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Challenges ahead for Booming Subsea Industry

28 August 2008

The booming subsea industry must prepare for choppy waters ahead, a UK expert who champions the multi-billion pound sector has warned.

The subsea industry employs more than 40,000 people in the UK and has a $9 billion share of a $25 billion global market. The UK sector has grown by 25% in each of the last two years and exports 50% of its products and services.

The success of the industry will be celebrated at the inaugural Subsea Europe Exhibition and Conference in London on Thursday, October 30 (2008). The event will highlight opportunities in Europe and West Africa as well as new technologies and subsea economics.

The future appears rosy but David Pridden, Chief Executive of event organisers Subsea UK, says it is vital companies are aware of basic supply and demand issues which are likely to present future challenges.

The rapid growth of the subsea sector since 2004 has fuelled an unparralled surge in the construction of new vessels of all types. In particular, the so called SURF (Subsea Umbilicals Risers and Flowlines) fleet of world class vessels is expected to grow from around 20 vessels to more than 50 in the next three to five years.

Pridden said: "Including the SURF fleet, there are more than 150 vessels on order in the multi-purpose category. Add in over 400 anchor handlers and more than 200 supply boats and you have in excess of 750 vessels on order. That's an awful lot of vessels with an ever increasing level of capability. With the rate of global subsea development activity expected to decline over the next 3-5 years, the industry is running the risk of creating an oversupply problem.

"The subsea industry is increasingly reliant upon deepwater and ultra-deepwater subsea developments. While much of these are today being developed by the major international oil companies, an increasing number of these fields will be controlled by a few key, national oil companies (NOCs). They are likely to have a different agenda, one in which a high oil price does not stimulate development. Instead, political rather than pure commercial drivers will come into play. The rate of field development will come down to a country’s requirements, not a company’s as it is today."

The age-old problem of finding skilled and competent staff won't go away either as companies strive to grab a slice of the market.

The Subsea UK chief executive fears were heightened when the International Marine Contractors Association (IMCA) predicted that the new subsea construction vessels and drilling rigs will require some 2,000 additional watch keepers, 800 additional personnel in saturation and diving-related positions, 1,000 personnel in survey area and 1,200 personnel to man new ROV spreads.

Pridden said: "On top of the other factors to consider, manning will remain an issue. Where will the crew come from to man these new vessels? What solutions are industry and academia putting in place to tackle this issue?

"All of this is worrying as increasing costs and a shortage of drilling rigs in deepwater are pushing up exploration costs.

"Does this imply that the rate of growth of the subsea sector is about to decline dramatically just as significant new tonnage hits the marketplace? Possibly.

"The new build surf vessels have increased capacity which will further expand the overall capacity of the market and thereby compounding the potential oversupply problem.

"It is unlikely that many old vessels will be retired.  It is likely though that they will exert commercial and capacity pressure further down the market as they start to look for work."

Pridden added: "It's not all doom and gloom. We have a fantastic subsea industry in the UK , we're the world leader but we must prepare for all potential problems to ensure we remain in front. There is no point in looking back in three years' time and saying we should have done something in 2008. "We must hope the need for deepwater production and enhancing recovery from the more mature offshore provinces continues to drive the subsea business worldwide. We certainly don't want to see new vessels tied up waiting for better market conditions or a crew to arrive. "Across a number of sectors from the subsea industry to stakeholders and financial institutions we must work together to ensure one of the most successful British industries in recent times goes from strength to strength." Subsea UK and its member companies have recognised the developing manpower problem for some time and has welcomed the setting up of an increasing number of university courses in subsea engineering as well as online familiarisation courses to enable personnel to transfer easily form other professions. In addition, a subsea skills website has been created which acts as a portal for subsea companies wishing to recruit skilled people.

However, with upwards of 3000 people required in the near future, further courses and training are required. The one-day Subsea Europe event will take place under one roof at the Business Design Centre in Islington. The event is organised with support of Oil and Gas

UK and BERR will be preceded by a networking dinner at the London Aquarium.