Failure to Support Subsea Programmes Could Influence UK Oil Production and Export

Government ministers, including energy minister Michael Fallon, and MPs will this week be warned that failure to support subsea technology and skills programmes could impact on UK oil production levels and export revenues.

At a reception in Westminster on Wednesday 3rd of July, Subsea UK will unveil its manifesto which spells out the need for greater collaboration between industry, government and academia and significant public and private investment in skills and technology research and development.

The body representing the country’s subsea sector, which generates over £6billion in revenues and supports 50,000 jobs, is calling on the government to back plans for a national programme that will support and fund subsea research and a UK-wide skills programme that will help the sector find the 10,000 people it needs to capitalise on current and future demand nationally and internationally.

Neil Gordon, chief executive of Subsea UK, said: “If, as David Cameron says, the UK’s oil and gas industry is the jewel in our economic crown, then the subsea sector is the sparkle on that jewel. Extracting the UK’s remaining reserves is now heavily dependent on subsea innovation and skills. Already almost 45% of UKCS production comes from subsea wells and new developments will take this up to 70%. Getting the remaining oil out of the ground, in the North Sea and in other deeper water provinces around the world, will largely rely on the next wave of subsea innovation. But we are not investing in R&D to the same extent as competing countries in Brazil, the US and Norway.”

Global competition is increasing sharply with less mature oil and gas provinces investing significantly in technology development programmes and people. The governments in Brazil, Norway and the US have had the strategic vision to implement sustained investment programmes in subsea research which, says Subsea UK, is threatening the UK’s leading position in this sector.

Export sales account for around half of the country’s subsea revenues. As the world leader in subsea, with over a third of the global marketshare, the UK is in an enviable position but its future dominance is being compromised by a shortage of skills and a lack of investment in the development of new science and game-changing technologies.

Brazil’s oil and gas R&D fund, managed by ANP, is projected to raise almost £6billion by 2020. Norway’s demo 2000 programme has attracted around £7million per annum and in the US, the DeepStar scheme receives annual funding of £2.4million. In comparison there has been zero investment from industry and government in any similar programmes in the last 15 years. The UK’s current success in subsea is due to industry and government investment in the early years of the North Sea when it was a test-bed for subsea equipment and processes.

Mr Gordon added: “Our blueprint reveals that for our industry to continue to create jobs, generate wealth and export revenues, we need significant funding for R&D, a national skills programme that will create a sustainable pipeline of new talent into the sector, an effective government-led and funded technology development programme and a stable fiscal regime that encourages investment in game-changing technology.”

Subsea UK believes that securing support and funding via a national programme would have a major impact on developing the next wave of research and scientific discoveries that will lead to the creation of new technology applications to economically and safely recover the more difficult to reach reserves of hydrocarbons and to prolong the life of and increase production from mature wells.

“A national subsea R&D programme would help extend the life of ageing North Sea assets, ensuring maximum recovery of remaining reserves in a commercially viable way, it would underpin the long-term future of a major UK manufacturing and service industry and have a positive impact on the emerging marine renewables sector, “ added Mr Gordon.

Subsea UK has just launched a UK-wide initiative to attract people into the subsea sector but believes that more needs to be done to raise the profile of the industry and ensure that subsea companies have access to a pool of engineers, technicians and project managers now and in the future.

The challenges in finding suitably qualified people, particularly in engineering disciplines, have come about as a result of the decline in the number of school children taking up maths and science subjects, the ageing workforce in the oil and gas industry, the industry’s perceived negative reputation and increasing global competition.

Mr Gordon said: “We are already working with schools and universities as well as rolling out conversion training programmes for engineers coming into subsea and for former military personnel but we need a much more concerted effort between the industry, education and Government to make sure we have a sustainable pipeline of talent.”

The Subsea UK parliamentary reception will be held in the Terrace Pavillion in Westminster from 4pm – 6pm on Wednesday 6th of June 2013.

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Press Release, July 1, 2013; Image: michaelfallon.org.uk