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Cause To Be Upbeat About Energy Engineering

5th April 2018

Gavin Mackay, HIE's head of energy industries, reflects on the opportunities and challenges facing the region's energy sector.

At the launch of Oil and Gas UK's 2018 business outlook in March I was invited to use their event portal to pose questions and give my ‘multiple choice’ view of the future of the UK Continental Shelf (UKCS).

‘Still more to do’ was selected by 65% of us, 25% opted for ‘positive’ with the balance largely neutral. This as it turns out, was a pretty accurate proxy for the performance of our domestic basin over the past year and the outlook for 2018.

Much has been achieved since the oil price crash in 2014 - bucking the global trend for high cost basins. In fact, the UKCS has actually increased production and reduced costs. The combined effect has been to reduce the unit operating cost by 50% which is a remarkable achievement. Operators expect to be able to sustain these improvements at the same time as investing up to £5bn in 16 new fields in 2018.

The majority of industry representatives at the breakfast briefing still believing there is more to do, I think reflects positively on an industry that has come a long way in a short space of time; making the basin attractive to new investment and believing they can achieve more.

Some of these savings are undoubtedly down to deferred expenditure but many are sustainable over the longer term. There are, for example, well over 5,000 people working in core offshore oil and gas roles who call the Highlands and Islands their home. This number has remained relatively constant for the seven years we’ve been tracking it. They have contributed to a massive 40% increase in productivity per person employed offshore; a physical embodiment of the can-do attitude, efficiency and productivity that can emerge when given the freedom to innovative and take the initiative.

This is an industry that is learning how to do more with less; re-focussing on innovation with excellent support from the likes of the Oil and Gas Technology Centre, and attempting a return to the pioneering mentality of the 60s to unlock the next 20 billion barrels.

In some ways, Oil and Gas is beginning to introduce the objectives in Scotland’s Manufacturing Future. This sets out a plan to boost productivity, stimulate innovation and encourage investment to support manufacturing firms to better compete globally, while providing well-paid, highly-skilled employment opportunities across the country.

Nowhere is this more apparent than with companies in the energy and engineering supply chain across the Highlands and Islands. Some such as Hydrasun in Aviemore and Global Energy Group at Nigg Energy Park are pioneering standardisation of components and structures for subsea oil and gas. It’s still early days but this enables them to introduce efficiencies, savings and serial production where previously the industry demanded individual, tailored, one-off and bespoke solutions.

To my mind, there are two complementary but distinct directions of travel for our energy engineering supply chain. On one hand there will be ever-increasing levels of automation, robotization, serial production and digital manufacturing enabled by standardisation across the renewables, nuclear and increasingly the oil and gas supply chain. We’re already seeing huge leaps in production efficiency at CS Wind’s Machrihanish wind turbine tower manufacturing facility as they introduce, among other things, automated painting capabilities. CS Wind excepted, while facilities across Europe generally appear to be further along the curve of the efficient serial production, we have been investing in creating the basic template. This includes water depths, quaysides, buildings, available land for development and skilled labour to enable further targeted inward investments that could transform supply chain capability in offshore renewables, making components from facilities in our region competitive across Europe, not just in UK projects.

On the other hand, developments in smart and advanced manufacturing such as additive manufacturing are transforming the way we think about producing typically smaller, stronger and more complex components. As well as enabling greater levels of personalisation, advanced manufacturing techniques could make traditional supply chains and inventory almost unrecognisable from today, with the potential to move production closer to demand and eliminate the need to hold stock and spares.

The UK oil industry has had to increase productivity to remain relevant in today’s world. HIE’s role is to ensure our world-class energy and technology supply chain is able to match the pace and continue to take advantage of fundamental shifts in technology and new approaches to manufacturing. That might be greater levels of standardisation or more bespoke production closer to demand. Ultimately it’s about productivity.

We’re working with companies to help them invest in research and development and across the spectrum of innovation. This covers how they structure their process flows, business and people to accessing new markets and investing in next generation plant and equipment. Working closely with the Scottish Manufacturing Advisory Service, we’re showing our businesses best-in-class facilities across the UK to motivate and inspire while helping to shape Scotland’s new National Manufacturing Institute announced in December.

There’s good reason to be upbeat about the future of energy engineering in the Highlands and Islands. We already have a strength in world-class companies and capabilities that time and again has proven it can respond to opportunities and challenges. Our new collective challenge is to keep pace with new approaches to manufacturing. They are going to change the face of the energy industries and I’m confident we can be agents of change to create a bright, highly productive future for energy engineering in the Highlands and Islands.


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