The Future of Energy?
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BusinessBulletin MAY 2016 Energy focus THE FUTURE OF ENERGY? PAGE | 06 PAGE | 12 PAGE | 22 PAGE | 36 ENERGY COVER FEATURE CIVIC LINKS THE NIGG BAY REFERENDUM: OUR OUR FOCUS THIS THE CHALLENGE OF OPENING TRADING VISION: BRIAN RELATIONSHIP MONTH DECOMMISSIONING DOORS WILSON WITH EUROPE Chamber Viewpoint What is the future for MAY 2016 energy in Aberdeen? IN 2013 I gave a presentation to the area to create the world-leading centre of Qatar Olympic Games Bid committee excellence for supporting innovation in the in Doha. energy sector. My home city came up in the conversation Decommissioning is a natural consequence CHAMBER VIEWPOINT | and I said: “You might have heard of of operating in this sector so it should not Aberdeen for two reasons. be treated as a dirty word, synonymous with the early demise of UKCS operations. “First, it is where Sir Alex Ferguson practised before going to Manchester Embracing this and developing United; second, it is Europe’s oil capital.” leading edge know-how, systems and processes can establish Aberdeen as the His Excellency Sheikh Saoud bin acknowledged global expert in this space Abdulrahman Al-Thani responded by and provide opportunities in maturing saying: “No, no, Aberdeen is not the oil basins around the world for many years to capital of Europe, it is the oil capital of the come. world.” The proposed Aberdeen Harbour So given the current issues that are being expansion will be central to this and must be experienced in the sector as a result of a delivered. perfect storm of global market factors, is that reputation still appropriate and, if so, And whether it be Iran, Ghana, Mexico or how do we capitalise on it? one of the many other emerging markets, our supply chain needs to be open- Question: how can we ensure that we really minded to exploring opportunities outside do anchor a significant energy industry hub traditional comfort zones. here well beyond any of our lifetimes? Gloomy headlines might suggest to Answer: COLLABORATION, INNOVATION, outsiders that our city region is closed for INTERNATIONALISATION, “UPSIDES”. business and that oil and gas is dead. In the short term, operators and the supply If we allow things to be talked down chain have been working together to too much, how can we expect potential introduce innovation, new thinking and investors to view Aberdeen as a safe best practice that has seen strong progress financial bet or to attract people to come towards the target of almost halving the here to study or build a career? average cost of production. While not forgetting that times remain Maintaining these behaviours as prices rally tricky, we have a job to do to remind will be the key to maximising the recovery ourselves and others of the upsides; the of the significant remaining oil and gas many good things about living, working and resources in the UK Continental Shelf and doing business in Aberdeen. ensuring that the UK Government continues to listen to the industry in terms of providing The foundations remain in place for a highly the necessary tax conditions to incentivise successful future. long term investment and activity. If we collectively make good and bold The establishment of an Oil and Gas decisions and take the necessary actions Technology Centre is the centrepiece of now we will anchor Aberdeen as a the Opportunity North East initiative, and significant international oil and gas location aims to coordinate and build on the pockets for many years to come as part of a vibrant of great work already happening in the and diversified regional economy. Russell Borthwick chief executive 3 We thank our Premier Partners Premier for their continued support of Partners the Chamber. Want to learn more? Contact Liam Smyth, Membership Director T 01224 343920 E [email protected] 4 MAY Contents 2016 Focus on Energy Aberdeen & Grampian Chamber of Commerce Features The Hub Exploration Drive Aberdeen Energy Park Bridge of Don Aberdeen AB23 8GX T 01224 343900 E [email protected] www.agcc.co.uk Affiliated Chambers Moray 12 African President Edel Harris opportunities T 01224 343911 E [email protected] Bulletin Team Editor Joanna Fraser T 01224 343926 E [email protected] News Features 06 20 Graeme Smith Media Decommissioning Investing in T 01224 275833 challenge the future Advertising Jim Bruce T 01224 343905 E [email protected] Regulars PAGE | Design & Production POLICY UPDATE Keiran Smart 36 Relationship status with the EU ... it's complicated T 01224 343934 E [email protected] HOT TOPIC Which fashion item would you like to see 40 making a comeback? TRAINING & EVENTS CALENDAR Dates for your diary 42 ON THE MOVE Who is going places in the region? 44 Cover image Cromarty Firth Courtesy of Peter Jolly 5 The next decade for oil and gas TheThe industryindustry isis forecastforecast toto spendspend aa totaltotal ofof MAY 2016 FEATURE | £16.9billion£16.9billion on the decommissioning of offshore oil and gas installations, wells, pipelines and other subsea infrastructure on the UKCS 50% INCREASE OF £2.3billion £8.4billion on 2014's ten year forecast of the total forecast expenditure from 2015 to 2024 will be concentrated in the Central North Sea 79 platforms are forecast for removal across the UKCS over the next decade 6 Future of energy feature MAY 2016 The challenge of FEATURE | decommissioning DECOMMISSIONING presents one of the major challenges to the new Oil and Gas Authority (OGA) as part of its aim of maximising economic recovery of UK offshore oil and gas. While decommissioning offers a significant opportunity and could help offset the jobs which will inevitably be lost as the industry continues to mature, it is vital that assets are not decommissioned prematurely. That could lead to the domino effect with the decommissioning of some resulting in the early demise of others around them because of increasing cost pressures. Dr Angela Seeney, OGA director for technology, supply chain and decommissioning is pleased with the progress the board is making. “Ultimately decommissioning is a very natural part of the SKILLS asset life-cycle. Decommissioning “We want to take a much more integrated approach so we experience is the not only do it more cost effectively but do it in a safe and “Ultimately number 1 skill environmentally friendly manner. decommissioning required for the “Maximising economic recovery may indeed mean next three years simplification in regional hubs but we need to ensure it is a very natural CHAMBER'S 23RD doesn’t collapse critical infrastructure and allows us access part of the asset OIL & GAS SURVEY to new fields to make use of the recent exploration initiatives we’ve launched. life-cycle” “It must also allow us to get to the marginal fields which Dr Angela Seeney might be relatively close to some of these hubs. OGA director “We are taking a progressive view by making sure we for technology, address the short-term priorities, while also building a bridge to the future upturn, which is going to lead to a better supply chain and outcome for the UKCS. decommissioning “We want to build a competitive UK capability in decommissioning which allows us to service not only the UKCS and the industry more effectively but also allows us to build a strong export position. “A key challenge will be developing the supply chain capability to ensure it is both sustainable and competitive on a global scale. “We are a mature basin so we are facing diverse decommissioning challenges and we are the first to address some of those challenges. “Norway has yet to decommission in earnest but is already beginning to think about its decommissioning programme 7 Future of energy feature MAY 2016 and certainly its supply chain is “Then we would have a dialogue FEATURE | teeing up. around alternative approaches. “The UK is in “The UK is in a pioneering position “The bulk of what we do is around a pioneering because of the diversity of conditions influencing and promoting new we face and for the maturity of our solutions, building on the powers we position because asset base, but also because we have have. masses of untapped potential in the UK of the diversity of “We can use them, but we are continental shelf. conditions we face” much more interested in working “We have taken 43billion barrels to in partnership, developing the Dr Angela Seeney date and there is still another 20billion collaboration with the industry so barrels out there and the challenge is we can have those dialogues around ‘how do we optimise our approach to how we maximise economic recovery maximising economic recovery while while achieving cost reduction in decommissioning effectively?’ decommissioning.” “The trick is to plan more effectively She stressed the aim is to improve cost through an asset’s whole lifecycle, efficiency while still being safe and including late life, and avoid premature environmentally compliant. decommissioning and the domino “We are not talking about dropping effect.” standards. She explained that for some the oil “The early signs are good and we price slump could mean they want to are getting lots of traction with decommission earlier, while others may operators and the supply chain want to defer and it is in everyone’s and we have people who are very interests to rephase the programme to keen to be actively involved in our avoid creating inflationary hotspots in Decommissioning Board and in the the market. workgroups. “We want to help the market manage The MER UK “I am optimistic we will be able to the decommissioning programme on Decommissioning pull together a very compelling a more structural basis which might Board is led by industry decommissioning programme to help mean, instead of doing everything chair Colette Cohen, the industry deliver significant cost asset by asset on an ad hoc basis, senior vice president reduction.