February 4, 2012
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№ 7 (July - August 2011)

Renewed Optimism in the European Oil and Gas Sector

   As operators and EPC companies gather at Offshore Europe this year, they will be greeted by a general sense of renewed optimism in the European offshore oil  and  gas sector.

By Mike Major, Chief Executive, EIC (Energy Industries Council)

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   Few would deny that the last few years have been something of a rollercoaster ride for the sector with financing difficulties and a low oil price resulting in a number of projects going on hold.

   There is also some uncertainty in the future as we wait to see the full extent of the recent Government tax increase on UK production although it will probably take as long as 12 months before we can make a full evaluation. This being said, however, there are positive signs.

   Globally, for example, our database EICDataStream which tracks over 8,500 projects in the global energy industry is showing Europe leading the way in terms of the number of offshore projects.

   Fig. 1, for example, proves interesting reading showing the top 15 countries around the world in terms of number of offshore projects. As one can see, the UK and Norway with 168 and 117 offshore projects respectively are both attracting considerable business alongside, other offshore hubs, such as the Gulf of Mexico, West Africa and South East Asia. For the Oil and  Gas Eurasia’s readers, it’s also interesting to see that Russia is in 13th place with 30 current offshore projects.

   The number of projects is, of course, only one search parameter with the value of offshore projects being of particular interest to the energy supply chain that will be at Offshore Europe this year.

   To this end, when you look at offshore projects according to value, there are a number of other countries leading the way, such as Kazakhstan due to the capital intensive nature of the Kashagan developments, and Russia because of the large scale investments in the Shtokman and Sakhalin fields (see Fig. 2).
What is clear from this illustration, however, is that Europe is continuing to hold its own with the combination of investments in UK and Norway together amounting to a cumulative higher investment value than any other country.

   These encouraging figures are backed up by the 41 members and non-members we will be hosting at the EIC pavilion at Offshore Europe this year, covering many different facets of the UK offshore supply chain and all looking to tap into new business development opportunities. In total, we believe that our over 600 members, many in the offshore oil  and  gas sector, generate around £100 billion in revenues from their UK operations alone, although, of course, only a portion of this would be from European offshore oil  and  gas projects.

   And there is no doubt more investment to come. Oil  and Gas UK, the trade association for the UK offshore oil  and  gas sector, believes that up to 25 billion barrels remain to be won from the UK Continental Self alone and in Norway, there is also significant potential. The Norwegian Petroleum Directorate (NPD) estimates that 50 percent of oil remains in place on the Norwegian Continental Shelf with the volume of undiscovered resources estimated by the NPD at 2.6 billion standard cubic metres of oil equivalents.

   While production in the North Sea is dropping with Q1 2011 showing a significant decline of 15.6 percent in crude oil and 17.6 percent in gas compared to the same period in 2010, there is still all to play for in the North Sea’s fields.
This potential is manifesting themselves in a number of new projects with EICDataStream pointing to a considerable number of subsea processing, subsea tiebacks, subsea pipelines and platform projects throughout the North Sea. If you search EICDataStream under current subsea development projects across Europe, for example, 202 current and future projects are found.

   Having been in production for more than 40 years, the North Sea is today one of the world’s most innovative offshore locations where older infrastructure from the 1970’s and 1980’s is now functioning alongside some of the latest new technologies and a host of smaller operators who are looking to make older and smaller fields more economically viable.

   The result is an increased focus on reservoir monitoring technologies to ensure wells are performing at optimum performance, a growth in multilateral wells, complex subsea systems, and a growth in technologies, such as subsea tiebacks, which tie in newer fields to established infrastructure as well as minimising platform requirements.  

   Many of the North Sea’s fields are also defined by high pressures and temperatures with the regular dangers of corrosion, hydrates, sand and water breakthrough. Against this context, operators today need to develop reliable and accurate gauges and instruments, which can generate real-time data for quite literally decades.

   Finally, there is an increased focus on enhanced oil recovery (EOR) techniques in the North Sea sector with Statoil, in particular, considered an industry leader, with an ambitious recovery goal of 55 percent for its subsea operated fields and 65 percent for platform operated fields.

   This breadth of technologies is well represented in the wide variety of companies we will be hosting at Offshore Europe this year, covering everything from valve and power specialists, process technologies to help with the treatment of increasing water cuts, anti-corrosion providers, fibre optics solutions and the latest safety equipment (among many others).

   From remote and geologically complex reservoirs to the need to increase production and maximise investments from offshore assets, European operators are looking to new technologies like never before. With prospects for the offshore European sector looking encouraging, Offshore Europe is likely to prove to be a busy few days.

   The Energy Industries Council (EIC) is the leading trade association for UK companies that supply capital goods and services to the energy industries worldwide and will be hosting of 41 of its members and non-members at Offshore Europe in the event’s largest pavilion at stand B64 in Hall 3.The EIC will also be launching the EIC Procurement Guide 2012 at the event as well as EIC Consult, a new service which will provide market reports and bespoke consultancy, market research and business development services.

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