For too long, some have perceived the UK’s oil and gas contractor sector as the silent partner in contracting relationships.
This is changing though; March marked the formal start of efforts by the UK Government and industry to feed the growing appreciation of the unrivalled range of products, services and expertise developed here over the last 40 years that which can now play a key part in rebalancing the UK economy.
While the role of the UK oil and gas production in supporting employment, tax revenues and energy security has received increasing recognition in recent years, several events since the beginning of the year have helped boost awareness of the supply chain as a major contributor in its own right to the UK economy and the nation’s trade with other countries.
The sector now spreads across Britain and is defined by the sheer breadth of its reach and diversity of capabilities which include seismic surveys, exploration, engineering, engineering-manufacturing, installation, production and maintenance of offshore assets. At the start of March, I visited the north of England where, in association with the Department of Energy and Climate Change (DECC), Oil & Gas UK held a dinner in Gateshead for members of its new Fabrication Forum, prior to the NOF Energy national conference.
Recent oil and gas projects with equipment or services supplied from the region include the £150million contract for the design and construction of the Forties Alpha satellite platform awarded to Offshore Group Newcastle (OGN) by Apache North Sea and the contract for the 2,750 tonnes York platform awarded to Hartlepool’s Heerema Fabrication Group by Centrica Energy.
These contracts generated well over 1,000 new jobs in north-east England and breathed new life into a region historically known for supporting a workforce skilled in heavy engineering, But to ensure more similar success stories like this there was consensus that UK companies must be sufficiently competitive when it comes to bidding for future major manufacturing projects.
Attending the Gateshead event was energy minister, Charles Hendry, who explained that the Government does not stand neutral on the question of encouraging locally-based content into new energy projects. He acknowledged the significance of Tyneside and Teesside as areas of engineering excellence.
Encouragingly, a discussion of ways to enhance and promote the value creation capabilities of the sector was held, including the training and development required to retain a skilled and flexible workforce responsive to future supply chain challenges.
March also provided the industry with a helpful tool with which to promote the supply chain at the launch of Ernst & Young’s review of the UK oilfield services industry in Aberdeen.
This document confirms the value of the supply chain, estimating that it generates annual revenues in excess of £25billion.
It is interesting to note that Ernst & Young identified more than 900 additional companies outside the scope of its report. In terms of the sector’s economic contribution to the economy,
Oil & Gas UK’s most recent economic report estimates that the wider supply chain pays around £6billion in corporate and payroll taxes and exports goods and services annually to the same value.
The significant role of the oil and gas supply chain in the drive for growth was shared with business secretary, Vince Cable, at a meeting of industry representatives with UK Trade and Industry and DECC in London just the day before the 2012 budget. We highlighted the hundreds of thousands of highly-skilled jobs, export of high value-added goods and services worth billions of pounds a year to the balance of trade and the fostering of technology development and advanced manufacturing not only in Aberdeen, but throughout Britain.
We were encouraged by Cable’s commitment to the meeting – he expressed determination to work with the industry to build capacity and to exploit the sector’s full potential – and looks forward to that engagement being the first of regular discussions on how to ensure the supply chain can best support UK trade, innovation and enterprise.
To maximise the economic benefit for the British economy not only of indigenous oil and gas production but also of its service sector, it is vital that the supply chain remains anchored here.
The UK Government has now launched a helpful two-pronged attack, giving encouragement to investment through measures announced in the 2012 Budget and stating its support for the supply chain.
Oil & Gas UK will respond by fostering further collaboration through PILOT Share Fair and our wide range of forums. For further information, please contact David Ripley on dripley@oilandgasuk.co.uk
David Ripley is supply chain director at OGUK.
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