I have recently completed a study of new market opportunities for the former oil fabrication yard at Nigg, in Easter Ross. Brown and Root stopped building offshore platforms and modules there in 2003, since when the facilities have only been used by other companies on a very small scale.
I am also currently undertaking a similar study of the former RGC/Kvaerner fabrication yard at Methil, in Fife.
At their peak, Nigg employed about 5,000 people and Methil 1,500, and they were vital parts of their local economies. Some of the best known production platforms in the North Sea were built at these yards.
Many of the people consulted believe that the best opportunities for the two yards are to construct components for wind turbines, notably for offshore windfarms. Global Energy and Burntisland Fabrications have already done that on a minor scale at Nigg and Methil, respectively.
There have been various forecasts of the windfarm markets – onshore and offshore – in the UK and elsewhere in Western Europe, but I think that all have proved to be wildly optimistic, particularly regarding the timing of orders.
The main reason for that is probably the long delay in getting planning permission onshore; nonetheless, some of the offshore windfarms that have approval have yet to proceed. Further, much of the work for the existing windfarms, both onshore and offshore the UK, has been done overseas – in Denmark, Germany and even China. The UK content has been very low and the Scottish content tiny.
Older readers may remember the Offshore Supplies Office (OSO), which was set up by the UK Government in the 1970s to try to ensure that British industry obtained a large share – target 70% – of the opportunities generated by North Sea oil&gas developments. I was not a fan of the OSO at the time and had a number of public fallouts with John d’Ancona, a particularly colourful director-general of this Government outfit.
Looking back, I was too critical of the OSO which, to a large extent, achieved what it was set up to do.
UK industry’s share of the UK windfarm market is probably less than 10%, compared with the 60%-plus in the days of the Offshore Supplies Office. Because of that, it is easy to conclude that there are market opportunities for Nigg and Methil, but in reality, can those opportunities be realised? There are two existing fabrication yards in Scotland which produce components for wind turbines – Vestas at Campbeltown, in Argyll, and CamCal at Arnish, near Stornoway – and both are struggling to survive because of a lack of orders.
Highlands and Islands Enterprise has invested millions in these two facilities. Indeed, Vestas is planning to shut the Macrihanish operation, though the Scottish Government is hopeful of keeping it alive, but in different hands.
The British Wind Energy Association (BWEA) recently published a “State of the Industry Report” and its conclusions in this regard are depressing.
The document states that “the UK must invest in coastal infrastructure such as ports and industrial facilities in order to enable the manufacture, assembly, construction and operation of windfarms … incentives should be offered to encourage inward investment by overseas turbine manufacturers and diversification into the wind sector on the part of UK firms who have the capability”.
Arnish, Campbeltown, Methil, Nigg? HIE has already done what the BWEA recommend, but with little success – and probably the loss of a lot of taxpayers’ money. Vestas is a world leader in the manufacture of wind turbines and if it cannot survive in Scotland, who can?
The Offshore Supplies Office succeeded with a carrot and stick approach. HIE and Scottish Enterprise can certainly provide the carrots for the wind energy manufacturers, but there is no one in Scotland – and the UK – wielding the stick.
There is the further complication of EU competition laws, which have more teeth and carry more weight today than perhaps they did when D’Ancona “The Maltese Falcon” ruled the roost with a remarkable ferocity.
Let me end by pointing out that there is still a significant demand for platforms and modules for new oil&gas fields on the UKCS.
Sadly, our fabrication capacity in Scotland is now largely limited to Burntisland Fabrications, with the result that most of these facilities now have to be built overseas anyway.
As well as Methil and Nigg, the yards at Ardersier, Ardyne Point, Clydebank, Hunterston and Kishorn have disappeared from the scene.
Come back John d’Ancona – all is forgiven.
Tony Mackay is MD of economists Mackay Consultants