The North Sea oil and gas industry has weathered many cycles in a half-century of exploration and production but the region’s reputation for offshore innovation has remained consistent throughout the ups and downs.

The offshore and subsea industry — part of what has come to be called the “blue economy” — may face its biggest challenge yet in the current difficult market.

The recent oil price slide and ongoing Covid-19 pandemic have resulted in thousands of layoffs across the industry, including in the UK and Norwegian North Sea sectors.

Industry group Oil & Gas UK (OGUK) said early this month that the downturn has cost 9000 jobs in the UK and reiterated its warning from April that as many as 30,000 UK jobs could be lost.

Compounding the challenges for the North Sea’s technology developers are new national initiatives to quickly scale down greenhouse gas emissions, with net-zero ambitions — especially in Europe — now a significant consideration, if not the main focus, in just about any research and development programme.

Energy transition

Governments in the region are stepping in to help keep offshore innovation moving forward, often with the proviso that it helps advance the energy transition and low-carbon goals.

The Research Council of Norway, which invests around Nkr10 billion ($1.13 billion) each year to support research and development in the country, in June approved Nkr2 billion to support the creation of 22 new R&D centres to encourage collaboration between research organisations and commercial interests, including several ocean industries projects.

The same month, Scotland announced the creation of a £62 million ($81 million) Energy Transition Fund geared specifically to helping the energy sector recover from the coronavirus outbreak and oil price crash.

Commenting at the time, Andy Samuel, chief executive of the UK’s Oil & Gas Authority (OGA), said: “With the north-east of Scotland’s existing expertise, infrastructure and subsea engineering excellence, it’s well positioned to take advantage of the opportunities of the energy transition and help advance exciting innovation in game changing solutions like carbon capture and hydrogen.”

The UK’s subsea supply chain should be aiming even more broadly, maximising market scale across industries, both within the UK and internationally, says Tony Laing, director of the National Subsea Research Initiative (NSRI).

Laing insists that a “green recovery” is an opportunity to break down the “silos” that have hindered energy integration, with companies exploring markets beyond traditional offshore oil and gas.

“The subsea supply chain has hit a perfect storm between the low energy price and Covid-19. However, this has created innovation as is normally recognised in a crisis, especially as society globally is going greener,” Laing says.

“Capturing the green recovery opportunity is part of the energy evolution, and as we see offshore (floating) wind taking off globally, there is a significant target market, although it will not go without its challenges.”

NSRI has developed tools to help companies determine the commercial viability of early-stage technology development in the subsea industry with an eye toward the energy transition and, more immediately, a wider blue economy that includes defence, aquaculture and possibly more.

“Cross-industry sharing is critical to accelerating the green recovery opportunity,” Laing says. “The pull for renewables is not quick enough or big enough to balance the loss in oil and gas.”

The OGA called for a similarly wide-ranging effort early this month in its Energy Integration Project report, claiming that an energy strategy that integrates offshore energy systems including oil and gas, renewables, hydrogen and carbon capture and storage could help deliver some 30% of the UK’s total carbon reduction requirements to reach its 2050 net zero target.

Scaling up wind, wave and tidal energy — potentially ripe markets for many small-to-medium enterprises (SMEs) in the UK’s offshore industry — could net an additional 30% emissions reduction, OGA says.

Renewables expansion

The report calls for electrification of oil and gas platforms and the use of offshore infrastructure, technical capability and supply chain to further support renewables expansion, carbon capture and storage and hydrogen projects.

Colette Cohen, chief executive of the Oil & Gas Technology Centre, says the OGTC has been working with industry and groups such as the Offshore Renewable Energy Catapult to help develop an integrated energy vision for the UK.

“Because we are technology-oriented, our aim is to get very practical, pragmatic projects working that can help lead the transition,” Cohen says.

One example is a proposed energy hub, Project ORION (Opportunity for Renewables Integration with Offshore Networks), a collaboration of industry and the Shetland Islands Council that envisions using renewable energy to power offshore platforms and produce industrial quantities of hydrogen.

Cohen acknowledges the profound impact of the downturn on the UK workforce and the risk it poses for oil and gas research.

What makes this cycle different from previous downturns, she says, “is that the industry was already pivoting towards a different future.

“Roadmap 2035 came out at the end of last year with a very clear direction to a net-zero hydrocarbon basin in the North Sea,” Cohen says, referring to OGUK’s carbon-cutting blueprint for the industry.

The UK and Scottish governments have vowed to make green considerations part of their economic recovery efforts, she notes, suggesting there is a degree of “alignment” between industry and government goals.

“The industry, both the oil and gas side and the renewables, covers such a broad spectrum of companies that it is going to be a challenge to get a consistent message across, and for everyone to be in the same position of understanding. I think it will take time, and repetition,” she adds.

“But I think there’s really good communication between the government and industry, and a consistent message.”

Focus

Protecting the North Sea’s technology track record