with Bob Keiller, Keiller, Offshore Contractors Association
What role does Offshore Contractors Association (OCA) play in the UK’s oil and gas arena?
The members of the OCA represent between a half and two-thirds of the people who live and work in the offshore fixed installations in the North Sea and other parts of the UKCS. The primary role is to help manage industrial relations between members of the supply chain and their main customers. The main benefits that OCA brings to the industry is that it reduces the risk of industrial action, helps make for a more efficient negotiation process, and avoids related cost increases. By helping avoid production disruptions and getting operators and the supply chain to find common solutions, OCA reduces the cost impact of operating in the basin.
What is the main distinguishing factor between OCA’s permanent and associate members?
OCA has 10 permanent members and about 70 associate members. The permanent members are primarily determined by the number of people they employ in the UK offshore sector, regardless of global turnover or product range. They go from topside service contractors like Wood Group, Amec, Petrofac and PSN, to the maintenance contractors such as Cape, Sparrows and RBG. Associate members benefit from OCA’s collective negotiation with operators in terms of rates, payment terms, etc.
How are OCA’s member companies coping with the challenge of attracting and retaining the skilled workforce necessary to meet the industry’s growing demand?
There are a whole range of different things happening in this regard, such as fitting new workers into the system through apprentices and, and there is also a large commitment by OCA member companies to hire and train graduates. In fact, finding the right people is not the only challenge we are facing right now. Due to high activity levels, it has become increasingly difficult to actually get people on the platforms, due to lack of capacity in everything from helicopters to bed space. Nevertheless, we continue working hard to make sure we hire new talent for our business, while also tapping into experienced people from other sectors.
There are countless individual examples of initiatives coming from the company level. For instance, at PSN we have a big focus on converting people who used to work in the Armed Forces, through a program called ‘Re-engineer Career Conversion Program’. In conjunction with the ECITB, ASET and the Ministry of Defense Career Transition Partnership (CTP), the programme enables highly skilled mechanical, electrical & instrument technicians from the armed forces and other industries to gain essential oil and gas industry experience.This skills conversion program allows us to take technicians from the Royal Air Force, for example, and give them sufficient knowledge to use their skills in a slightly different environment like offshore. We are also doing something similar for managers coming from senior or officer ranks in the military, offering them the chance to join us as project managers/engineers both here in the UK and internationally. Re-engineer has been enthusiastically welcomed by the oil and gas industry.
PSN has also established a design academy through which we are training people to become a part of our workforce specialized in computerized design techniques. In the past we have often sourced these skills from other heavy industries, but since they have been disappearing from the UK we are finding ways to develop these people ourselves. Other OCA companies like BIS Salamis and RBG have set up dedicated onshore training facilities for people so that there is no need to move them offshore, for basic skills in areas like maintenance and scaffolding.
To what extent can OCA members collaborate on the skills issue if at the same time they are often competing in the same pool of people?
It is true that in our commercial activity we are often fierce competitors, but when it comes to collective long-term interests for the offshore industry we are also capable of coming together and finding common solutions. For example, PSN does not have an infinite capacity to take in the people going through the Re-engineer program, so rather than having all the extra work simply go to waste we are working with OPITO to make it available to other players in the industry with similar needs. This approach also means that PSN isn’t assuming the whole cost of maintaining the program itself, while maintaining access to it when needed. So for OCA members there is a healthy degree of competition but we also value the benefits of different degrees of collaboration.
As always, there are things which could be better in terms of cooperation, but the formation of Oil & Gas UK has already represented a major step in this regard. For the first time in its history, the different parts of the oil and gas industry in the UK are sitting at the same table discussing different issues of interest. This is a signal of the fact that the industry has matured along with the basin, and that there is a need to redefine our approach towards the North Sea in the second half of life which it has entered.
The growing opportunities in the current context also bring many challenges along for companies. Which would you say are the major issues at this moment facing offshore contractors in the UKCS, besides the skills shortage?
Most of the assets in the UKCS were designed for 20 years field life, so this means that many are still operational 10 or 15 years beyond that point. However, this does not happen automatically, it requires a massive amount of investment in order to bring the assets up to the very high standards in terms of safety and integrity which must be met. Just in terms of maintenance the industry has to make enormous investments. Additional accommodation facilities have had to be put in place, and new platforms have been built alongside older existing ones. All of this has required an incredible engineering effort, hundreds of miles offshore and in the middle of a very hostile marine environment.
In many cases, platforms that used to produce 200 thousand barrels per day have dropped to 50 thousand, yet still have to deal with the same amount of liquid going through the plant due to higher water cut. For this reason, one of the biggest challenges for the industry in the UKCS is to increase the overall recovery rates of producing reservoirs. Despite the existence of enhanced oil recovery (EOR) techniques which are widely used in onshore operations, there is very limited use of EOR in the North Sea. This is due simply to the fact that EOR on offshore fields requires much more in terms of energy and infrastructure, which as made its application uneconomical in the UKCS. But in order for us to achieve the prize of 25 billion barrels or even more, we will have to explore the edges of existing areas and make them commercially viable. This will require a great transformation in terms of technology, organization and the regulatory framework which will have to further create incentives for investments in the area.
Another important challenge that we must overcome as an industry is the perception many people have about the industry being in ‘decline’. The reality is that this is not a sunset industry as some would have it, but rather a mid-life industry with a lot of potential. One can choose to see the glass either half empty or half full, and too many people are focusing on the former. In our view, there is still a very long way to go, but if talk about an early demise continues then investment and overall interest in the UKCS will also fade.
For the supply chain in particular, it is crucial that the UKCS maintain its activity in terms of exploration and production because this will allow us to further strengthen the foundations of our companies, which are already spreading their wings internationally. We have been able to build our business on the back of North Sea expertise and are now servicing hydrocarbon basins around the planet.
As the supermajors have largely been moving on to more buoyant oil and gas regions, many medium and smaller sized companies seem to be moving in to the E&P scenario in the North Sea. What impact is this trend having on offshore contractors’ business?
There are two interesting developments in this regard for the offshore contractors. On the side of the major international oil companies, they are going through a phase where they have to focus their own skilled resources on opening up the enormous fields in regions like West Africa and the Caspian, so it is important for them to free up people who are sill managing the last few barrels of oil in old fields in the UKCS. This is where the supply chain has a big opportunity to further support the majors in the operational development of the mature fields, while allowing them to concentrate on big explorations abroad. For them as well, there is a clear benefit of making better use of the supply chain for certain aspects like maintenance.
Regarding the new exploration and production companies entering the North Sea, they are often in a situation in which they do not have the core skills for hand-on operations of the offshore facilities, as they tend to be more focused on areas like upside and reservoir potential, drilling and well technologies. Therefore, instead of having to go through all the time and money related to building up large new capabilities, a more convenient option for some of them is to tap into the supply chain’s expertise. Again, this trend gives contractors the opportunity to take a step forward and develop new skills which can ultimately be exported elsewhere. The challenges we have hade to face in the North Sea apply to any mature basin where there is still ongoing investment.
The issue of decommissioning is being increasingly evoked by the industry at different levels. Where do you see this heading over the coming years?
It’s been a very long time since everyone believes that the big decommissioning wave is 10 years away, so it’s difficult to know. From the UK’s perspective, it has been in hindsight a very good thing that the assets were not decommissioned over the last decade. If we had gone through with the dismantlement of many old assets, we would have had to leave a lot of commercially viable oil in the ground in a context of record-high prices. Therefore, companies would have surely had to invest massive amounts in new infrastructure, and we would be kicking ourselves over that. So it will be a challenge to make sure that we keep infrastructure as long as possible, all while passing the safety and economic tests.
There is a time pressure on us to seize the opportunity to see what we can still manage to tie back, and afterwards we can seriously talk about the decommissioning industry. Until now, it has been relatively minor and confined to a few specific places, and we don’t expect a massive wave of decommissioning of the major assets to happen anytime soon. Companies like Apache and Talisman have been very successful in showing that, thanks to putting energy and effort into the investments in mature assets, it is possible not only to increase production but also to extend the life of these assets by years.
20 years after Piper Alpha, do you believe that the North Sea’s oil and gas industry has learned the lessons? How does the region compare to other oil and gas provinces?
I sincerely believe that the safety culture in the North Sea is second to none in the global oil and gas arena. Compared to other parts of the world, the attention to detail is considerable, and the standards are highest in terms of training and instruction necessary to get people working offshore. In the end, we can never become complacent because we are dealing in an isolated environment which is effectively handling explosive hydrocarbons. But I feel that from the management side there is a real commitment to safety as a top business priority, which is here to stay. Of course, it is never perfect and we have to address the pockets of poor behaviour which may still persist.
How do you see the members of OCA’s willingness to dedicate scarce time and resources to the development of international markets?
I cannot say much about the other companies, but speaking from PSN’s point of view, internationalization has been a real cornerstone of our development. I see it as a natural progression of the business, in order to reduce risk by operating in different areas and different types of customers. It also allows us to grow our capabilities by taking best practices from one region to another, connecting them in a network of lessons learned both onshore and offshore.
What are Aberdeen’s main advantages with regard to other oil and gas centres around the world?
In general, Aberdeen benefits from having grown up over the last several decades facing the very challenging conditions of the North Sea, and has therefore developed great expertise in offshore operations. Aberdeen is also a place that is very much connected to the rest of the world’s oil and gas provinces, due to many companies being based here or because people have spent time training in the city. There are also many interesting things happening in the Eastern Hemisphere, making the city a good place from which to handle business for a wide range of countries. Aberdeen has a critical mass of support, a real concentration of oil and gas expertise that allows you to get any job done and to perfect new techniques. From a connectivity point of view, we are a single flight away from cities like London, Amsterdam and Paris, and can easily reach anywhere else from there. And then of course, Aberdeen is a great place to live and work, raise a family, and for higher education.
Does Aberdeen really stand a good chance of remaining an oil and gas centre of excellence a few decades down the line, even as the UKCS production inevitably declines?
That is a choice we as an industry and society have to make. If we sit back and do nothing, surely then there will be a decline for the city and its industry. But if we want to have a business that is sustainable in the long run, we need to further develop products and services for the global market. We should work on this now, while we still have a vibrant North Sea oil and gas sector. It is also very important for Aberdeen to remain attractive as a location for headquarters, and for this we should offer business a reasonable fiscal environment. Aberdeen has to maintain the critical mass of companies here in the oil and gas industry, which also draws in activity from areas such as finance, human resources, consulting, etc.
What is your final message to the readers of Oil & Gas Financial Journal on OCA and Aberdeen?
The key message is that though the North Sea is a mature region, it still has a long way to go, and Aberdeen has everything going for it in order to remain an oil and gas hub. Cities like Seattle have managed to establish sustainable added-value businesses like aerospace and software based on quality of life and human capital. By continuing to make Aberdeen and its region a great place to live, work, and develop skills we can do the same within the oil and gas industry.