Opportunities on the Horizon
15 July 2009
WHILE the North East's oil and gas sector is keeping one eye firmly on the growing reach of the recession and the global economic situation, many of the supply chain even so are coping well and have full order books.
They will also have been buoyed by the Chancellor's Budget promise of new incentives to help extract at least a further $2bn of North Sea reserves.
In particular, those companies connected to the subsea sector, in which the North East has a very strong global position, will benefit as the incentives will be targeted at investment in small and technically-challenging fields.
Securing these reserves will involve subsea activity undertaken by North East businesses.
These include BEL Valves, Duco, Penspen Integrity, Perry Slingsby Systems, IHC Engineering Business, Wellstream and Wilton Marine.
All these businesses have developed products and services of the highest calibre utilised by oil and gas operators around the world.
Away from the benefits offered from the Budget incentives, the sector is reacting to the current economic situation in the most positive way possible.
Most of the operators and key supply chain businesses have experienced tough times in the past and know what they must do to prepare for the arrival of an upturn.
Based upon findings in the 2007 Energy White Paper, oil and gas will still provide almost 80% of the UK's energy needs by 2020.
However, the sector is fully aware of the roles nuclear and renewable energy such as offshore wind power, play in offering alternative power sources and maintaining security of supply.
Many companies have successfully developed skills, technology and products for the oil and gas sector that can be switched and applied to the emerging energy sectors, particularly in the nuclear industry.
Energy needs of the future will be dominated by a blend of oil, gas and nuclear power.
So the industry needs a supply chain with synergy across sectors.
Following the Government's decision that nuclear new build is vital to future energy needs and the need for energy security, the opportunities for regional businesses supplying and looking to enter the nuclear industry will be huge.
So during 2009 and 2010, it is vital for companies in the regional supply chain to undertake activities that will strengthen their businesses so that, as the global economy recovers from recession, they will be well placed to capitalise on the opportunities.
In some areas of the supply chain there is a misconception that opportunities exist only for those supplying the “nuclear island” - the part of the site generating the power.
Not so. Businesses that have successfully developed skills, technology and products for the oil and gas sector will see these can easily be transferred and applied to the nuclear sector.
In reality about 80% of new-build activity relates to general construction type work, which many North East firms are experienced in.
The Government has announced 11 potential sites for the new nuclear stations, including Hartlepool and three in Cumbria, with the first due to produce electricity by the end of 2017.
Nor is there any Government cap on the number of power stations that can be built.
So, from a construction perspective, these plans will provide 25 years of manufacture and construction activity.
If the ongoing and eventual decommissioning of the plants is also considered, there could be at least 60 years' work, giving opportunity to create a strong supply chain working across all areas of the energy industry for many years.
