SubseaUK chief executive Neil Gordon considers the impact of a tough 2015 on the subsea sector, ahead of February’s Subsea Expo in Aberdeen
With the year barely under way, the subsea industry is already gearing up for its annual centrepiece event – Subsea Expo.
A great deal has changed since the previous summit in 2015. The industry remained upbeat when it last met, focusing on the ways in which costs could be reduced, and placing a firm emphasis on collaboration as record numbers of delegate attended the AECC in Aberdeen.
Yet the interim has not been kind, and the cautious optimism of a year ago has been replaced by something more closely resembling steely determination in the face of a growing energy storm.
Nevertheless, SubseaUK chief executive Neil Gordon has highlighted the industry’s ability to adapt. He speaks to InnovOil below about the trials of 2015, and how the theme for the 2016 conference – “Time for Transformation” – applies to the sector, and to the whole energy industry.
What has been your experience of the sector in 2015?
There is no getting away from the fact that it has been tough for everyone in oil and gas.
The cost-cutting has been severe and project delays and cancellations have had a major impact on many subsea companies.
Regrettably, we have seen companies forced into administration, with the damaging knock-on effect across the subsea supply chain. Others are struggling to keep their heads above water and there will inevitably be further casualties both in terms of firms and individuals.
After the initial fear, panic and rationalisation, 2015 has ultimately been a year of realisation – a wake-up call to the industry that we have to make fundamental changes to survive and eventually thrive.
But the subsea sector, which has been responsible for game-changing technology and innovative thinking over the last 40 years, is up for the challenge of re-inventing itself and transforming to deal with the fundamental changes now required to secure a sustainable future in a lower, and longer, oil price environment.
What has been the main impact of a low oil market for subsea firms?
The main impact has been on jobs and investment.
While cost reduction and efficiencies are required, the long-term damage of some of the cuts, particularly in terms of the loss of skilled people or lack of investment in training and development, may come back to bite us in the years ahead.
The subsea sector is renowned for its technology but cuts in research and development will put the smaller companies under pressure to develop the next wave of technology, which the industry needs urgently if it is to find more viable ways of extracting the remaining reserves.
On the upside, oil and gas companies are becoming more receptive to looking at new or existing technology. Those companies with a technological solution to the challenges of maximising economic recovery should find it less challenging to get their technology to market more quickly. Equally, the subsea industry’s pioneering approach to finding new and better ways of working will count in their favour as they seek to work more collaboratively with their customers.
You’ve highlighted events in Asia recently. With a slowdown in the North Sea, are more companies eyeing opportunities in other regions?
While the repercussions of the low oil price are perhaps being more sharply felt in the North Sea owing to its high cost base, the rest of the world is not immune. However, there are some key regions which stand out for me in terms of short to medium-term potential. These are parts of Africa, Southeast Asia and Mexico.
Companies who are able to spread the risk across several geographical markets are weathering the storm better than others. But it’s not about being a fair weather exporter; subsea firms must all be looking to new markets if they are serious about their long-term future.
British subsea expertise, experience and technology are in demand and SubseaUK will continue in its efforts to help companies capitalise on overseas opportunities. Collaborating with other organisations is an important element of SubseaUK’s strategy and we continue to work with Scottish Development International (SDI) and UKTI to develop a strategic approach to growing the industry’s international capabilities and reputation.
To support subsea companies further with exporting their skills, technology and expertise to key oil and gas provinces around the world, we launched a new online portal, Global Business. As a specially developed online tool, this provides regularly updated details on opportunities and contacts in over 20 countries. Global Business acts as a starting platform for companies looking to expand into international markets: the portal allows members to access intensively researched industry reports, market data, related news and events to help them pinpoint exactly where the opportunities are outwith the UK.
How has the role of the NSRI developed in 2015?
Following the re-launch of NSRI in 2014, the organisation has made significant progress towards meeting its overall aim of bringing new subsea technology to market, consolidating the UK’s leading position across the globe and helping to sustain the life of the North Sea.
NSRI launched its Matchmaker database in 2015, which aims to partner end-users with technology researchers and developers in the appropriate fields. The resource is a starting point on which NSRI will build to make sure that it truly represents the entire industry and relevant research organisations, by providing the best and most relevant contacts and collaborations needed to advance the development of new technology.
Following a study into the recovery of small hydrocarbon pools, NSRI and Subsea UK ran a series of workshops (Hackathons) to explore the new, disruptive technologies that will help exploit small and currently uneconomical stranded fields. All ideas were captured and will be screened to prioritise the efforts in the short, medium and long term, with cost reduction and efficiency measures addressed first. This could bring some real long-term benefit and opportunities to the North Sea subsea sector.
What topics/areas of discussion are you most looking forward to at the 2016 conference?
The theme this year for Subsea Expo is “Time for Transformation”. The first and inevitable reaction to the lower oil price was the round of cost-cutting. This was followed by the drive for efficiency, with calls for co-operation and collaboration.
Now it’s time for the hardest part, that of transformation. The oil and gas industry as a whole has to change the way it behaves and works with the supply chain. Leading figures from the regulators, the operators and the supply chain will come together at Subsea Expo to tackle how we need to change, what we can do simpler and more effectively and where we need to reinvent ourselves for a sustainable future. This is our time to demonstrate the pioneering attitude and ingenuity for which our industry has been renowned in the past.
Are there any areas of technology, innovation or development within the sector which we should look out for in 2016?
In my opinion, 2016 will be about smart, simple solutions to complex issues.
A major focus is going to be integrity. With subsea infrastructure and assets coming of age, we need to explore more radical approaches to maximising production from these assets and extending their life.
The recently formed Subsea Asset Stewardship Workgroup brings subsea engineering and construction companies and equipment manufacturers together with operators to look at how we manage the integrity of subsea assets to increase production and reduce costs. This subsea-specific group is fully aligned with OGA’s asset stewardship board as part of the MER UK forum.
And finally, NSRI’s Small Pools initiative will generate the opportunity to develop new, disruptive technologies and we are eagerly awaiting the outcomes of the recent hackathons on this subject.
In my opinion, 2016 will be about smart, simple solutions to complex issues