Power of Scotland June 2014

Power ofScotland

Thursday June 26 2014

Trawling for hidden valueHow seismic mapping unlocks further reserves

Transfer windowThe key knowledge partnerships between academia and industry

Thursday June 26 2014 | the times

Power of Scotland2

Challenges exist but subsea is optimistic

Welcome

ENGLAND is sitting on huge reserves of shale gas and the picture in Scotland will likely be similar when the Brit-ish Geological Survey presents its views on reserves here. The 1,300 trillion cubic feet (tcf) of gas below north-west

England alone compares with current UK annual consumption of 3 tcf of natural gas.

Even if a small percentage were tech-nically and economically recoverable, it would provide years of gas while North Sea gas production declines and the UK faces up to the prospect of having to source 80 per cent of its gas from abroad by 2030.

Russia’s shutting off of the gas sup-ply to Ukraine earlier this month was a stark reminder of the how external forces could hit energy security and send prices soaring.

Under current market practices, importing more Liquefied Natural Gas is also a volatile option as contracts usually mean LNG tankers can be diverted to higher bidders. The UK’s shale gas poten-tial is becoming clearer while experts warn of power blackouts later this decade as renewables prove slow to replace fossil fuels and nuclear as sources of electricity.

Shale gas produced by hydraulic frac-turing — aka fracking — could be one way to secure the medium-term energy supply and bring price benefits to indus-try and consumers just as in the US.

The UK government is removing one obstacle to shale gas development through legislation trailed in the Queen’s Speech to allow onshore operators to extract gas from deep below private prop-erty without being prosecuted for tres-passing in England and Wales.

Local communities are also to be offered financial incentives by operators to compensate them for the inconven-ience that comes with shale operations, notably lorry traffic to and from well sites.

So far so good for onshore operators, but shale gas faces a stiffer challenge in the shape of environmental and anti-fossil fuel lobbyists, among others.

To get a state-of-art view from the industry, Power of Scotland talked to Scotland-based Ken Cronin, chief execu-tive of the UK Onshore Operators Group.

“Questions we need to answer over the next three years include: what kind of geology we are dealing with, what kind of shale, what would the flow rates of gas be, and how much it would cost,” he said. “Only then will we be able to make a bet-ter judgment about what is technically and economically recoverable.”

In the US, where a shale boom has driven down gas prices to low levels, a few less scrupulous operators have given the industry a bad name by cutting cor-ners on health, safety and environment. Regulation of the industry in the US is inconsistent because of the wide variety of attitudes taken by individual states.

Cronin said: “Onshore drilling and hydraulic fracturing are not a new phe-nomenon in the UK. We have drilled more than 2,100 wells over 100 years and 10 per cent of those have involved hydraulic fracturing. We have done it in areas such as Easterhouse in Glasgow and you cannot see any ill effects now those operations have been restored to what they were before.”

The UK’s regulatory system is “exem-

plary” and considered to be “a gold stand-ard around the world”, he added. “We have four regulatory bodies that regulate every step of the way in terms of the environment, well integrity (i.e. does it leak contents into the environment), the financial and operating experience of the companies involved, and also local issues such as noise, light, air quality and so on.”

This regime is “probably the strictest in the UK compared with other sectors”, he added. “This has lent itself to a very good track record in the UK over 60 or 70 years.

“One recent study by Durham Uni-versity found that only one well had any issues with respect to well integrity. That was picked up fairly quickly by monitor-ing systems with minimum impact on the environment.”

In the UK, but not in the US as a gen-eral rule, companies must also monitor soil, air and water at sites before drilling so there is a baseline against which to measure any impact.

“We do continuous monitoring throughout drilling and also after we have decommissioned the site to check for any variation against the baseline,” Cronin said.

UK regulations also lay down strict measures to contain methane, the greenhouse gas in the water, used for the hydraulic fracturing process, when it comes back up the well. In the US, the water is often stored in open lagoons where the methane can then evaporate into the air.

“We would never have open lagoons in the UK,” Cronin said. “We store every-thing in stainless steel containers, siphon off the methane, and use it properly. A number of authoritative reports in recent years have all said that the risks of the industry in the properly regulated envi-ronment that we have can be mitigated to a minimum.”

Inside ...The knowledgeTechnology transfer boosts academia and industry Page 4

Cover storySeismic mapping is revealing hidden reserves Page 8

Life goes on ...The positive role of decommissioning Page 10

... And on The quest to prolong production from older assets Page 14

Shale gas could provide years of energy as North Sea production declines but is a solution attended by environmental challenges, writes Rob Stokes

Industry tackles energy gap with a nod to environment

Welcome to the June issue of Power of Scotland, which follows on positive news, as Aberdeen & Grampian Chamber of Commerce’s latest industrial survey indicates that the majority of firms expect to increase activity in UK waters and increase investment in devel-oping new assets this year.On these pages we look at both opportunities and chal-lenges: the potential of shale gas and the possible legal intricacies facing the sector in the event of a ‘Yes’ vote in the independence referendum. Elsewhere, we highlight the fact that decommissioning is an essential, not negative, part of the industry life cycle, as some assets now see their futures extended well beyond previous predictions.We also focus on the valuable collaborations between academia and industry that result in innovative knowlege and technology transfer both in the home and overseas marketplace, while discov-ering how advanced seismic mapping is helping to realise the remaining potential of the North Sea.

ANARDARKO

Chief executive of the UK Onshore Operators Group Ken Cronin

Anardarko, one of the world’s shale gas

majors drilling in south-west Texas

Power of Scotlandthe times | Thursday June 26 2014 3

Any lawyer specialising in law affecting the oil and gas industry could well be sorely tempted out of pure self-interest to campaign

for a “yes” vote in September. Scottish independence would be guaranteed to provide years of very highly-paid work.

The economics of oil and gas — how much resource is left, how much is likely to be extracted, and what tax revenues it might yield — has dominated the referendum debate.

But all of this depends on one of the few certainties the industry has: the legal framework it operates in.

Little attention has been paid to this, but it was raised at a meeting of Holy-rood’s economy committee in Aberdeen in April. It was enough to make even a very highly-paid lawyer salivate.

Most Scots would be surprised to learn that while they may think of the waters and seabed around Scotland’s coast as Scottish, the law which governs oil and gas operations is almost entirely English.

This came about really as a conveni-ence to the industry. Companies, more familiar with English than Scots law,

used it to draw up the vast majority of contracts used, for example, between oilfield operators and the contractors they employ.

Although this may offend some onshore Scottish sensibilities, it shouldn’t trouble the offshore industry if inde-pendence occurs unless the Scottish government insists, as it may do, that all new contracts be written under Scots law. Even then, there may be no immedi-ate difficulties unless there is a major offshore accident.

Evidence given to the committee by Penelope Warne, senior partner in CMS Cameron McKenna and an oil and gas law specialist, said: “Currently for many practical purposes there is little difference between English and Scottish contract law although there are some differences in the analysis of liability and indemnity clauses where in the case of a serious offshore incident the impact could be very significant.”

Insisting on the use of Scots law, she said, would “risk an increase in cases of conflict between the interpretation of similar clauses in different contracts relating to the same incident if older contracts were still governed by English

law but newer contracts were governed by Scots law.”

This is the kind of man-trap hidden deep in the legal undergrowth that the Scottish government has assured the industry it is anxious to avoid creating. But unless it is prepared to tolerate the anomalous position of another country’s law holding sway in part of its territory, it is hard to see how it won’t happen.

Indeed, even though ministers may be dedicated to upholding the principle of “continuity of existing law” set out by its expert commission on the oil and gas industry, there still could be pitfalls.

Any independence law would have to transfer all the exploration and production licences granted by the UK government to the Scottish government. In theory, this should be fairly straightforward.

But in practice, Ms Warne advised MSPs, it might get complicated — and not just for licenses for any fields which straddle a proposed maritime boundary between Scotland and the rest of the UK. “There may be some who might seek to use this as an opportunity to escape from licenses with work obligations which are viewed as onerous,” she said.

Peter JonesDaunting legal wrangles that may be lurking on the seabed

But the really big issue which could get very messy is tax relief for decom-missioning costs, now estimated to be about £45 billion. Theory says that the UK government should shell out for decommissioning installations built pre-independence and the Scottish government for bills incurred post-independence.

This would be negotiated between the two governments and their agreement would need to be approved by both the Scottish and Westminster parliaments, a process which has obvious opportunity for political monkey-tricks.

Ms Warne observed: “This would not be a straightforward exercise, going as it does to the heart of one of the most emotive issues in the independence debate, which is the use of past North Sea revenues.”

The Scottish government’s white paper pledged that “the outcome of these negotiations will have no impact on the value of relief received by the operators.” Does that mean, if the UK government ratted on all or part of its presumed contribution, Scottish ministers would swallow their anger and pay up?

And finally, can it all be done in 18 months? Apart from commenting that sorting out the tax rules for two jurisdic-tions would be extremely complex, Ms Warne notes that just amending tax codes to allow for the introduction of decommissioning relief deeds took 30 months. What do you think?

This is the kind of man-trap the Scottish government has said it is anxious to avoid


Power of Scotland4

Even as Scotland’s uni-versities continue to lead the way in the research and develop-ment of technology for the oil and gas and renewables industries, Scottish energy com-panies are forging a global trail, operating

in around 100 markets worldwide. It’s an exciting period for univer-

sity technology transfer programmes, with research and developments from other academic fields increasingly being exploited in the energy sector.

Olga Kozlova, the enterprise creation manager for Heriot-Watt University, believes much of the activity in technol-ogy transfer programmes is because the universities benefit from having such a dynamic industry on their doorstep.

“The key point about energy, and about oil and gas in particular, is that it is one of the few markets where we have a cus-tomer base right here in Scotland,” she said. “A lot of spin-outs face challenges when they go international. However, here there is a vibrant market — that doesn’t mean it’s going to be easy, but at least the target for technology is local, and although spin-outs will still have to trade internationally, they will have an early-stage advantage.”

Research at Heriot-Watt has led to a number of technological advances with commercial potential, and resulted in a number of successful spin-out companies.

Epistemy is a spin-out from the Uncer-tainty group and incorporates cutting -edge research on history matching, and uncertainty quantification, in oil and gas. The software produces history matches with an accurate quantification of uncer-tainty and risk, providing a platform for effective collaboration and knowledge capture, while analysing and visualising data.

Hydrafact, which was launched in 2006, performs the commercial activities of the Centre for Gas Hydrate Research & Reservoir Fluids Research (CGHR), providing high-quality, competitive tech-nical services to the oil and gas industry. In addition to consultancy and technical studies, Hydrafact also works to com-mercialise IP developed at the CGHR, including flow assurance software and the HydraCHEK inhibition monitoring system.

Petroc Technologies, one of three

carbon capture and storage spin-outs from Heriot-Watt, provides laboratory services, and specialises in Enhanced Oil Recovery (EOR), hydrocarbon recovery technologies and geological storage of carbon dioxide, including CO2 injection and underground storage.

“There are obviously a number of strands of works in the energy field,” says Kozlova, who is also director of Heriot-Watt’s Scotland-wide competition Converge Challenge, awarding winning projects a business start-up package. “For example, university spin-out company Hydrason Solutions created a wide band sonar system with a SMART sensing system able to distinguish between man-made objects. Originally developed for the military, it also has applications for the oil and gas industry.

“It can be difficult to penetrate the energy market but Heriot-Watt has good links in this field. It’s always a challenge, and that’s where we come in. When staff and students come up with ideas, the key is to find out potential markets, which can often be different from what is first envisaged.

“The original project might be different, or not big enough to justify investment. From the first business plan they ever write, it will change within the first year, and people have to understand that to learn their market takes time and effort.

“What you think you know changes, and the best way to address this is to talk to your market. You have to go out and speak to your potential customers to find out exactly what the real problem is, and develop the product or service to address it.

“It always helps if academics are involved or working with a customer already. Hydrafact, for instance, already had a working relationship with industry, and knew the customer’s problems. We will look as broadly as possible at the route for a project, at the market that offers potential and opportunity, and can

be penetrated at an early stage. It’s about reaching for the biggest and the lowest hanging fruit.”

Partnership is key to the success of many projects, and that can also mean inter-departmental collaboration, in addi-tion to the joint approaches of university and industry. Mercedes Maroto-Valer, the first holder of the Robert M Buchan Chair in Sustainable Energy Engineering at Heriot-Watt, heads up the university’s Centre for Innovation in Carbon Cap-ture and Storage (CICCS), which deliv-ers high-impact research at the interface between science and engineering. Work-ing closely with academics across the School of Engineering and Physical Sciences and the Institute of Petroleum Engineering, CICCS works internation-ally to accelerate the technological inno-vation needed for the wider deployment of carbon capture and storage.

Following the recent success of Project COMET, a collaboration with Intercon-nector UK, CICCS is now embarking on a new series of carbon capture projects. “What makes our work different is our level of engagement with industry,” says Maroto-Valer. “Our mission is to develop a holistic view to the development of carbon capture and storage, making a significant impact in finding solutions in climate change and protecting the planet. For example, the ‘COMET’ project, funded by DECC, assessed the suitability of metering technologies for use in CO2 transportation by pipeline.

“The Heriot-Watt Energy Acad-emy works across all schools, bringing together science, engineering, environ-mentalists and economists, to cover every technical element, and also to look at social aspects and social impact. We have the mechanisms here at the university to be very efficient in terms of knowledge transfer to companies, and to industries in general, in relation to the intellectual property generated.”

The benefits of working together, department with department, university with university, universities with indus-try, underpins Scotland’s ambitions for the energy industry. In February, £10.6 million from the Scottish Funding Coun-cil, and supported by Scottish Enterprise and Highlands & Islands Enterprise, launched the new Oil and Gas Inno-vation Centre (OGIC). Academic and private sector partners will create and fast track new, innovative solutions for the oil and gas industry, focusing on the longer-term challenges faced by the sec-tor. More than 2300 oil and gas operators and service companies will be linked to 12 Scottish universities, including Heriot-Watt, with more than 450 academic staff and researchers working on oil and gas specific technologies.

“We’re a leading partner in OGIC, and

Valuable lessons of collaboration in vibrant sectorScottish universities are are the forefront of technology transfer programmes in both local and global markets, discovers Ginny Clark

Mercedes Maroto-Valer talks of a high level of engagement with industry

this venture will power innovation in oil and gas,” says Maroto-Valer. “It is high-level strategic partnerships with com-panies that have already helped CICCS to build a reputation, and to deliver industry-sponsored projects. Heriot-Watt is placed among the UK’s highest-ranked universities for total research income from industry, as well as per capita indus-trial income.

“We are very active, and very oriented to working closely with our markets, to make sure research is translated to viable results. Also, with Scottish Carbon Cap-ture and Storage (SCCS), we are involved in creating the largest carbon capture

Feature

Where industry sees a problem, academics see an opportunity to use knowledge


and storage research group in the UK.”SCCS is an independent partner-

ship engaged in high-level research and joint projects with industry, with the aim of supporting the development and eventual commercialisation of CCS as a climate mitigation technology in the UK and abroad. The partnership brings together the British Geological Survey, and the universities of Heriot-Watt, Edin-burgh, and Aberdeen, as the most recent addition.

John Scrimgeour, executive direc-tor of the Aberdeen Institute of Energy, says SCCS, and this type of partnership, is vital to ensuring Scotland’s research-ers have the platform — and strength in numbers — to compete for the top international projects. “Where indus-try sees a problem, academics see an opportunity to use knowledge,” he said. “Researchers like nothing better than getting a real problem to solve, although blue sky research is also important! How-ever, some of the bigger projects require collaboration between universities and institutes to gain that critical mass. When

you compare the numbers of researchers employed by the big-hitters, partner-ships such as SCCS help researchers to get on the global radar. So collaboration between universities, as well as collabo-ration with industry, is very important. Some of biggest companies will deal only with universities of certain ranking, with excellence also equated with mass.

“So an aggregation of universities here into a bigger entity can make us more competitive; for example, in Imperial College London there can be more than 100 scientists working on a project, and Harvard is a behemoth. So aggregation, but also developing a reputation for expertise, is important.”

Scrimgeour says his previous 35 years spent in the oil industry, developing expertise in field development, opera-tions, and subsurface, demonstrates another aspect of the strength of links forged between academia and the oil industry.

An engineer, he completed his first degree at the University of Aberdeen, before specialising in petroleum engineer-ing at Imperial College London, before carving out a career that included time as regional manager for Petro-Canada.

“Part of my job is to make people more aware of what is being achieved here,” he says. “However, it’s not just about bringing industry in, but to encourage

and grow the collaborations, improve the teaching and research, and grow the international offering, with many more opportunities to develop partnerships with industry and foreign universities.”

Aberdeen is continuing to estab-lish partnerships with universities and research organisations in south-east Asia, China, South America, the Gulf and other energy regions to deliver research collaborations in addition to student and academic exchanges, and there are also scholarship opportunities for students created by companies such as Hallibur-ton, BP, Talisman and Chevron.

The university is now two years into leading a consortium of UK universities and local authorities in Qatar in the Gulf Organisation for Research & Develop-ment (GORD) project to develop Green Concrete. This is a significant multi-million, multi-disciplinary, four-year project, focused on the next generation

of sustainable, environmentally friendly, affordable green cements and concretes that can be used to produce high quality buildings — both more carbon friendly (concrete causes around 10 per cent of the world’s CO2) and more insulated.

However, Scrimgeour says underpin-ning projects such as this is the ongoing work to help solve the skills shortage, vital for sustaining the pathways to research and development.

“We’re already working within the Oil and Gas Academy of Scotland, a Univer-sity of Aberdeen collaboration with Rob-ert Gordon, Heriot-Watt, Forth Valley College and North East Scotland College, supporting qualifications from techni-cian right through to postgraduate level, focusing on geoscience, petroleum engi-neering and subsea engineering among other disciplines.

“As an example of our overseas col-laborations, we’ve also been in Tanzania recently, looking at how to encourage studies to support the oil and gas indus-try there, from school through to degree level, so that young people are encour-aged to follow the subjects necessary to becoming engineers or geologists.

“We’re currently seeking funding, with the aim of assisting the delivery of a geo-science degree in Tanzania. We can help to solve the skills shortage, and that has to be a priority.”

John Scrimgeour stresses growing collaboration and improvement in teaching

Olga Kozlova believes much activity in technology transfer is because universities have a dynamic industry on their doorstep

Problem solving for industry crucial to transfer partnerships

The technology transfer empha-sis may be on spin-outs and commercialisation but as Ian Brotherston, Head of Enter-prise Services at Heriot-Watt,

explains, it is at the point of investment to support the original research itself where real value lies for industry and Scottish universities.

“For most universities, the biggest income from industry partners is from the funding of research in the first place. It’s crucial for us, and not just from an income perspective, to show we are doing relevant research, and helping to solve problems in both inventive and innova-tive ways.

“At Heriot-Watt we view all collabora-tions as an extremely important part of what we do, this is something we have a long history of,” he says. “However, what is particularly important is not just seeing ideas that have been commercialised bring in money through licence fees, but the actual impact of the research we’ve done. By working strategically with partner organisations we can influence the direction of each other’s research programmes in the medium to long term to the benefit of all partners while also concentrating on shorter term ‘problem-solving’ that has more immediate impact

“The Research Excellence Framework (REF), the new system for assessing the quality of research in UK higher education institutions (HEIs) outlines the importance of this as it measures how research can have an effect on society, culture, public policy or services, health, the environment or quality of life as well as its direct economic impact through commercialisation”

Strategic partnering between universi-ties and industry has been recognised as the way to move forward, with the research councils involved in funding

impact acceleration accounts and indus-trially focused training with Centres for Doctoral Training (CDTs) in a number of fields.

The Natural Environment Research Council (NERC) recently part-funded a new £8 million training centre, led by Heriot-Watt, aimed at helping the oil and gas sector to put environmental science at the heart of responsible operational man-agement. This CDT will focus on creating a highly-skilled workforce with expertise that can be used across the wider energy and environmental sectors, as well as filling skills gaps in oil and gas. It will equip the industry with the skills needed to reduce the environmental impact of oil and gas exploration and extraction. This CDT will support a minimum of 90 postgraduate students who will benefit from being embedded alongside world-class researchers and industry partners through placements, mentoring, facilities and equipment — an invaluable resource.

“From Heriot-Watt’s point of view, this collaborative, strategic, early stage but directed research is of great importance across all our specialisations, not only in oil and gas.

“The priority is not just about com-mercialisation and technology transfer, important as this is; what is most important is the quality and impact of the research itself, and it is in the generation of that joint research programmes where the real value lies for industry and the university.”

Ian Brotherston, head of Enterprise Services at Heriot-Watt

JAMES GLOSSOP FOR THE TIMES

Distinctly Ambitiouswww.hw.ac.uk

Distinctly AmbitiousDistinctly Ambitiouswww.hw.ac.ukwww.hw.ac.uk

• Business• People• The environment

For more information contact:Professor Mercedes Maroto-Valer0131 451 [email protected]

Energy AcademyFocused Energy Research

Heriot-Watt University’s Energy Academy develops intelligent solutions for:


Industry Spotlight: Scottish Funding Council

It fl ows like an invisible current under the surface, but the ever-growing contribution of the Scot-tish Funding Council (SFC) to the development of Scotland’s energy industry — in the form of fi nancial backing for collaboration between it and university research — is increasingly deserving of more visibility, say many oil and

gas professionals.For there are no fewer than six

industry-relevant parts of this impres-sive instrument that so effectively oils the processing wheels of Scotland’s oil and other exploitable natural resources — with only one of this year’s injections being to the tune of nearly £11 million.

It’s big money but well spent, believes Professor Paul Hagan, the SFC’s direc-tor of research and innovation, who says: “As our unique geographic location gives us the key elements for success in oil and gas, wind and wave power — more so than most other countries — the energy industry is and will be into the future, a critical component of Scotland’s economy.”

Obviously such natural advantages need to be maximised, so how does aca-demia help? “In a number of ways and areas,” he says. “Not least with the sophis-ticated level of expertise in our academic research base, which can offer know-how

and ideas in — for example — engineer-ing, collecting data, fi nding solutions to problems, and smarter ways to use and monitor oil wells.

“We are very fortunate to have the academic expertise to help exploit such resources, bringing together leading industry partners and experts from Scot-tish universities to work on shared chal-lenges. Many such things can be done with the help of university researchers – but not, of course, without the industry’s essential input.

“So Scotland’s advantages are threefold: a sustainable supply of energy, a highly developed industry to exploit it, and a world-leading research capacity to help drive its development into other areas of the economy, such as manufacturing.”

The Scottish government-backed council has an overall budget of £1.5 bil-lion and is committed to “research and knowledge exchange”, aimed at pull-ing academia and business closer. Its 16-member board, including the chair Professor Alice Brown and chief execu-tive Laurence Howells, prefer the word “investment” to “contribution” as all industry requests for collaborative action are expected to offer the general promise of success and advance.

“That said,” adds Professor Hagan, “we do support basic collaborative research even when it’s not immediately obvi-

ous where benefi ts or opportunities for exploitation might be. But we essentially back research where there is a clear need in the industry base and where academic expertise can help to service that need and be innovative about ways to solve industry problems.”

Growing investment? “We have increased our funding for the basic research activity in the universities over the past three years; we have also assigned strategic funds to support this or that proposed project on merit.”

To the suggestion that the SFC is the glue that binds the parties gently together, he says: “Yes, but it is important to recognise that we’re not doing this on our own; we are working in close align-ment with Scottish Enterprise and High-lands & Islands Enterprise. Together we help bring the research and the industry input to achieve the required culture of innovation.”

“Innovation” is another of the coun-cil’s key words. Among the six strands of support it offers to industry-university co-operative work are: three carbon reduction projects for which leading Scottish universities have received £20 million; RenewNet, in which SFC and European backing help universities pro-vide technical support to Scottish SMEs working in renewables; and the Oil and Gas Academy (OGAS), a collaboration between six training providers for the sector including Forth Valley College, Heriot-Watt University, North East Scotland College, Robert Gordon University, Aberdeen University, and ASET International Oil and Gas Training Academy.

But the most immediate direct

help that goes straight into the industry’s bloodstream comes from the network of SFC-funded innovation (that word again) centres: the research pooling initiative Energy Technology Partnership and the newly patriated Offshore Renewable Energy Catapult.

The SFC launched its £110 million innovation-centre programme in 2012 to support collaboration between universi-ties and businesses in partnership with Scottish Enterprise and Highlands and Islands Enterprise. Designed to add value through secondments, industrial stu-dentships, collaborative workspace and shared access to equipment — as well as support for skills and training — they quickly grew to an eight-strong network, of which one purely devoted to oil and gas innovation was announced by First Minister Alex Salmond in Aberdeen ear-lier this year.

With backing of £10.6 million, it brings together more than 2,300 oil and gas operators and service companies with 12 Scottish universities and 450 academic staff and researchers working on oil and gas-specifi c technologies.

“We have gone on a fairly long jour-ney in terms of the support our academic research base offers into the industry sec-tor,” says Professor Hagan, “and one of the most signifi cant steps was taken a few years ago with the formation of research pools. I can’t overestimate how important they have been to Scotland in bringing together expertise in all of our institu-tions, and there were several pools that were important particularly in relation to the energy sector.”

These are under the banner of the Scottish Research Partnership in Engineering; we had a group-ing in the Aberdeen area, a grouping in the east, and one in

the west, all working under this umbrella, bringing together expertise in engineer-ing, some of it with a direct interest in oil and gas, some with an interest in offshore renewable energy.

“And spontaneously emerging from that collaboration has been the establish-ment of the Energy Technology Partner-ship (ETP); which is one of the big drivers linking academia with industry today.”

But there is a further bonus, he points out. “It’s because of that base of the research poolings and collaborations, because of the establishment of the ETP, that Scotland has been successful in securing a base for the Offshore Renew-able Energy Catapult.

“I believe that, without the investment from SFC in supporting the pools in this development — creating the culture change in terms of collaboration — we wouldn’t have been in such a strong posi-tion to make the case for bringing the Offshore Renewable Energy Catapult’s base to Scotland.

“The Catapult technology and innova-tion centres are multi-centre across the UK and there are now nine of them. Our preference is to lead on them where we can, and of course renewable energy is one that has particular importance to Scotland.”

More general benefi ts? “Such a stimu-lus helps grow a healthy supply chain to the oil and gas industry. The major multinational oil companies involved in the North Sea are supporting it across Scotland.

“We’ve got a raft of SMEs and what the innovation centre does is allow big play-ers to link into them to further develop that culture of innovation.”

He concludes with a smile: “So it really is a very good-news story. Very exciting! Indeed, it’s transformational.”

Oiling the wheels of Scotland’s industry

Collaboration between academia and industry, key to the offshore industry, is underpinned by vital fi nancial backing, fi nds RickWilson

Professor Paul Hagan says ‘innovation’ is one of the SFC’s key words


Power of Scotland8

Cover story

Maximising eco-nomic recov-ery is crucial to sustain-ing the UK Cont inenta l Shelf (UKCS), an urgency u n d e r l i n e d by the recent

Wood Report recommending that the government work with the oil and gas industry to develop a new strategy to exploit significant opportunities that still lie off our shores.

The aim of Sir Ian Wood’s MER UK (Maximising economic recovery from the UKCS) report is to promote more rigorous stewardship of the remaining oil and gas resources through the creation of a new independent regulator to work with HM Treasury and the industry —

With up to 24 billion barrels of oil still to be found in the North Sea, advanced seismic techniques are key to the future, writes Ginny Clark

announced by the government on June 12 as the Aberdeen-based Oil and Gas Authority — and to stimulate greater industry collaboration.

One key strand of work in this new approach is exploration. There is some good news around, such as the go-ahead for the £1.5 billion Catcher project in the North Sea, where Premier Oil aims to recover around 100 million barrels of oil. Yet levels of exploration activity have plummeted over the past five years, with no major discoveries during this period, only 22 wells drilled in 2012 and seven fewer in 2013. Clearly, the need for a more collaborative and dynamic programme has never been more pressing.

With up to 24 billion barrels of oil equivalent (boe) still to be found, devel-oped, and produced offshore, the indus-try has already shown its commitment to ‘fundamental change’. In welcoming Sir Ian Wood’s final report four months ago, Malcolm Webb, chief executive of Oil & Gas UK, the leading representative body for the offshore industry, said: “This is a seminal moment in the history of the UKCS. The report is a game changer.”

Now helping to act on the recommen-dations of the report, Oil & Gas UK has launched the first phase of a project to

stimulate more exploration by promot-ing new and existing plays on the UKCS, commissioning SLR Consulting to under-take a preliminary study on the best way forward for the 21st Century Exploration Road Map — a digital perspective of petroleum geology, funded by the Depart-ment of Energy and Climate Change (DECC), Natural Environment Research Council (NERC) and Oil & Gas UK.

The project is one of several initiatives being driven by the PILOT Exploration Task Force (PETF), set up two years ago by Oil & Gas UK to work with DECC to revitalise UKCS exploration, and other stakeholders include the British Geologi-cal Survey (BGS), Natural Environment Research Council (NERC) and Common

Data Access (CDA), along with explora-tion companies and operators.

Oonagh Werngren, Oil & Gas UK’s operations director, explains: “The 21st Century Exploration Road Map aligns with the Wood Report recommendations, which identify the urgent need to evalu-ate new and unexplored reserves, and create an up-to-date perspective of the geology of the UKCS together with tools to ensure more effective sharing of data across the industry.”

One of the participants in the 21st Century Exploration Road Map project is CDA, a subsidiary of Oil & Gas UK, which is recognised by the industry as a valuable resource for subsurface informa-tion. Malcolm Fleming, its chief execu-tive, said: “In fact, CDA ‘does what it says on the tin’, which is to make data relating to the sub-surface of the UKCS accessi-ble to oil and gas explorers so they can take advantage of the industry’s collective geological and seismic information.

“CDA provides this information on a not-for-profit basis via the UKOilandGas-Data.com website, allowing operators and other parties to cost-effectively access quality data on UKCS wells, seismic sur-veys, production licences and infrastruc-ture from anywhere in the world. This

Subsea maps that are taking exploration to another level

Malcolm Fleming, chief executive of CDA

LUUD HECK


“High-quality seismic mapping of our oil and gas reservoirs and efficient inter-pretation of massive data sets is essen-tial,” he says. “Heriot-Watt’s Institute of Petroleum Engineering (IPE) works with major oil and gas companies to improve techniques that will result in better reservoir models. IPE is conducting advanced, applied research into seismic interpretation techniques and applying its knowledge to systematically reduce many of the risks associated with oil and gas extraction. Through multi-sponsor programmes such as the Edinburgh Time Lapse Project, researchers are working to improve the quality of oil and gas reser-voir parameters by understanding reser-voir behaviour over time.

“Applied, integrated research pro-grammes mean that IPE’s applied research helps major oil and gas compa-nies have the information that is required to make critical operational decisions.”

Of course, the drive is not just to help inform current operations, it’s also cru-cial that we continue to develop and grow the talent necessary for the oil and gas industry long-term.

At the University of Aberdeen, rooted in Europe’s oil capital, the training cen-tre exploHUB focuses on hydrocarbon exploration to deliver skilled geoscientists — the next generation of explorationists. This post-graduate degree course is a joint industry/academic training initia-tive that provides an unique environment to prepare exploration geoscientists for the challenge of discovering, not just that of the UKCS, but the planet’s remaining hydrocarbon resources.

“ExploHUB trains the next generation of geoscientists, not just from Scotland, but all over world,” says Dr Nick Scho-field, who specialises in Igneous and Petroleum Geology at the University of Aberdeen. “Students come from as far afield as Mexico and Japan. Exploration is always the key aspect of the petroleum industry; we have to keep exploring.”

Schofield, a seismic interpreter, pro-ducing maps in an academic context, but also working with industry in analysing this material, particularly in the west, in the Faroe-Shetland basin, underlines how the increasing links between the oil and gas industry and Scotland’s universities is not only vital to maximising economic recovery from the UKCS, but is also a positive relationship for all involved.

“Every basin is challenging, and the Faroe-Shetland basin particularly so,” he says. “However, the technology over the past 20 years has massively increased, and since the 1990s, and the first 3D seismic data cubes, we have significantly expanded the regional data sets. The big challenge in Scotland is west to Rockall, where the thick sequences of volcanic rock create problems in seeing where the oil may be.

“The focus is to improve sub-basalt imaging and open up the way for explo-ration. We’ve come a long way but there is still a long way to go, and over the next 10 years, as imaging gets better, it will be an exciting time for exploration.

“There has definitely been an increase in the collaboration between industry and academia. As academics, we work in different timescales, and can spend years working up something. However, the boundary between the industrial and academic sides is decreasing, and the more we learn is also a good thing for the exploration ongoing.

“Closer collaboration also benefits academia hugely, apart from the fact that industry can spend a lot of money acquiring seismic data set, worth tens of millions — something we could never get the funds to acquire — it then becomes a two-way street. We can feed results back, but we wouldn’t have had the access to work on that data otherwise.”

Schofield believes the success of this synergy is producing something invalu-able — a new breed of Scottish talent.

“Some of the people who work in our industry are also some of most experi-enced in the business, and know basins all over the world,” he adds. “Equally, we have people coming here for training, because of the expert knowledge ... we have some of the best geoscientists and engineers.”

CDA is also investing in a number of international initiatives around data management education, and Fleming added: “The aim is to define a global industry professional standard and estab-lish diploma and degree courses that will be run in association with universities located in key energy hubs.”

shared resource represents an outstand-ing example of industry collaboration — a key theme following the publication of the Wood Report earlier this year.

“The broad scope of important subsur-face data which CDA makes so readily accessible enables exploration and produc-tion companies to respond faster to licence rounds and asset transfers, to reduce costs, accelerate new field developments and achieve significant efficiencies. Swift access to quality data is crucial to helping companies reduce development risk and increase their chances of exploration suc-cess — all of which is vital to sustain the continued development of the UKCS.”

With the emphasis now firmly on gath-ering, sharing and increasing accessibility to subsurface information, the industry has an opportunity to collectively realise the remaining potential of the North Sea. Technological advances play a key role in that process and techniques are being developed to achieve ever greater accu-racy in seismic surveys of both existing reserves and new plays.

Werngren, who co-chaired this year’s ITF Technology Showcase, a PILOT ini-tiative, explains: “Technology and explo-ration are two of PILOT’s key priorities and it’s crucial to bring technology inno-vators together with the operators and major contractors. “The development and implementation of new technology is vitally important to maximising recov-ery from the UKCS. We hope this annual event will help create the right conditions for advancing new techniques and help anchor those game-changing technolo-gies in the UK.”

Reflection seismology is used by petro-leum geologists to map and interpret the potential hydrocarbon reservoirs, and the latest generation of 3D technology, together with advanced computing, is helping to extend both reach and knowl-edge. Adrian Bradley, director of energy innovation in Accenture’s Resources UKI Client Services Group, explains how new technologies are being applied to improve

the geoscientist’s working environment, accuracy and productivity.

“Geoscientists need substantial pro-cessing power and storage, hundreds of times that of ordinary corporate users,” he said. “Historically, that meant expensive servers and big, chunky desk-tops — and the several days required to send models from one user to another removed opportunities for ad-hoc peer reviews. Now, advances in virtualisation technology means that complex geotech-nical applications and data can be deliv-ered from a virtual desktop in a remote data centre — including in the cloud.

“For the oil and gas industry this is a tipping point that significantly cuts the cost of delivering exploration and pro-duction IT, and enables geologists and geophysicists to share models on this virtualised platform in real time, with colleagues in the same office, or remotely with other assets. This results in more accurate analysis and better decision-making. Accenture’s own ‘Geodesktop’ programme, in collaboration with oil and gas consultancy New Digital Busi-ness, showcases how these ‘ready now’ technologies can be integrated to fulfil the vision of geoscientists working seam-lessly across locations.”

However, in addition to technol-ogy innovation, it is the ability to understand and interpret the information amassed, that remains key to pushing the

boundaries of exploration.Fleming of CDA, explains: “A recent

study shows senior managers believe on average 70 per cent of the value gener-ated by oil companies’ exploration and production activities relies on their understanding of the subsurface. Data managed effectively can add significant value to a company’s activities as well as providing benefits in the long term. Exploration and production companies can often re-use historic data available through CDA’s UKOilandGasData.com website to re-evaluate previous inter-pretations of reservoirs, leading to the development of new fields or the redevel-opment of existing ones, thereby extend-ing profitable extraction.”

Gordon Winton, director of business development at the Institute of Petro-leum Engineering at Heriot-Watt Uni-versity, says increasing the understanding of the earth’s geological structure and the minerals in the Earth’s crust is critical to efficient mineral extraction and the UK’s oil recovery targets.

New research institute is focal point for industry

A major subsea research initiative has launched this month. The National Subsea Research Insti-tute (NSRI) will be the

focal point for the co-ordination of research and development activities for the UK’s subsea oil and gas sector.

As a direct link between the subsea community and academia as well as government, NSRI will facilitate the development of subsea technologies which enable increased recovery of hydrocarbons, prolonging the life of the UKCS as well as innovation which adds value to the UK’s subsea engineering base, helping to maintain the country’s position as a world-leader in subsea.

NSRI will play an influential role in making sure the UK’s subsea technology needs are understood and

met within the increasingly complex and competitive technology strategy and associated funding landscape in the UK.

Subsea UK director and NSRI Steering Group leader John Mair believes that within the current landscape, which includes the Oil and Gas Innovation Centre and the Oil & Gas Technology Strategy Board, there is a greater need for more meaningful engagement between industry and academia.

“NSRI will become the single voice on subsea technology in the country. As the ‘go-to’ advisory body and knowledge centre for subsea technology, it will essentially broker the development of subsea technolo-gies, rather than seek to fund R&D activity itself.”

Mr Mair added that with countries

like Brazil and Norway continuing to invest significantly higher levels of funding into deepwater research than the UK, there is a more pressing need for an industry-led body in the UK that will build stronger links between industry and academia. “NSRI will be the primary source of knowledge on subsea technology for technology

developers, universities, academics and centre of excellence wishing to conduct research or research-related activities. It will engage with, influence and feed into the Oil & Gas Innovation Centre, the Scottish Funding Council and the Technology Strategy Board and other organisa-tions. Like Subsea UK, the organisa-tion will be able to operate across the entire UK in order to access and represent all the subsea companies and potential academic partners.”

Initial funding for the initiative over a three year period has been secured from Scottish Enterprise, Subsea UK and industry with further industry funding expected in the coming months. David Rennie, Sector Head, Oil and Gas/Thermal Generation and CCS at Scottish Enterprise, says as a not-for-profit

independent organisation, the NSRI will be in a strong position to work closely with Subsea UK to champion subsea development.

“As the industry’s advisory body and interface for subsea R&D activi-ties, NSRI will act as the conduit of knowledge transfer between industry and academia.

“For instance it will support and engage with the Oil & Gas Innova-tion Centre to build stronger links between the industry and the UK’s academic community, increasing subsea related research in the UK.

“The availability of this information to subsea companies throughout the UK will be a game changer by provid-ing understanding and knowledge of subsea technology needs which will help grow and move forward this nascent and important industry.”

It’s crucial to bring technology innovators together with operators

NSRI Steering Group leader John Mair

Oonagh Werngren, Oil & Gas UK’s operations director

Dr Nick Schofield of the University of Aberdeen


Power of Scotland10

C certainty over tax relief for removing, recycling and dis-posing of UK Conti-nental Shelf (UKCS) infrastructure has pushed back some decommiss ioning , but strenuous efforts are under way to

ensure that the job will be well done, costs contained, and as much work as possible results for UK based suppliers.

Oil & Gas UK (OGUK), the industry representative body is gathering survey data now for its annual Decommission-ing Insight for October publication at the annual Decommissioning Conference that OGUK co-organises with Decom North Sea (DNS), the Aberdeen-based umbrella forum, think-tank, learning and networking organisation for stakeholders in this sector of the industry.

Decommissioning activities grew at a modest rate in 2013, accounting for 3.5 per cent (£0.9 billion) of total UKCS expenditure of £25.8 billion, OGUK’s Activity Survey 2014 found. OGUK fore-casts spend of £10.4 billion over 10 years, including large decommissioning projects under way for completion within seven years. It expects peak annual spend of £1.7 billion in 2016

Since the 2013 Decommissioning Insight, trends are “much as anticipated”, said Mick Borwell, OGUK’s environmen-tal issues director.

“Overall predicted costs to 2040 have remained fairly static when compared to the 2013 Activity Survey,” Borwell added. “Well plugging and abandonment will be the dominant activity, totalling £4.5 bil-lion within a 10 year period up to 2022.”

Beyond the big figures, Sir Ian Wood’s review on maximising oil and gas recovery from the UKCS has hardened the need for decommissioning activ-ity that complements ongoing opera-tions, according to Nigel Jenkins, newly appointed chief executive of DNS.

“The Wood Review is looking for a ‘game changer’ that will drive down costs,” Jenkins said. “This game changer will come out of DNS because we are the only organisation bringing together all stake-holders focused on decommissioning.”

DNS is linked into a significant collab-orative network. Jenkins and DNS board director Nigel Lees, projects director at leading offshore contractor Wood Group PSN, are to sit in OGUK’s new decom forum.

This forum feeds into the INSITE and MASTS programmes. INSITE is a joint industry project facilitated by OGUK to provide stakeholders with independent

scientific evidence on the influence of man-made structures on the North Sea’s ecosystem. It is expected to award fund-ing for research projects later this year.

The Marine Alliance for Science and Technology for Scotland (MASTS) is a consortium of organisations involved in marine science and represents the major-ity of Scotland’s marine research capacity.

Paul Charlton, another DNS director, is also chairman of NOF Energy, the UK business development organisation working to identify global opportunities within the oil, gas, nuclear and offshore renewables sectors and to help its mem-bers — more than 460 of them — to secure a share of this value.

DNS Chairman Callum Falconer sits on the Oil and Gas Producers (OGP) and Salvage and Underwater Technology (SUT) decommissioning committees.

DNS also has clear links into: industry associations Subsea UK and the Offshore Contractors Association; the UK gov-ernment’s Department of Energy and Climate Change (DECC); development agencies Scottish Enterprise and High-lands and Islands Enterprise, industry forums Energy North, Scotland, and East of England Energy Group; and the Nuclear Industry Association.

“Any game changer will emerge from that network,” Jenkins said. He sees oper-ators starting to regard decommissioning as more than just the last act at the end of field life.

“Decommissioning is a positive activity of reuse, removal and renewal. There is a growing realisation that assets have a finite life and that decom is an essential, not negative, part of the asset lifecycle. The supply chain is aware of the need to collaborate to create innovative decom-missioning solutions.”

DNS is, he maintains, the only organi-sation dedicated to this “end of asset life challenge”. His motivations in taking on the chief executive’s role are “firstly born from a personal commitment to full life-cycle management” of oil and gas fields, he explained. “We as asset owners have a duty of care, not only to excellence in design, construction and operations but also to late-life management and even-tual decommissioning.”

He is also attracted by the challenge of building on “the excellent work” of DNS through its formative years.

“Responding to new market and regu-latory drivers and helping all stakehold-ers navigate a successful route through a local, national and global landscape is immensely interesting and enjoyable. My background in engineering (at contrac-tors KDC and AMEC among others), decommissioning across related sectors (such as nuclear) and stakeholder man-agement will be very useful.

“DNS will facilitate, coordinate, medi-ate, promote and drive collaboration, removing barriers and encouraging the most efficient end of asset life solution development and delivery.

“We will also nurture the skills that are the lifeblood of innovation and decommissioning. At our core is a drive to safely reduce decommissioning costs and reduce the liability for taxpayers and future generations.”

Jenkins will firm up a refreshed DNS strategy with the existing board and

Operators now see decomissioning as positive reuse and renewal, not just the last act in the life of an offshore field, writes Simon Gray

Late-life approach vital to the future

membership over the coming months but based around the organisations four key strategic themes: Inform, Learn, Collabo-rate and Improve.

Projects under these headings include: early contractor involvement for better and lower-cost decom projects; improved market information for members and operators; lessons learnt from past pro-jects; reuse of equipment and materials; raising the profile of supply chain capa-bilities; opportunities to meet buyers of services and equipment; cross industry events to exchange ideas with other

sectors, such as nuclear, that have faced similar issues in decom; enhancing skills; emerging technologies; and the develop-ment of solutions.

The launch in May of Strategic Decom, an oil and gas consultancy dedicated to decommissioning, is another sign of an industry coming of age. “The reason we are here is that we have seen a change in the decommissioning landscape in Europe,” said Richard Heard, managing director and co-founder of the Aberdeen-based firm that offers strategic planning, consultancy and training services.

Decommissioning

Nigel Jenkins says there is a realisation that

decom is an essential part of the life cycle


“The industry is getting experience in decommissioning big platforms. The Decommissioning (tax) Relief Deed agreed between government and the operators last year guaranteed the cur-rent tax rules and effective tax rates applied to decommissioning costs incurred in the future. Then after we decided to set up the business, the Wood Review emphasised the strategic and col-laborative approach required to deliver cost-effective decommissioning.”

The calibre and experience of Strate-gic Decom’s founders tells its own story. Heard founded leading contractors Xodus Group in 2005, and from 2011 managed decommissioning projects with OGUK. The other founding directors have wide experience of decommissioning with operators such as BP, Shell, ConocoPhil-lips and Marathon Oil, and are promi-nent members of industry expert groups including OGUK’s forums.

Strategic Decom works with clients to plan safe, efficient and cost effective asset decommissioning whatever the current stage of field life.

“But the earlier you think about decom-missioning in the latter stages of a field’s life, the more you can influence the outcome of that programme,” Heard said. “It’s about applying the same mental techniques and processes as you do for ensuring that field development is as cost effective as possible so that you get the most out.”

Late-life approach vital to the future

immature industry in the UK currently, it is likely that the UK will in time become a centre of excellence and that these key skills will become exportable.”

Downloadable documents on OGUK’s website include the 2012 Report on the decommissioning of Steel Piled Jackets 2012, and the 2013 Decommissioning Insight in which data has also been ana-lysed by phase of decommissioning, as well as by region of the UKCS.

“This approach, which includes research into the requirements for heavy lift services and the current capacity for onshore disposal, will help inform sup-ply chain companies where to focus their energies,” Borwell said.

There is also an OGUK report on decommissioning of North Sea pipelines as well as databases on installations due to be decommissioned.

PILOT Share Fair, an annual OGUK conference to be staged next in Novem-ber, is another effective way to under-stand about the business opportunities.

“Share Fair has proved its value time and time again as an event that success-fully brings together the industry’s major purchasers with the contractors and suppliers on whom the sector’s vitality depends,” Borwell said. “It is where del-

egates find out about the forward plans of major purchasers, including plans for decommissioning activities.”

In a wider context, the International Association of Oil and Gas Producers (OGP) has published a report on the Decommissioning of Offshore Concrete Gravity Based Structures.

OGUK is working on guidelines for comparative assessment processes in decommissioning programmes. These consider safety, environmental and eco-nomic aspects of all options for disposal, such as reuse, recycling, disposal onshore and any other offshore disposal options.

One thing that has become abundantly clear is that current challenges confront-ing decommissioning planners include the availability of sufficient lift capacity, equipment, vessels, rigs and specialist crews to carry out search work.

“This will require operators and the supply chain to be innovative about driv-ing down costs and increasing efficiency,” said Borwell.

For all the surveys and analysis, there is also awareness that decommissioning will demand a flexible response from both operators and suppliers as planning and studies give way to reality.

“Decommissioning expertise is consid-ered to be available within the UK supply chain, but without significant activity in this area, the supply chain has not been fully tested,” Borwell noted.

“It is expected that some adjustment will be required as activity increases and competition for resources may be expe-rienced in some areas with oil and gas production.”

Nigel Jenkins at DNS said: “Operators and regulators need a supply chain that is proactive, innovative and will drive out cost through collaborative working”.

With limited experience of large scale decommissioning projects in the industry, sharing knowledge is key. Stra-tegic Decom, together with partners DNS, delivers two-day training courses introducing key concepts in late field life and decommissioning planning. It offers bespoke courses to update opera-tors’s teams on what is happening in the industry. “I also think there is a need to start thinking about decommissioning as a specialist field in its own right, such as subsea engineering, process engineering, and so on,” Heard said.

Another strand of Strategic Decom’s business is advising would-be purchasers of assets on the liabilities that they may incur for future decommissioning.

“It’s an important part of due diligence for these transactions,” Heard said. “With our directors’ experience of executing decommissioning programmes from operators’ perspectives, we know exactly the challenges faced when trying to take over an asset.”

Decommissioning opportunities are being assessed by a subgroup of OGUK focused on addressing actions put for-ward in the UK Oil and Gas Industrial Strategy launched by the UK govern-ment in March 2013. The subgroup cov-ers development of technical, commercial and regulatory proposals to bring cost efficiencies in decommissioning.

OGUK issued guidelines in 2012 and 2013 to help operators through stages of the decommissioning process. “The information is of value to both opera-tors and the supply chain as it helps to create a responsive and competitive mar-ket,” OGUK’s Borwell said. “Experience gained from a number of flagship projects which will be delivered in the next five years will provide valuable insights to the industry.”

These projects, listed on the Project Pathfinder part of DECC’s website, include those for the Brae, Brent Alpha and Bravo, Murchison and Miller fields.

“Ensuring that information about the decommissioning market is available is vital in terms of helping both operators and supply chain prepare for the projects ahead,” Borwell said.

Strategic Decom’s Heard said: “Nowa-days operators are recognising that rather than saying ‘the taps have been turned off so what needs to be taken out’ they need to get on the front foot and show that the best possible approach is being taken to get the most cost effective outcome. That is what we are seeing from operators.”

DNS encouraged operators to share more details of plans, and earlier, with suppliers in the organisation’s member-ship. Jenkins saw the cost cutting power of this approach in his experience with nuclear industry decommissioning.

UK supply chain companies are well placed to capture a significant share of UKCS decom spend, he believes.

“They have been aware of the market and the key regulatory, legislative and related drivers. The key now is active and informed engagement with opera-tors and key stakeholders to deliver cost effective decommissioning solutions. We should also remember we have member-ship from across Europe and therefore our focus is North Sea wide (not just the UKCS). Although decom is a relatively

There is a need to start thinking about this as a specialist field in its own right

Decom the main eventThe rise of activity around decommis-sioning is reflected in a packed calendar of events organised by Decom North Sea for the coming months. Learning and networking events in Aber-deen feature a wide range of companies making presentations: Aggreko, Baker Hughes, CUT and ABB (August); Sky Futures, Spartan Solutions, Weatherford and Pastoor Offshore (September); Babcock International, Scotoil and Maclay, Murray & Spens (November); and Fugro, Lucion Environmental and the Met Office (December). There are meetings in July and November in Norwich of the Southern North Sea Special Interest Group formed by DNS and East of England Energy Group.DNS’ Offshore Decommissioning Conference takes place in St Andrew’s, Fife, in early October under the banner ‘Delivering the Future Together’. Judging

by past editions, it will sell out as operators, Tier 1 and 2 contractors and small and medium sized supply chain companies gather for one of the flagship events of the North Sea decommission-ing community.Its popularity is down in part to its interactivity, with many leading opera-tors and main contractors available for one-to-one discussions. Its seven sessions include analysis of the current situation on decom; well plugging and abandonment; issues surrounding vessels, heavy lifters and cranes; technology that addresses decom needs; sharing the space i.e. collaboration and communication between stakeholders and suppliers; onshore handling of decommissioned equipment and structures; and focusing on future opportunities and challenges.

The Murchison platform on the field operated by CNR International

A flurry of activity has been organised by Decom North Sea in Aberdeen

Richard Heard of Strategic Decom

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Asset integrity

The industry associa-tion Oil & Gas UK’s has recently issued technical guidance on the management of ageing and life extension of oil and gas installations on the UK Continen-tal Shelf. It marks

another milestone in action around the theme of asset integrity as operators seek to prolong production from exist-ing infrastructure. “It complements our work,” said Les Linklater, team leader at Aberdeen-based Step Change in Safety, the partnership set up by industry asso-ciations to make the UK the safest oil and gas province in the world.

“OGUK’s guidance addresses keeping the offshore infrastructure safe, keeping the hydrocarbons in the pipe, managing corrosion, reducing downtime and the maintenance burden. That all leads to the most important elements, which are keep-ing our people and environment safe.”

Step Change is well into the rolling programme of initiatives launched in its 2010-2015 strategy. Its three-year target to reduce hydrocarbon releases (HCRs) by 50 per cent by 2013 saw the industry achieve a 49 per cent decrease. A second target was set in two parts. The fi rst is another 50 per cent reduction in HCRs by identifying lessons learned and shar-ing them through a Safety Alert Data Information Exchange database (SADIE).

“We want to eliminate new releases that happen for old reasons,” Linklater explained. “We have seen a step change in the use of SADIE through greater involvement by the (UK government’s) Health and Safety Executive.”

As more companies share informa-tion, the challenge is to learn and embed lessons, Linklater said. “The emerging themes will directly link to the Joined up Thinking engagement packs that we will create over the next 12 months around key topics.”

Since 2010, Step Change has seen more than 6,000 people in the industry trained to maximise the integrity of mechanical joints. The revised training and compe-tence model focused on the installation, maintenance, inspection and dismantling of bolted, clamped and small bore tubing joints where failures could lead to HCRs.

Step Change’s Asset Integrity Steer-ing Group recognises that, while oil and gas production takes place in a complex multi-stakeholder environment, effec-tiveness depends on doing some things really well before moving on.

Step Change is now analysing the results of a questionnaire sent out by its long-standing Technical Authority Workgroup to ask industry players, ‘what does good look like?’

“There are many different terms and structures around the industry for what a Technical Authority should do. We are creating a common denominator to cover good practice. We will look at the questionnaires to get a sense of what constitutes the very best for all aspects of

a technical authority role, regardless of what organisations call it.” This process is expected to be complete by the third quarter of 2014, Linklater said.

“It was important to get a few things well embedded and sustained rather than trying to do 100 things,” Linklater said. “We had a relentless focus on HCRs as an overarching principle. But we also put in place new assurance and verifi cation documents (for equipment and materi-als) so people can better understand how

their built-environment offshore can be better looked after.”

Best-practice guidelines to prevent HCRs have also been rolled out across the industry.

“All of this is supported by senior leaders and we have supported that through communication tools such

as joined-up thinking that helps with workforce engage-ment,” Linklater said. “This is

important because it is not solely a boardroom issue.

It extends right through opera-

tions to the

front line. We have to create an environ-ment where people engage and involve others.”

Petrofac scoops major dealsPetrofac recently announced a major contract win, worth $630 million (£373 million) for up to 10 years to support independent operator EnQuest on its North Sea assets: Thistle, Heather and Northern Producer.

Thistle and Heather in particular are mature assets installed in 1976 and 1978 respectively with 25-year design lives. Thistle is in the throes of the Thistle Late Life Extension project to recover a further 35 million barrels from the Thistle and Deveron fi elds. Heather is being redevel-oped and its life could be extended to as late as 2030.

The deal replaced Petrofac’s original fi ve-year contract in 2013 for work on Thistle and Heather but is the fi rst time in Petrofac’s history that it has won a contract of that length.

“These contracts are typically three to fi ve years,” said Walter Thain, senior vice president Europe for Petrofac Offshore Projects & Operations.

“It means EnQuest is aware of what the next 10 years may bring, in terms of these assets, and that is a huge comfort to us. We have 300 people on the job and could have another 50 to 100 as EnQuest ramps up activities on its new fl oating, production, storage and offl oading ves-sel (EnQuest Producer, which will be deployed to the Alma/Galia fi eld).”

The main focus of Petrofac Offshore Projects & Operations is its expertise in safely extending the life of ageing assets in the North Sea, increasing uptime and production effi ciency, reducing main-tenance and integrity backlog, and ulti-mately delivering safe operations.

Petrofac is the duty holder, under Health and Safety Executive legislation, for EnQuest’s Kittiwake platform, and operated the asset for Centrica before it was sold to EnQuest and Dana. Shell was the original operator.

One reason EnQuest invested in Kit-tiwake was the potential for developing smaller fi elds, such as Scolty and Crathes, in the Greater Kittiwake area. These smaller fi elds are subject to fi eld develop-ment approval but would be tied back to the existing infrastructure.

North Sea assets installed as long ago as the 1970s are having their lives and value prolonged by expert management, writes Mark Miller

Value of strengthening the things that remain

CAN GROUP

CAN Group’s offshore personnel undertake the inspections required and feed back the results for analysis onshore, identifying longer-term threats

Walter Thain, senior vice president Europe for Petrofac Offshore Projects and Operations


Power of Scotland14

“Kittiwake is a fantastic model of pro-longing field life,” Thain said. “It was pro-ducing only around 5,000 barrels per day (b/d) before a new entrant to the industry (Venture Production) acquired it from Shell in 2003. After that, we operated it for Venture Production (subsequently acquired by Centrica), safely managed the asset and its ongoing operations while completing three subsea tie back projects with Venture’s investment, and increased production to more than 25,000 b/d.”

As the constant factor in the story since 2003, Petrofac has benefited from a decade of learning on Kittiwake, as well as from its other UKCS outsourced duty holder operations.

“For us, it has been about getting an integrated team together with a singular focus on the performance of one asset,” Thain said. “Many large oil companies operate with a multi-asset perspective, which in turn can dilute the performance focus of any individual asset.

When we operate these facilities, we focus on that specific asset. We live and breathe its performance, whether that is production, cost, or safety.”

The other key point is about managing asset integrity as the field life extends.

“As assets mature you have to change strategy,” Thain said. “That includes how you manage integrity and monitor corro-sion. You can’t develop an integrity man-agement strategy on day one and imagine that it can stay that way indefinitely. You have to review and change it every three to five years to look after the asset.”

Monitoring is a strong area for Petro-fac. Its Asset Integrity Review framework involves custom-built software to manage asset integrity more effectively by pre-senting the data in a ‘dashboard’ format that identifies risk patterns emerging.

It is based on a ‘barrier model’ which manages the integrity of the safety criti-cal barriers required to protect people and the installation. These barriers include, among others, physical ones like fire and gas detection and emergency response systems, through to less tangible meas-ures like the competency of people.

The dashboard uses a traffic-light style, green-amber-red display to flag up status of the physical, human and process meas-ures being monitored. Smaller issues may point to more fundamental ones and help Petrofac to anticipate any larger problems. The suite of measures is aligned to the major accident hazards on installations.

“We have recently redeveloped our complete risk-based inspection strategy down to a components level rather than a systems level across our assets,” Thain said.

Training and recruitment are vitally important too, he added. Petrofac’s own scheme for teaching theory is comple-mented by on-the-job, industry approved training. It is also working with the Min-istry of Defence’s careers transition pro-gramme to recruit new, skilled people into the industry.

“We’re currently looking to recruit around 300 employees within different disciplines,” Thain said. “This is because we have three major contracts that are

in the pre-operations phase. One is with EnQuest, another with GDF Suez (for UK assets including the Cygnus gas field), and a third with Ithaca Energy (for the Greater Stella Area fields). These are all assets that are going to be producing in 2015, so we are recruiting for them right now.”

Petrofac exports its North Sea exper-tise around the world, to the Middle East, Mexico and South East Asia. A wide range of global assets are being addressed from a consistent Asset Integrity Review framework involving the use of the dashboard.

All the assets it is responsible for worldwide ar6e managed within the framework of a Case for Safety that sets standards even where there is no regula-tory requirement. “All our procedures for running assets do not necessarily have to be exactly the same in different coun-tries,” Thain said. “However, all our assets have to perform to a certain standard even though the local procedures may vary. This means the integrity standard is applicable across all Petrofac organisa-tions right across the globe.”

Petrofac’s operations technical author-ity team has just returned from south-east Asia where they were doing an integrity assurance review to ensure that asset integrity work is being done prop-erly on a field. “So Aberdeen is very much an international centre of excellence for us,” Thain said.

CAN Group can doCAN Group similarly specialises in deliv-ering full asset integrity programmes that ensure the safety and reliability of offshore assets.

Targeted at meeting the varied needs of the industry, it can provide small project-based or integrated complemen-tary services across its three businesses:

CAN, ENGTEQ and VENTEQ. “What our group does sounds very simple but is actually highly complex and touches on a large number of disciplines,” said group director Innes Walker.

“Essentially our role is to inspect off-shore oil and gas production facilities and provide the operator with an assur-ance that the system is safe to continue working, estimate its remaining life and a recommend any actions that are required to ensure continued safe operation.

“Even basic assets incorporate thou-sands of individual pipework compo-nents, pressure vessels and structural items. The aim is to be pre-emptive and capture issues before they become problems to ensure safety and minimise downtime.”

The process starts with ENGTEQ’s multi-disciplinary engineering teams car-rying out a risk assessment to determine the most critical systems from a safety, production and environmental standpoint.

This involves considering the prob-ability of failure by the numerous corro-sion and degradation mechanisms held offshore. The results are used to decide the frequency of subsequent inspections, what will be examined and the optimum techniques to be used.

From there, CAN’s offshore personnel undertake the inspections required and feed back the results for analysis onshore. As well as looking for areas of immedi-ate concern, the survey identifies longer term degradation threats associated with ageing assets.

Inspection results and analysis pro-vide operators with a high level integrity statement and the information used to set a new inspection frequency and risk assessment process.

Engineering Director, Simon Hurst, explained: “Normal practice requires

the periodic inspection of the inter-nal surfaces of major pressure vessels. However, as the pressure on platform uptime increases, there is an increasing desire to carry out inspections from the external surface by non-intrusive means. This brings health and safety benefits by avoiding the risk associated with the man-entry inspection. ENGTEQ and CAN work together to deliver a seamless package while ENGTEQ engineers carry out the non-intrusive inspection assess-ment to determine what, where and how much to inspect.”

One area where CAN Group continues to see increased activity is in what they term ‘Find and Fix’ and ‘Find and Arrest’.

“There is often a focus on the large remedial projects and whilst these will invariably bring long term benefits in terms of asset reliability and uptime, they typically do nothing to address the short term integrity risks,” Hurst said.

He added: “Our approach has been to take ownership of these integrity risks and, in conjunction with the client, deter-mine if it should be fixed or arrested. Once agreement has been reached we then manage the entire process through to completion. In this way we have helped a significant number of our clients to reduce both the number of anomalies on the asset and its overall risk profile.”

Petrofac’s Kittiwake Area is, says the

company, a model of prolonging field life

You have to change strategy. You cannot develop it on day one and imagine that it can stay that way indefinitely

6000Trained by Step Change since

2010 to maximise integrity of mechanical joints

3 Complementary businesses through which CAN Group

fulfils industry needs

$630mValue of Petrofac contract to

support EnQuest in its North Sea assets

Innes Walker highlights preemptive approach to ensure safety

Last year’s sell-out conference is back and bigger and bett er than ever before.

This year’s conference will include sessions on the following topics:• Wells • Sharing the Space• Vessels and Heavy Lift ers • Onshore Handling• Technology • Focusing on the Future Our speakers will share their expert knowledge of the industry while welcoming interacti ve discussions between representati ves from operators and contractors.

Last year’s event was att ended by 300 delegates from the UK, Norway,The Netherlands and the USA – don’t miss your chance to be involved in this key industry event.

Prepare to meet the exciti ng challenges of this expanding sector by booking a place at our conference now!

Off shore Decommissioning Conference 20147 - 9 October 2014

This year’s conference will include sessions on the following topics:

Our speakers will share their expert knowledge of the industry while welcoming interacti ve discussions between representati ves from operators and contractors.

Last year’s event was att ended by 300 delegates from the UK, Norway,The Netherlands and the USA – don’t miss your chance to be involved

Prepare to meet the exciti ng challenges of this expanding sector

Organised by:

Fairmont Hotel, St Andrews, Scotland, KY16 8PN

Our speakers will share their expert knowledge of the industry while welcoming interacti ve discussions between representati ves from operators and contractors.

Principal sponsor:

Supporti ng sponsors

For further informati on about the conference, sponsorship opportuniti es and to book visit: www.oilandgasuk.co.uk

Member Rates £585.00 plus VAT per person Non-Member Rates £900.00 plus VAT per person

Member rates apply to companies who are members of either Oil & Gas UK or Decom North Sea at the ti me of booking.

Power of Scotland June 2014

Documents

Transcript of Power of Scotland June 2014