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Brian Wilson MPOffshore Europe 2001 |
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CHECK AGAINST DELIVERY Mr Chairman, it is an honour to be invited to address you today. More than 20,000 people from across the world have come to Aberdeen to take part in this astonishing event which showcases the UK's oil and gas industry to a truly global audience. The eyes of the oil world are on Aberdeen. It's already discernible that the mood at 'Offshore Europe' is upbeat. There is a real buzz about the place which sends a strong message to the world that the United Kingdom Continental Shelf is still a great place to do business. All of this is very different from two years ago when exhibition stands were being cancelled and the words 'ten dollars a barrel' were in the air. Now, however, the resilience of the North Sea industry is being demonstrated yet again. We're certainly here to celebrate the past, and everything that has been achieved by this industry. But we're also here, quite definitely, to plan the future and that in itself is cause for satisfaction. Many of you will have read at the weekend the findings of a new study by Aberdeen City and Aberdeenshire Councils. It found an industry much more confident than it was two years ago. Success over the next five critical years will depend on the industry's ability to build on its strengths, on the way in which it develops new and innovative technologies, and crucially on strengthening the collaboration across the industry, and with government. It's appropriate on an occasion like this for the representative of Government to recognise just how much the oil and gas industry contributes to the UK economy:
There are many big issues facing the energy sector and I want to say a few words about one of them now. As some of you will be aware, I am chairing the steering group of the Cabinet Office review of national energy policy announced by the Prime Minister in June. Today the UK is self sufficient in energy. However, it's more than just a cliché to say that we cannot be complacent. We need only look, as I did recently, at the way in which the problems evolved in California, where the impossible happened and the lights went out in the richest state of the richest country in the world. The parallels are by no mean exact but neither are they irrelevant. In future, Britain will become increasingly dependent on imports of fuel, particularly gas. This, coupled with our obligation to meet the challenge of global warming, make this review vital to creating an energy strategy which is tailored to meet our needs over the next 50 years. Our deadline is to complete the report by the end of the year and that is challenging. I assure you that the oil and gas industry will have an important contribution to make to the work of the review. And the interim message must be that the more we can produce from our own natural resources, the less we will depend on other sources. In that context, I was delighted to hear Talisman's Paul Blakeley - the next co-chair of the Industry Leadership Team - predicting that the UKCS could yet yield a further 56 billion barrels of oil equivalent. Admittedly this is at the upper end of predictions but it is refreshing to hear such a challenge from Paul to both industry and Government to turn this into reality. And never forget that this is an industry that has a long history of surprising itself by achieving more than has been predicted for it. I see this challenge as threefold:
On the issue of investment, I am delighted to announce that, following a survey of their members, UKOOA is confident that the predicted investment of at least £3.5 billion on the UKCS this year will be met. And it could be higher. I cannot stress strongly enough just how important continuing investment in the North Sea is. Paul was absolutely right when he talked of releasing undeveloped acreage and I will say more on this later. But it is equally vital that the right licences are in the hands of the right players. The UKCS has benefited hugely from the strength and diversity of its operators and licensees but we now need to ensure that we continue to attract new players with the skills, knowledge and business models to exploit the full range of opportunities the UKCS will present over the coming years. I have recently established a team to help potential new players to see the opportunities the UK presents and to ensure that, once here, they are made welcome. I know that this innovation will please Colin Moynihan who has previously spoken publicly about the need to increase the diversity of our licence holders and operators. Today, Mr Chairman, as we look to the future, I am issuing my own challenge to the oil and gas industry to unlock the hundreds of fields lying unexploited on the UK's continental shelf. There are currently 250 fallow fields and 200 unused licenses. Research by the DTI shows that these fields can play an important role in helping the industry meet its ambitious investment targets. Unlocking them is crucial to the future of our industry and there are already some outstanding success stories. I want to work in partnership with the industry to see as many of these fields as possible developed. We must work creatively and consistently to establish the conditions which ensure that all our existing economic developments are brought into production. I have established a government-industry working group which will seek these issues to the benefit of every one involved. The group is working towards commercial solutions, underpinned by our existing powers. I have high expectations of progress in this area. No one should doubt the government's resolve that licenses should be in the hands of companies who want to develop them. Hundreds of fallow fields and unused licenses are a luxury which we can no longer afford. Our system has traditionally given operators a great deal of time and flexibility in determining the pace of development. At this stage in the life cycle of the UKCS, however, I think we are entitled to ask for firm plans or else for alternative proposals. I want to turn briefly to the West of Shetland and indeed the whole west coast. The award of offshore petroleum licences in this year's 19th Round will soon see drilling activity take place in this area. If successful, and we're all optimists by nature in this hall, this could lead to significant finds, even another Clair sized discovery. And on Clair I am pleased that BP has brought the prospect of its development closer than it has ever been. That is a welcome boost for the whole of the industry and very good news for our supply chain. It is generally acknowledged that the West of Shetland has world class potential but while that is of huge long-term importance, the focus need not shift entirely from the North Sea. There is still a lot of life left in the so called "mature" area of the UKCS and it has surprised a lot of people that they can still yield the recent Buzzard discovery - a 200-300 million barrel field with an appraisal programme that could reveal considerably more. That takes me back to my main theme. Buzzard is an excellent example of how when the right licence is in the hands of the right players - in this case a new operator, Pan Canadian, working with well established, skilled, supportive partners like BG, Intrepid and Edinburgh - risks can be calculated, undertaken and rewarded. It also shows that my Department is very willing, where necessary, to use our powers to help licensees overcome barriers and help bring discoveries to fruition. This discovery will not just have a significant impact as a stand-alone project in itself. It will also, I believe, provide a huge stimulus for further regional exploration and development. My Department is working very closely with the exploration community to find ways to stimulate new exploration and ensure that the "maturity" tag attached to the UKCS does not discourage new exploration and discovery. A further boost this year has been the significant increase in the number of field development plans submitted to my Department for approval. Again, I look forward to the knock-on benefits that this will create. I anticipate being able to announce a further round of offshore petroleum licensing before the end of the year. The 20th Round is likely to include areas in the Central, Southern and Northern North Sea. Mr Chairman, there is a growing realisation that many of the commercial structures and negotiating behaviours that have been built up in the UKCS in the past forty years are not well suited to the challenges ahead - a realisation that the industry needs to apply the same energy and enthusiasm to innovation in these areas as it has in the engineering and geological fields. No doubt new behaviours and structures will evolve to fit the new circumstances but we know that evolution is a slow and arduous process - in the UKCS I fear waiting for evolution would leave many economic discoveries undeveloped and many good prospects undrilled. We must accelerate that evolution. I am determined to do all that I can to help this bit of British business get to that future first. PILOT has established the Progressing Partnership Workgroup to address these structural and behavioural issues through two groups looking at issues between operators, and between operators and the supply chain. I mentioned earlier that it is fundamental to the continuing success of the UKCS that licences are in the hands of the players with the skills, knowledge and investment appetite to create developments. I am very encouraged that the operators' group is looking in particular at barriers to licence exchange or to the entry of new players, such as pre-emption, that might frustrate this. The contractor's group is considering resource availability and improving the way contractors and operators work together. For instance how to focus more on enhancing value than simply on reducing costs. They will also be discussing how the supply chain can foster technology, innovation and new talent. I would encourage you all to support the work of these groups. Of course, we not only need to make progress, we need to communicate that progress to the wider world. The medium, as McLuhan put it, is the message. Communication and reputation are vital issues - where your industry has, perhaps, a new challenge. The perception is of short-termism - taking massive profits without re-investing sufficiently on the UKCS. As an industry, both up and downstream, you must work harder to change that view. I want to say something now Mr Chairman about skills and training. We know that the UKCS still has much to offer. And I have outlined why I feel we must change our behaviours if we are to get the most from it. But what we must also ensure is that we have the skilled workforce in place to exploit that potential. In the past year, skills and training has emerged as one of the most high profile and sensitive issues to face the oil and gas industry. It is now widely accepted that the ageing workforce is a problem for the industry. The situation is unsustainable. The future competitiveness of the UKCS depends on recruiting young people into the sector and retaining them once there. Industry and Government are already tackling this problem at one level in a very positive manner, working together and contributing funds to substantially increase the number of technician apprenticeships. The skills shortage is, however, not confined to technician level and it's imperative we maintain this momentum if we are to secure a workforce suitably equipped to tackle the challenges of the sector in the years ahead. That said, I think we sometimes forget just how good our workforce is. Only a fortnight ago I was privileged to be asked, by my fellow panellist Luke Corbett, to inaugurate Kerr-McGee's new oil production facility for the Leadon Field. Swan Hunter's Tyneside yard can be justifiably proud of its achievement: a technically complex floating production platform produced on time, within budget and to the very highest standards. And our expertise is not confined to the UKCS. British skills can be exported in one way or another to virtually every other oil and gas province, however difficult and wherever it may be. In the course of this year, for example, AMEC has won a £300 million Engineering Procurement & Construction contract for the Bonga FPSO, offshore Nigeria. Corus and ABB Vetco Gray have also benefited from Bonga through the award of contracts for subsea facilities. This one project has secured in excess of 4,000 jobs the length and breadth of the UK and it was won by industry working very closely with government. There are many more such stories and I cannot over-emphasise my own long-standing belief, based on what I've seen and heard around the world, that exporting can play a crucial role in maintaining employment in the oil and gas sector. Wherever there is oil and gas in the world, there is a demand for the expertise that has been developed in the North Sea. My message to companies large and small is that we can get even better and bolder in our efforts to win that work. UK competitiveness also benefits from DTI's support for the development and deployment of new technologies and for industry bodies such as LOGIC which actively promote better business practices and encourage the use of e-business and sharing of knowledge. I know that another of my fellow panellists, Sir Ian Wood - whom I have worked with for many years - will speak in more detail about some of these areas so I won't pre-empt him on his home soil. But I do want to express my appreciation of all the vision and energy that he commits to these tasks. Let me now turn to new field developments. It gives me great pleasure to announce today the approval of two new projects in the Northern North Sea; Shell's Penguins Cluster development and Canadian Natural Resources International's Columba-E "Phase 3" incremental project. Both of these developments typify the projects that dominate the North Sea today. They are complex and difficult fields, which have required novel approaches and careful risk management to bring them to fruition. First discovered in 1974, Penguins was considered uneconomic as recently as 1999 and failed to attract any interest when placed on the PILOT "LIFT" site. The DTI discussed options for Penguins development with Shell last year as part of our "Fallow Discovery Initiative" and the partners carried out a fundamental review of the development potential. I am delighted that this has resulted in an economically attractive project going ahead. Penguins will be a phased development with Phase 1 involving a challenging and record breaking 65 kilometre tieback to Shell's Brent C oil platform. Penguins once again pushes the boundaries of what can be achieved in the North Sea and its expected 10 year lifetime will help support further production from Shell's Brent infrastructure hub. Incremental development around existing infrastructure is the key to extending the life of the North Sea and the jobs that depend on it. My congratulations go to all involved in bringing forward this innovative scheme. I am also pleased to be able to announce that the Government has agreed with CNR International and their partners that royalty payments should be waived for further development of their "Columba E Terrace" oil development. I am convinced that without the offer of royalty remission they would not be committing to the significant investment needed to secure the remaining reserves from Columba E, which are significant but commercially marginal. So this is a win-win situation for both the Columba E owners and Government. This is the second such agreement to be announced this year. Our willingness to consider, sympathetically, good cases for royalty remission, demonstrates this Government's commitment to the continued success of the North Sea oil industry. I am pleased to be able to end on such a positive note. Our oil and gas industry has changed much over the last few years with Government and Industry now pulling together through PILOT for the common good. It is, by common consent, one of the most effective bodies that any of us who are members have ever been involved with. It is no talking shop. Thanks to the openness and commitment of those who are involved, it is now a crucial forum for taking forward the objectives I've outlined today. As someone who has long admired the awesome technological achievements of the North Sea Oil industry and who now finds himself in the privileged position of being Energy Minister, I assure you of my personal as well as political commitment to working with the industry in order to ensure that it continues to play its proper and vital role in meeting our country's energy needs for a very long time to come. My best wishes for a great week. |
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Other speeches by Brian Wilson MP
(the following are available from the archive) |
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