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Big risks and big opportunities

10th April 2013

Oil & Gas Technology met up with Subsea UK CEO Neil Gordon at the association’s flagship event in Aberdeen this year to discuss growth in the UK’s subsea sector, enhanced recovery from aging fields, new smart technologies and what lies ahead for the booming USD 9.4bn revenue industry

Big risks and big opportunities
The subsea industry in the UK is aiming to prolong the life of older fields and enhance the recovery rate of new discoveries

Originally from Braemar, Scotland, Subsea UK CEO Neil Gordon initially trained as a commercial diver and spent eight years carrying out numerous diving assignments in the UK and Norwegian waters involving new construction projects, pipeline surveys, welding and inspection.

Gordon has over 20 years' management experience in director and business development roles, combined with over 10 years in the subsea industry. He worked in India, the Middle-East, Africa and Brazil.

OGT: Could you start by giving us an outlook of what the UK subsea industry represents globally?

Neil Gordon: The subsea industry in the UK is a growing part of our economy. The global market in subsea within the oil and gas sector is valued at about USD 40bn. The UK represents a third of that global market share. Within that, around 56.5 per cent is exported to other parts of the world, so we are a strong centre of excellence both in engineering and manufacturing.

The strength that we have is really the supply chain, the manufacturers, the skills, the technology and the people that really make this a global hub. This is where the action is and where a lot of the decisions are made.

OGT: What are the current main technological challenges for the UK subsea industry?

NG: If you look at UK waters, this is quite a mature basin so there are a lot of older assets that have been here for a number of years and well into the mature stage of their life. As a result, strategic integrity management is important. We want to make sure that we are going to prolong the life of some of these infrastructures. In addition, more and more technologies are actually involved in looking at pipelines and structures to make sure that we can actually say that the condition of a given system is efficient. Therefore, subsea systems in general and integrity monitoring and inspection in particular are crucial– there are some very smart tools coming out of there.

Analysing aging assets and considering how we can get more out of them is very important because those types of infrastructures provide access to some of the more marginal reservoirs. It is more important to reach out and put in satellite fields and connect them into the pipelines so we can get more out of them.

We’re also trying to enhance the recovery rate in the newer and bigger fields. Subsea processing is key to this. In average, the recovery rate in the UK sits at about 40 per cent. In global terms it’s more like 35 per cent. Norway, however, is already getting close to 60 per cent. Some of those targets are well achievable. We have to look at new ways to improve this, so there’s some smart new ways of boosting the pressures in those reservoirs to actually get more out.

OGT: What new technologies and systems do you see coming to the fore throughout 2013?

NG: There is a lot of talk around the subsea field of the future. What is it going to look like, for instance? How remote is it going to be? What kind of personnel and infrastructure are we going to have there? Some interesting technologies I see coming about are now able to drill remotely and take samples without putting big rigs in place. There are also some exciting things in terms of subsea factories, power generation, electric driven subsea control systems and processing on the seabed – so there’s some pretty fiery stuff looking ahead.

OGT: Last year, subsea, pipeline and reservoir technology was transferred from the UK to Brazil, China and Russia, respectively. How do you see this West-BRIC trend developing in the coming years?

NG: I see that growing in the future. We are and always have been a nation of inventors. We used to be a very big nation of shipbuilders but now we are coming up with some really smart tools.

I see some integrity management technology being able to do more things through water communication, inspection and equipment monitoring. This is where the strength of some of these small companies can help them deliver some really smart – albeit small – bits of technology which can make a big difference in larger projects.

A company like Nautronix, for instance, is currently working on intelligent equipment, a complete underwater GPS-type system, and some of that technology is very leading edge. When field operations begin, it makes the installation in terms of rig positioning much easier because, precisely, it has that underwater GPS system. That’s the kind of technology that will really make a difference to some of the big fields in the future.

OGT: What relevance will the subsea industry in the UK have for Brazil, given the South American nation’s goal to double oil output over the next decade?

NG: Brazil is a very important market for the UK. But if Brazil is really going to achieve that target than it is critical that the UK is engaged with it, because they want to emulate two countries in the world, Norway and the UK: Norway in terms of how a national oil company like Statoil operates and how they’ve got a system to support their industry; they also look at the subsea industry and the supply chain that the UK has. However, as I have mentioned, the UK’s subsea supply chain took a long time to develop, so they’re going to need all the help to reproduce that in Brazil.

OGT: In your view, are Brazil’s local content rules an obstacle to the UK oil and gas industry or is there ample space for it to expand there?

NG: Some of the companies, if they are considering getting into the country, have to look at setting up in Brazil itself and as a result cost-base could be quite high. Perhaps a joint venture or an acquisition strategy can smooth the process. Both Subsea 7 and Fugro have taken the acquisition path after looking at who is operating in the subsea sector in the country and they have done quite successfully out there.

Local content is an issue which can be a bit confusing, I would say. It can be seen by some as a barrier for companies to come in because, how do they up their local content if their product has to be manufactured here? That has implications over there on taxation and imports as well.

OGT: How do you see the global and UK subsea industries growing in the coming years?

NG: Looking ahead, the global market is set to double in the next five years. There are parts of the world, particularly key subsea areas like Brazil, Gulf of Mexico, West Africa and Australasia where there are some big developments and opportunities. In some of those new areas, major subsea construction and technological challenges arise in deepwater plays, mainly in Brazil and West Africa, where the big reservoirs and reserves are located, so that’s where the big risks but also the big opportunities lie.

It’s a great and exciting time as the market is about to grow and move to this next stage. In the UK, we must ask ourselves how we can continue this boom. You have to realise that it took us 40 years to get here; it’s not something that can be fast-tracked.