Boom times are back for the region’s oil and gas industry

Jun 23 2008 by Karen McLauchlan, The Journal

THE good times are back for the North East’s offshore industry as Karen McLauchlan reports.

TEN years ago, the region’s offshore industry was hanging by a thread and the future looked desperate. Order books were empty, yards were closing and hundreds of workers faced joining the dole queue.

Today, the picture could not be more different with the sector “transformed” in the last decade, according to industry leaders.

New projects are up and running, securing new investment and creating new jobs.

While the sector is thriving globally – so are developments closer to home.

Oil company Total has just produced the first gas from its Jura field in the North Sea, with plans for a broader exploration campaign launched in the area. With energy prices still bullish it’s predicting more companies will do likewise. Meanwhile, the UK government, keen to boost production and alleviate price pressure at the pumps, has given the green light to further development of the North Sea oil fields.

West Don and Don South West are due to start production in the first half of next year and are estimated to produce up to 50,000 barrels of oil a day at their peak, with total output of 50m barrels.

Plans have also been unveiled for new oil and gas lines to be carved out of unprofitable parts of around 30 existing fields, which could see additional daily production of 20,000 barrels of oil.

Business Secretary John Hutton revealed changes to the system for licensing oil fields in the North Sea and said there had been a record 193 applications in the latest licensing rounds.

Technology is providing the tools both to drill deeper and process heavier oils, giving access to previously untapped resources – key in times of spiralling oil prices and energy efficiency.

The subsea sector in the region grew 30% last year and is expected to continue growing for many more.

Experts say 50 North East firms are involved in the sector, employing 5,000 people and contributing £500m to the local economy.

And there are huge employment opportunities.

NOF Energy, the organisation representing companies in the sector, has calculated there are currently 1,730 jobs available in the North East energy industry.

George Rafferty, NOF chief executive, said: “The North East offshore sector has been transformed in the last 10 years.

“There are huge opportunities for companies across the region in the oil, gas and energy sector.

“Our association is at its highest membership level for 20 years – representing 300 companies.

“There are also great employment opportunities. This is a technically advanced industry that is exciting. If somebody wanted a life-long career, they can get it in this industry.”

Wilton Engineering Services is one company enjoying boom times.

It has breathed new life into the former Kvaerner yard at Port Clarence – which closed its doors in 1999 at the height of the sector’s struggle.

Almost ten years ago, Kvaerner laid off its 900 workers as the order book ran dry.

Just months later the site’s plant went up for sale lock, stock and barrel, leaving the yard an empty shell and shadow of its former self.

Today the site is a hive of activity – with plans for growth and investment on the cards, thanks to Wilton Engineering Group, which bought the yard from shipbuilder Swan Hunter in 2006, moving its operations from Hartlepool to the 30-acre site last year.

It has also recently acquired Project Design and Management Services (PD&MS) of Aberdeen to expand its capabilities.

The deal sees the expanded company – which quadrupled its staffing to 200 during the last three years – grow its workforce to 250 and almost double annual turnover to more than £30m.

“It’s very satisfying to see the yard up and running again,” said Bill Scott, who founded the company in 1994 with fellow director Steve Glenn.

“It was sad to see the demise of the facility, driven by market conditions. Our ambition now is to grow further.”

Wilton Engineering specialises in bespoke fabrications and associated services for the oil, gas and petrochemicals sectors.

Its recent acquisition has increased its capability for design and detailing, meaning it can now handle every part of a project’s development from design through to manufacturing and installation.

Mr Scott admits careful planning, targeting particular contracts, and a bit of luck, helped the company weather the oil and gas recession of the late 1990s.

“This will always be an industry that is cyclical and we were careful in the jobs we went for,” he said.

“We kept ourselves smaller and leaner so we could switch markets quickly.

“But despite that, we’ve always been on a growth pattern. But it eventually became a case of do we stay as a relatively small operator, or grow substantially.”

Taking what Bill describes as a “leap of faith” the business decided on the latter, moving to bigger premises at Hartlepool’s Tees Bay Business Park before relocating to the Tees.

And it’s a decision that’s paid off.

It has just secured a contract which will keep its order book busy for more than a year. It is working on a contract to build a 1,650 tonne structure to sit on the back of a ship to lay sub-sea pipework all over the world.

And it has plans to dredge the River Tees alongside its yard to allow it to bring in larger ships for future contracts.

The oil and gas sector currently accounts for around 75% of Wilton Engineering’s workload – with the other quarter focussed on petrochemical and liquid natural gas projects.

Mr Scott says the North Sea continues to be an area of huge opportunity.

“There are large operators out there with aging assets that need servicing,” he explained. “But also new companies looking to bring up deep oil reserves which were previously thought too expensive to access.”

But new markets and new sectors are creating new opportunities for the firm and others in the engineering sector.

“The 2012 Olympics presents a great opportunity,” he said. “Government plans to build two huge aircraft carriers will create a huge amount of work. Plus there’s going to be future opportunities in the energy sector with nuclear, tidal and wind power.

“It’s important to gear yourself up for what’s coming and keep one step ahead.”

He added: “The signs are there the oil and gas sector is set for growth for at least the next five years, if not the next ten or more.

“Our long-term strategy is for investment in the yard, to increase the number of people we employ and maximise the site we have here.”

HEEREMA is one Teesside yard which has survived the turbulent times – remaining open despite stormy waters.

The Dutch-owned firm recently secured a contract to build a 5,900-tonne deck and 500-tonne bridge for a platform working in the Nexen Buzzard oilfield off Scotland.

The project, one of its biggest to date, will swell the number of staff working at Heerema’s two dock yards from 120 to more than 300.

Once up and running, the “sweetening deck” will provide additional processing facilities and allow corrosive hydrogen sulphides to be removed from future oil streams – opening up new reserves.

Heerema completed a 9,500-tonne deck for Nexen Buzzard in 2006.

Director Frank Moran said: “This is a cyclical business but there’s cause for considerable optimism.”

Heerema is also looking to the renewable energy market and is tendering for wind farm projects. It hopes to be in the running for fabrication work on the Government’s new aircraft carriers.

Heerema is currently mobilising its project team for the Buzzard contract, which will provide work until 2010.

BOOMING offshore company Wellstream International is set to extend its complex at Walker Technology Park in Newcastle. The company, which supplies specialised pipework for offshore oil fields, plans to invest £35m on expanding its operation up to 2010. A planning application by the company to extend the Walker complex, including a new building to expand testing facilities, has been approved by the city council development control committee.

SONHOE’S decision last year to bring a £2bn crude oil refinery to Wilton was described at the time as the most significant inward investment since ICI moved in.

Two of the biggest names in the oil industry have also joined the project, which will create up to 2,500 construction jobs and up to 500 permanent jobs.

It will also mean the creation of around 1,500 spin-off jobs.

Sonhoe Development Company has reached agreement with Chevron Lummus Global and the Italy-based GE Oil and Gas in deals that will boost the project’s standing on the world stage.

A £150M CONTRACT awarded to Tees Alliance Group is bringing a new lease of life to the Haverton Hill shipyard near Billingham and will create up to 800 skilled jobs. Two state-of-the-art drilling rigs are being built, commissioned by SeaDragon Offshore. It is said to be the country’s biggest non-military fabrication project. The hulls for the giant rigs are being built in Russia and will be transported to Teesside later. The rigs will be used to drill for oil and gas in depths of up to 10,000ft in locations such as the Gulf of Mexico.

A NEW oil and gas engineering operation in North Tyneside hopes to benefit from a boom in the sector and create more than 250 jobs by 2011.

Fabricom Offshore Services, a subsidiary of Fabricom Contracting, said its new site in the Balliol Business Park, Benton Lane, will increase its offshore work in the North Sea on behalf of a number of its blue chip clients, including BP, Shell, Total and ConocoPhillips. It has already employed more than 20 engineers since beginning operations at the site in February and believes this will more than triple by the end of the year. Fabricom Contracting also has a base in Teesside, where it employs 150 staff.

GROUND-BREAKING technology which aims to increase the value of crude oil is to be trialled at the Wilton Centre.

Oxfordshire-based gas disposal firm CompactGTL will run a new testing plant, which will convert natural gas into crude oil. Wilton-based recruitment firm TechConsult UK has been hired to recruit about 10 staff to run the plant, including specialist engineers. The plant’s synthetic crude oil can be re-used by being mixed with conventional crude oil.

Steve Guest, MD of TechConsult UK, said a surge in job opportunities on Teesside was luring people back to the area.

Mr Guest said there was potential for growth in the oil and gas, sub-sea, construction, marine and renewables sectors. “We already send workers to the likes of Australia, the United States and across Europe, but it is increasingly apparent that there are opportunities at home as well,” he said.