Economic Report 2011
Focus on Fabrication
The extraction of oil and gas from beneath the seabed and its delivery to onshore terminals, for onward transport to refineries, requires a large amount of infrastructure. Some of the biggest structures ever built and moved by mankind have been installed in the very inhospitable waters around the United Kingdom. As well as being the means for producing oil and gas, these provide the daily working environment and accommodation for thousands of men and women and they operate round the clock. Most UKCS production platforms are fixed to the seabed, but some are mobile (such as semi-submersible and jackup rigs, as are used for drilling wells, or floating production, storage and offtake vessels, known as FPSOs). However, all must be designed, constructed, installed, and eventually decommissioned.
While the UK had a long tradition of heavy engineering, such as shipbuilding, mining and power generation, the discovery of gas in the 1960s followed by oil in the 1970s required the transformation of these skills into a new body of expertise to design and build the platforms now installed throughout the UKCS, starting with the West Sole gas field in the southern North Sea (SNS). The earliest SNS platforms were based on shallow water (up to 30 metres) Gulf of Mexico designs, but the move into deeper waters (100 – 200 metres) with oil in the 1970s represented a step change; it had never been done before on this scale anywhere in the world, never mind in such stormy waters.
Various projects and technologies stood out as defining stages in this engineering revolution:
- Forties, the first of the very large steel structures;
- Brent with its ultra-large concrete base units (known as Condeeps);
- Hutton’s tension leg platform (TLP);
- FPSOs such as on the Schiehallion and Captain fields and
- subsea production with long distance flow-lines, as in the Jura field and the currently being developed Laggan and Tormore fields.
Together, these form multi-choice solutions for the extraction of the UK’s oil and gas reserves which, to a considerable degree, were designed and constructed by companies resident in this country.
Fabrication yards were built along the coasts of Scotland and England, sometimes on the sites of former shipyards, to cope with the volume of work. In the majority of cases, platform jackets (the steel substructures) and the various modules comprising the topsides facilities (drilling, production, process, utilities and accommodation units) were split into separate packages for fabrication purposes which were then transported offshore and assembled in situ to create a complete production platform.
More than 6.5 million tonnes of concrete and steel have been installed to date, with 290 operational platforms currently in place and, based on the projected developments over the next ten years, another such 40 structures potentially still to be fabricated and installed.
Historical experience indicates that fabrication typically accounts for between 10 and 40% of capital expenditure, depending on the nature of the project. This would imply a fabrication market in excess of £6 billion over the next 10 years, a significant prize for the fabrication companies to pursue.
The UK’s yards retain the capability to serve this anticipated activity, but how many of these projects will be awarded to them remains to be seen. Recent awards of jackets and various topside modules have been to yards in Europe and the Far East, indicating how attractive and competitive they have become.
However, there have some notable successes at home, such as OGN in Newcastle and Hereema in Hartlepool. The benefits of these awards are highlighted in a case study in this report which describes the impact on direct jobs and the associated spread of activity to other parts of the country.
Work for projects is usually tendered and awarded on a number of criteria, but invariably including cost, quality, safety, past performance and time schedule. Such work will involve manufacturing and construction of a range of structures and components for the oil and gas and other energy related industries:
- Jackets
- Topside Modules
- Subsea Templates/Manifolds
- FPSOs
- Flotels (floating accommodation vessels)
- Renewables
- Nuclear
- Mining
Figure 48 indicates where the major capacity is located but there are, in addition, numerous smaller facilities around the country that are well able to deliver specialist units to the size and quality demanded by the industry. Over 4 million square metres of yard space are still available and engaged in fabrication projects, despite the apparent downturn in fabrication activity since the heydays of the 1970s, 1980s and 1990s.
In a recent survey completed by Subsea UK, forecasts indicated that planned subsea oil and gas projects around the world will require around 90 platforms, over 1,000 Christmas trees (production valves that sit at well heads), 80 subsea templates or manifolds and around 12,000 kilometres of pipelines and flow-lines. These future projects will require a very large amount of high quality steel and an ability to turn that steel into fabricated products.
As oil and gas projects move into increasingly deeper waters around the world and exploit ever more difficult reservoirs, the technical challenges increase substantially. Backed by experience of the UKCS and a reputation for excellent engineering, especially in subsea technology, companies based here can target these new opportunities with confidence. The challenge for the supply chain is to secure an equitable share of these international projects.
