Oil innovation chief: North Sea must work ‘smarter’

The head of Scotlands new Oil & Gas Innovation Centre (OGIC) has urged the industry to work smarter and more efficiently. Picture: AP

Ian Phillips, a 30-year veteran of the sector, took up his role as OGIC chief executive in September, just as the price of Brent began to fall dramatically in response to booming US shale production, unrest grew in the Middle East and an economic slowdown hit industrial powerhouse China.

Explaining the important contribution the centre could make, he told Scotland on Sunday: “We’re not trying to flog something; we’re trying to help people. We now have 18 projects that are under varying stages of discussion, and have approved four, one of which has now completed.”

Despite tax breaks unveiled by the Chancellor in last month’s Budget, 10,000 roles remain at risk in an industry that supports some 450,000 jobs, according to former Wood Group chief Sir Ian Wood. Shell and Taqa recently said they would be cutting at least 350 North Sea jobs amid these “challenging” times.

The Aberdeen-based OGIC was set up last year with £10.6 million of public money from the Scottish Funding Council, supported by Scottish Enterprise and Highlands & Islands Enterprise with the aim of increasing collaboration between industry and academia.

Since its official launch in November, it has been approached by more than 100 technology businesses seeking support from universities to get their ideas off the ground, and Phillips – who has worked for oil majors such as BP and Shell – said he has been encouraged by the response.

The OGIC’s first completed project saw Hydrasun, a specialist in flexible hoes and hydraulic components, partner with the University of Strathclyde to develop technology to keep wells clean and free from restrictions or blockages – a collaboration that Hydrasun engineering and research and development director Ben Coutts describes as “effective and efficient”.

Based at the Bridge of Don, the OGIC – one of eight industry-specific innovation centres launched by the Scottish Government – has seven full-time staff and receives administrative support from Edinburgh’s Heriot-Watt University. It can part-fund and provide management support for projects targeting exploration, production and decommissioning on the UK Continental Shelf.

Phillips said: “We’re in very early stages of negotiations to manage a UK-level pot of money that would be available to support innovation. In the longer term, there’s an initiative driven by ourselves, the Industry Technology Facilitator and Oil & Gas UK, nudging forward a proposal that will look at a much more rounded innovation support framework for the industry.”

Globally, the average price of producing oil is only $7 a barrel. In the North Sea, the figure is closer to $28, but Phillips said “that conceals some wide variations”.

He added: “Some of the new developments west of Shetland, like Clair Ridge, are huge and their production costs are pretty low.

“But at the other extreme if you’re the owner of an ageing platform that’s producing 100,000 barrels of water a day and oil is a minor by-product, it’s a whole different story.

“There’s no doubt that, in the North Sea, that some oil companies are struggling. But half of the activity in Aberdeen is not in the North Sea; it’s for export, it’s for services companies supplying oil field developments elsewhere in the world.”

However, Phillips admitted the supply chain has been hurt as North Sea operators have “turned the burner down”, cutting back on exploration.