleagues' subsea technology wish list for North Sea projects included: power distribution, long distance power, multi-phase pumping, downhole pumps, multiphase metering, raw water injection, HIPPS, chemical injection, wet insulation, heated flowlines, and high pressure risers. Chevron currently operated North Sea subsea projects on Strathspey, Captain and Alba, plus a joint operated project with ConocoPhillips on Britannia. Potential projects under consideration included Rosebank and Lochnagar, West of Shetland, and Alder in the North Sea.
Chris Bird, technical director, Centrica Energy Upstream, added: 'We need to look closely at capital and operational expenditure in the industry to ensure we are making investments that will secure a long and vibrant future for the North Sea. This includes investing in renewable energy and already we are seeing gas storage facilities and offshore wind farms being built in the region.' He said that key projects for Centrica Energy Upstream were: Seven Seas, F/3-FA (in the Dutch sector), Annabel East, Grove West, Acorn, Chiswick, York and coal bed methane in south Wales.
The global subsea market had shown significant growth over the last 10 years, with a compound annual growth rate of around 9%, Howard Wright (pictured), analytical services manager at Infield Systems, told the conference. West Africa had been the biggest growth market, but the NWECS remained the biggest regional market accounting for 30% of the wells. The UK actually had 15% of these completed wells, and Norway 14%.
Wright added, however, that the number of subsea wells brought onstream offshore Europe had decreased compared with the start of the decade. Installations were still taking place – despite lack of awards – working through existing projects. Whilst there has been an impact on number of E&A wells in the UK development drilling has not declined significantly. In fact in Norway they had increased towards the end of the year.
According to Wright, subsea tree awards were significantly down in 2009. The impact was being felt further down the supply chain where there was less existing backlog and shorter lead times to deliveries. A lot of operators in the UK had pressed the pause button on single and two well developments. There was an issue that if they were continually delayed the cost of development would become very expensive, bearing in mind the ageing infrastructure to which they were to be tied, and the costs associated with it.
In Europe, he foresaw new opportunities mainly as tiebacks to existing projects, prospects in areas such West of Shetland (see feature, page 33) would be important in the next 10 years as would heavy oil (quadrant 9); and then, of course, prospects in the Norwegian and the Barents Sea. Worldwide there would be growing subsea activity in North America, West Africa and Western Australia, with competition for offshore assets globally.
He concluded, however, that we were experiencing a short-term bump, and that overall the global subsea market was set to increase. In the medium to long term Infield expected market fundamentals to drive growth. As far as subsea Europe was concerned, he felt that ageing infrastructure could hinder future projects. There would be increased subsea well intervention programmes. Depressed gas prices could also impact on future developments. Greenfield projects were few and challenging in extreme environments. Success in the market was going to be to understand the variety of challenges that the market faced and offering packaged solutions to meet them
The total oilfield services (OFS) sector is worth around $425 billion, with large well services players making up around 50%, David Phillips, oil and gas equity research analyst at the HSBC Bank, told the conference. Of this, the subsea sector is worth $30 billion, 7% of the total, and including all vessel-owning exposure close to 15%. Putting the sector into context in the energy industry – the OFS sector is 20% larger than Exxon, twice Shell, and five times Statoil.
Phillips said that the industry faced the classic 'long cycle dilemma'; the short term was OK, the long term was good, but what's in-between? Delays were a consistent feature – 'mind the gap in 2010', but bidding activity generally was increasing. He foresaw an industry evolution. Further 'technology land grabs' were likely, and he also expected to see some heavy asset consolidation, and for some a 'grow or get out' decision.
Mark Richardson, subsea projects manager, with Apache North Sea, said his company saw the downturn as an opportunity to take advantage of lower prices. Apache is exploring the deep Jurassic plays around the Forties field, and is planning to install a couple of new 18-slot, satellite well head platforms. His colleague Jonathan Marsh, with Ionik Consulting/JP Kenny, described the comprehensive corrosion management strategy which had been in place since Apache took over the Forties pipelines, including intelligent pigging, pipeline replacement where necessary and an anode retrofit programme. OE
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