Shetland has bright prospects in offshore decommissioning, businesses told

Shetland is poised to capitalise even more on the burgeoning new era in offshore decommissioning.

The isles could gain a share of the 120 installations in the southern North Sea due to be taken out of circulation in the next 10 years, helping it to build on its existing credentials in the growing sector.

The message came this week from Decom North Sea – a body set up two years ago to maximise opportunities in what has become a fast-growing section of the industry.

Its chief executive Brian Nixon told an audience of around 20 local industry representatives £9 billion in expenditure was needed to dismantle major infrastructure from now until 2020.

Speaking at a meeting at the Shetland Museum he said the dredging of Lerwick Harbour in recent years, plus Shetland’s geographical location, stood it in good stead for future development.

The news has prompted the council’s head of economic development, Neil Grant, to consider whether further developments can be made in the isles to capitalise on the opportunities that have presented themselves.

However Mr Nixon warned some of the work will inevitably go abroad, as UK ports and yards struggle to cope with the influx of demand which is expected to develop over the decade.

“Shetland has experience already, which is a great plus. It’s done work in the Total Frigg field, and that establishes some early credentials,” said Mr Nixon.

“If you look at where a significant amount of this decommissioning work is going to come from, Lerwick is very central to an awful lot of that activity, which is important for towing times.

“I think the facilities you have here are excellent. There has been a huge investment over the years in the deepening of the water harbour, the extension of quaysides and the reclamation of land which is hugely important.

“I think the Lerwick port, in its widest sense, is now a really important hub in the whole of the decommissioning industry.

“For one thing, it’s done some work already, secondly it’s at a great geographical location and thirdly there are great improvements that it has made.

“The companies here will gain more of their business from decommissioning. They might not grow in ultimate turnover terms, but I think the percentage of decommissioning work they will do will increase.

“All of the forecasts we have seen are predicting the same thing. The best information we have is that the market will ramp up.

“If it does and we get to the stage of dealing with a good number of projects per annum, then we will not have the yards or the ports necessary to deal with it.”

There are flies in the ointment, however. “The UK won’t deal with all of this – some of it will go to Norway. But the point is Lerwick is very well placed to be a major, recurring and regular part of that programme.”

Even if jobs do go elsewhere, however, Mr Nixon stressed there were still opportunities for Shetland or UK workers to be employed as sub-contractors.

Another uncertainty is the £2 billion windfall tax chancellor George Osborne levelled against North Sea oil companies as part of his recent budget measures.

Mr Nixon said the move could put oil fields out of commission sooner rather than later. “In truth right now it’s more of a threat.  But, yes, it could be a double whammy.

“As well as increasing the tax on producing fields by quite a margin, and therefore potentially putting a number of mature fields closer to decommissioning than they otherwise might be, I think it’s quite possible very mature fields at a low level of productivity are going to get thumped with another ‘X’ per cent of tax.

“That could trigger the decommissioning decision, so it could be a retrograde step.”

Another problem could be a lack of support from banks and financial institutions.

Mr Nixon said there was a “perception” banks are unwilling to show support for the sector.

“What we’re dealing with is a reported perception there needs to be a greater awareness in the financial markets of the decommissioning programme.”

Mr Grant said Lerwick Port Authority had already put Shetland on the “decommissioning map”.

“It does beg the question is it right for Shetland to create further infrastructure?” he said. “We want to make sure Lerwick is best placed to pick up as many of these contracts as possible.

“Lerwick Port Authority have put Shetland on the map from a decommissioning point of view. Shetland as a community needs to have a think at this point in time to see whether it wants to be bigger than having just one decommissioning facility.”

North Sea decommissioning is a relatively new enterprise. Aberdeen-based Decom North Sea started out following a formal consultation process.

The body was created to galvanise the industry and support the development of the supply chain.