Administrator
Redhall buoyed by record order books
Engineering services provider Redhall Group plc has posted some positive figures for the six months to 31 March – not least a record order book of £152 million, about 50% higher than in the first-half of 2012.
As chairman David Jackson commented: "Recent orders and a record order book level of around £152.0 million to be executed over the next four years give the board confidence in the immediate prospects of the business."
Among recent contract in the mix were: A £26-million MDSW2 contract win at Sellafield with Hertel; a framework agreement for mechanical services at Dounreay; and £8.5m worth of orders from Hyundai Heavy Industries.
New orders further included: a £3-million three-year contract to partner PX on a combined heat and power plant at Sellafield; and a £3.3-million award from Air Products for work at its gas plant on Teesside.
On the other hand, Redhall's interim results with adjusted revenues down 5.4% year-on-year to £56.6 million and adjusted profit before tax and amortisation was £574,000, compared with £1.34 million in the first half of last year.
These reverses, though, were in line with management expectations, Redhall bosses adding that the group's performance is expected to be weighted towards the second half.
While market conditions remain challenging, Redhall chairman Jackson said principal clients remain confident in the group's ability to execute major projects.
Jackson cited how Redhall Nuclear is the main installation partner for Nuvia, which has secured a number of projects at the Sellafield site and is utilising. The value of the work to Redhall Nuclear will be circa £7m over the next two years.
Redhall is one of three contractors to have been awarded a framework agreement for mechanical services at Dounreay, which are valued at £20.0 million over four years.
In the manufacturing sector, the group has received a number of orders in the oil and gas sector for blast decks and panels from Hyundai Heavy Industries, Edward Greig and Talisman worth £11.0 million in aggregate;
"We await with interest the result of the Government's discussions with EDF on UK nuclear new build in general and Hinkley Point in particular," added Jackson.
Redhall's continuing legal dispute with Vivergo, however, remains unresolved, with Jackson hopeful of soon seeing a long-awaited court verdict in the near future on whether Redhall's contract was terminated unlawfully; and the level of extension of time that subsidiary RESL was entitled to under the contract.
In his review, chief executive Richard Shuttleworth said activity at the RESL engineering unit contributed revenue of £28.1 million, up 4.1% on 2012. Adjusted operating profit was £1.02 million (3.6% margin) compared with a 2012 figure of £744,000 (2.8% margin), reflecting operational improvements implemented within the business.
"Whilst the industrial market continues to be challenging, the business continues to secure an acceptable share of new opportunities as well as growing the work volumes from our existing customers under contracts that commenced prior to the period covered by this report," said Shuttleworth.
Nuclear segment turnover in the first half was £16.1 million, 11% lower than that achieved in the comparable period last year. Adjusted operating profit of £397,000 was significantly lower than last year's result of £624,000.
"We have now formally signed the contract with Hertel to provide multi-disciplinary site works at the Sellafield site which will run for up to four years," said the CEO. In addition the business was selected as a strategic partner by AWE to provide mechanical and engineering services at Aldermaston and Burghfield which also runs for up to four years.
"These two framework contracts underpin approximately 50% of the annual turnover of the Nuclear division. The transition between the old and new framework contracts has resulted in a lower than expected volume of work during the first half of this year. It is envisaged that work volumes will increase as the transition to the new framework contracts is completed."
Turnover in manufacturing for the period amounted to £12.4 million compared with £14.8 million in 2012, a decrease of 16.2%. Adjusted operating profit in the period was £731,000 compared with £1.35 million for the same period in 2012.
"Whilst this year's adjusted operating profit margin at 5.9% is disappointing compared with 9.1% for the same period in 2012 it does not accurately reflect the significant improvements which have been made in manufacturing by the new management team under the leadership of John Hynes who started with the business on 29 October 2012," said Shuttleworth.
Activity levels at Redhall's specialist door business in Bolton are showing signs of improvement with strong demand from the oil and gas and defence sectors, the CEO noted.
FW, Clariant, Wison in China syngas project
Foster Wheeler AG, Clariant International AG and Wison Engineering Ltd are to jointly establish a pilot plant in China to demonstrate Foster Wheeler’s VESTA technology to produce substitute natural gas (SNG) from synthesis gas obtained from gasification of either coal or petroleum coke .
The unit is to go on-stream later this year under the agreement, which envisages a long-term cooperation to deliver and build methanation plants in China based on this technology..
Under a co-operation deal, Wison Engineering will provide engineering and construction services, Foster Wheeler will license the technology. Swiss-based speciality chemical company Clariant will supply the proprietary developed catalyst, while the plant will be operated by Wison Engineering.
VESTA is said to be a novel methanation technology designed to produce SNG from syngas produced by any commercial gasification technology. Its once-through operation involves no recirculation, so avoiding the need for expensive compressors. More simple reactors can be used, as the maximum operating temperature of 550°C avoids metal dusting.
“Focused on China, the world’s largest SNG market, this agreement is an important first step in establishing our ability to address the global SNG market,” said Umberto della Sala, president and chief operating officer, Foster Wheeler AG.
Liu Haijun, senior vice president of Wison Engineering, added: “By leveraging Foster Wheeler’s global expertise and technological strength as well as Clariant’s strong innovation in catalyst technology, we’ll continue to build up our capabilities in coal-to-chemical sector and will be well positioned to seize the favorable market opportunities in the domestic and overseas markets.”
Wison Engineering Ltd, which is based in Shanghai, provides construction and technical services for engineering installations in the petrochemicals, coal-to-chemicals and oil refining industries.
Automation project lifts capacity at Coca Cola
By introducing standardised automation, Coca Cola Enterprises (CCE) has ramped up the annual capacity of its production lines in Sidcup, UK by 20 million crates whilst simultaneously driving down costs. The project is part of a Europe-wide strategy involving Siemens.
The Kent site processes the largest range of packaging types of any CCE production plant anywhere in the UK, filling plastic and glass bottles as well as 150 and 330 milliliter cans, with plans to introduce 500 ml cans in the future. The new canning line with its capacity of 120,000 cans per hour will extend the plant’s capacity by a further 0 million cases per annum.
By implementing a standardization strategy based on the Optimized Packaging Line(OPL) concept, an industry initiative by Siemens, Coca Cola in Sidcup now relies on seamlessly automated and standardized production and packaging lines.
The Totally Integrated Automation engineering framework, a common automation and communication standard, along with drives, programmable logic controllers and communication products such as Ethernet switches work together to not only enhance the production efficiency of a plant but also to drive down maintenance, spare part management and personnel costs.
The new standardised automation solution will allow Coca Cola Enterprises to adapt its operations more quickly and simply in response to future market changes, according to Siemens.
Challenging opportunities
Edited speech by Bob Dudley, BP group chief executive, at CERA Week, 6 March 2013:
I am often reminded of the contrast between the comfortable places where we discuss and consume energy and the sometimes inhospitable places where we produce it.
In order that people can live in comfort, the natural resource industries need to go to remote, challenging and often hostile environments to access the necessary sources of energy for society.
There is not a nation on earth where people aren’t relying on us every day to deliver the energy they need to do their jobs, heat their homes, get their children to school, and countless other needs. That’s how people emerge from poverty, economies grow and the standard of living rises.
In business we often talk of challenges and opportunities. What we face today in energy is a series of challenging opportunities — from the shales of America to the snows of Siberia.
The opportunities are plentiful, but they are also complex and difficult. And from BP’s perspective, and many other companies in our industry, the message is that we have learned from recent events and we plan to address those opportunities safely, responsibly and reliably.
We estimate that global energy demand is likely to grow by more than a third between now and 2030. According to the projections we make in our Energy Outlook 2030 publication, emerging economies such as China and India are likely to account for almost all that growth — over 90% of it.
Non-fossil energy — nuclear, hydro, biofuels and other renewables — will grow faster as a group than any fossil fuel. But they start from a very low base and will only provide, on a combined basis, about a fifth of all energy in 2030.
Gas will be the fastest growing fossil fuel at around two percent annually. It’s clean, cheap and increasingly available.
Oil will grow more slowly, at less than one percent per year. But that still means the world will need around 16 million barrels a day more in 2030 than today. Let us pause on what that means — that increase alone is nearly the combined daily 2011 production of Russia, Canada and the United Arab Emirates.
Turning to supply, many in the industry used to worry about whether demand on this scale could be met — we weren’t among them, by the way — but there hasn’t been much talk about “peak oil” lately.
Thanks to new frontiers such as shale and the deepwater, our industry is now producing an enormous amount of previously unreachable oil and gas. At current consumption rates, the data suggests the world has 54 years’ worth of proved oil reserves and 64 years’ worth of proved gas reserves in place — and more will be found.
So we are working in a world with ever more diverse sources of supply — and diversity of course increases energy security by avoiding over dependence on any one source.
However this diversity comes at a price. Many of the new supplies are in places that are hard-to-get at: shale oil and gas, tight oil and gas, heavy oil, the deepwater — and, in due course, the Arctic Circle.
And the physical and technological risks are not the only ones. Other factors range from fiscal regimes and other policy-related issues, to geo-political tensions and even the risk of terrorism.
We at BP were brutally reminded of that fact a few weeks ago, when four of our employees and colleagues from other companies were murdered in the terrorist attack on the In Amenas gas plant in Algeria.
Our thoughts are very much with the loved ones of those who died, from BP, Statoil, JGC and other organizations. And our sincere gratitude goes to all who have offered support and sympathy.
BP and Statoil staff and the contracting companies, are incredibly resilient and committed people and we will go on. We will never forget but we will go on with our mission of providing energy to the world. We have spent over 100 years producing energy in tough surroundings and we will not be deterred.
But the new opportunities bring new challenges, and we need constantly to develop our technology, capability and risk management.
When Colonel Drake drilled the first modern oil well in Pennsylvania in 1859, he gave birth to a new industry – and one where the US has held the technology edge ever since.
Forty years ago this year, however, there was an oil shock and a future of scarce energy or even “resource wars” was predicted.
BP never subscribed to those fears, and in the last five years, the situation has been transformed.
US crude oil production has soared from an average of five million barrels per day in 2008 to over 7 million barrels per day at the beginning of this year, according to the US Energy Department.
Deepwater Gulf of Mexico exploration and production scarcely existed 20 years ago. In 2011, it provided about 18% of US daily crude production. Alaskan oil was widely expected to run out in late 1990s, yet it is still producing.
North Dakota, which was on hardly anyone’s radar screen a few years ago, has seen its production soar from just over 100,000 barrels per day in 2006 to over a three-quarters of a million last December. Not only has that state now surpassed Alaska as America’s second-largest oil producer, it also pumps more oil per day than the OPEC nation of Ecuador.
Why is this happening? Resources below ground are a prerequisite, but favorable conditions above the ground are also essential.
Almost uniquely among the nations of the world, the US allows private citizens to own the mineral rights beneath their property, “from the Earth’s core to the sky.” In most states, this gives private individuals a personal stake in energy development. It incentivizes entrepreneurs to compete with each other to develop the technologies to access the wealth that lies underground.
So it isn’t surprising that the world-changing technologies of the last two decades were all either developed or advanced in the US: horizontal drilling, hydraulic fracturing — pioneered incidentally by Amoco in the 1940s — to deepwater equipment and of course the 3D and 4D seismic we and others have used to great effect in the Gulf of Mexico and in countries such as Angola and Azerbaijan.
Here is another fact that certainly needs repeating. This industry is not only transforming the energy of America but also the economy of America. Energy has rightly been called the number one job-creating sector in the US economy, with oil and gas employment rising a remarkable 27% since 2008.
And jobs are being created well beyond traditional energy regions, including what some used to call Rust Belt states like Pennsylvania and Ohio. It is a great renaissance. BP has just returned to exploration in Ohio, for example. Increased reserves and lower natural gas prices are also attracting new US investments in manufacturing. Oil and gas taxes are pouring into the Federal Treasury and into many state governments.
Import dependence is falling. In fact, with the abundance of domestic natural gas, a number of LNG export projects are now in the queue, awaiting federal government approval. Just last month, BP signed a 20-year LNG export agreement with Freeport LNG here in Texas.
This sector is turning around America’s balance of trade, helping it compete internationally, creating jobs and breathing new life into its economy. Colleagues — America should be very proud of its energy industry today.
But this is not the only land of opportunity. Many other growing regions are represented here today — including many from Russia
Russia is the biggest country in the world. It also has the largest combined oil and gas reserves, as well as the highest combined production of oil and gas. And in our view, its potential has yet to be realized.
There is enormous scope for increasing Russia’s production — through enhanced recovery in brownfield developments in the Western Siberian and the Volga Urals fields. And also through exploration and production in greenfield developments in Eastern Siberia and the Yamal Peninsula. Russia also has the potential to develop its own shale and tight oil.
What Russia and the US have in common is that each will require energy investment on an epic scale, undertaken by energy partners who are not daunted by the obstacles and have the resources, experience, capability and appetite for the task.
We are a global company and select investments carefully from a world of opportunities. We have gas plays in Asia and the Middle East, and deepwater possibilities in the Atlantic and Indian Oceans, from Africa to South America, the South China Sea and the Great Australian Bight.
And in terms of our own company, if I may end on this note, we have faced challenges in recent years — in America, Russia and elsewhere. But as I said at the beginning, this is not a business for the faint-hearted or the easily discouraged. And we are neither.
Getting energy right
Dev Sanyal, BP executive vice president and group chief of staff. (Speech at the Fletcher School of Law and Diplomacy, Boston, 18 March 2013):
It is a great honour and privilege to be invited back to speak at the institution where I studied almost twenty five years ago.
1988 seems a very long time ago. Ronald Reagan was the US President. It was the era of Perestroika in the Soviet Union. The Cold War was coming to an end.
However, if a week is a long time in politics, a quarter of a century is a short time in energy. It can take up to 20 years from the issue of an exploration licence for a gas field to the first consignment. A plan for a power station can take up to a decade to meet regulatory requirements and the resulting plant can operate for 50 years.
A technology research programme will often only see the fruits of its labour several decades after its inception. The current boom in shale gas seen here in the US has roots that go back decades – including a joint public-private R&D programme in the 1970s. Change comes slowly in energy – but when it comes it is profound.
When I arrived at Fletcher, the world’s population had just passed five billion. Today we share the planet with two billion more inhabitants. In that same time span, the world’s consumption of primary energy has risen by over 50%. Millions have escaped energy poverty. But as always, there is more to do.
In 1988 we had recently been privatised and had a smaller geographic footprint. Since then, we have grown through a series of mergers to become a truly global company – a so-called super-major - with activities in over 80 countries. We have learned from experience, including the Gulf of Mexico tragedy in 2010.
We have refocused our business to concentrate on our distinctive strengths. These range from using the latest seismic technologies to find oil and gas through to world class downstream activities such as leading petrochemical manufacturing processes. We specialize in maximising production from giant fields, operating in deepwater and managing large gas supply chains.
All these strengths are underpinned by advanced technology and a century of experience in building relationships. Our strategy is to focus on those strengths to become an ever safer and stronger company – one that is capable of delivering energy for generations.
More widely, our objective as an industry – and as a civilization, I would suggest – is to enable people to enjoy affordable and sustainable energy now and into the future.
Energy is essential to the most basic aspects of development. The energy industry brings heat, light and mobility to the world – the scooters that take people to work, the lights that enable homework to be done, the refrigerators that hold a village’s stocks of medicine. So while we must not shy away from the impacts of what we do, neither should we forget that energy has been central to development – and still is.
And in my view getting energy right means we must address three big issues – issues that mattered a lot in 1988 and matter even more today:
- First, sufficiency – is there enough energy to go round? If there is, is it affordable?
- Second, security – can we rely on our energy supplies?
- Third, sustainability - can we use energy for our needs without an unacceptable impact on the planet?
Sufficiency was a major concern throughout the latter half of the 20th century. Back in the 1950s, the geologist M. King Hubbert had predicted that US oil production would peak in 1970 and he had gone on to predict that the world’s production of oil would peak in 1995.
That focused plenty of minds. In fact, and I will, come on to this, things turned out very differently.
The second issue, that of energy security, informed economic and foreign policy in many countries. The Cold War had started to end but the oil price shocks of the 1970s were recent memories – days when crude prices rose 1000% to $100 a barrel (in today’s money) and queues formed at gas stations.
Prices subsequently fell dramatically with the collapse of the OPEC administered oil pricing system in 1985; we witnessed the emergence of an international spot market for crude oil and the removal of price controls for gasoline here in the US.
When I arrived at Fletcher in the mid-80s, oil was less than $30 a barrel – at one point it dropped to $10.
Today it is back over $100 a barrel.
Energy security has remained a hot topic throughout, with an increasing consensus that it depends on having a diversity of sources of supply – what many in the US call an ‘all of the above’ energy strategy.
The third issue is sustainability.
In 1988, serious questions were also beginning to be asked about the sustainability of energy as climate experts presented projections on global warming to the US senate hearings held in that year. And this issue remains central to the debate on the future of energy.
When today we ask the question: How do we get energy right? We are really looking to find solutions to those same three issues. Availability, security and sustainability: they are as relevant today as they were in 1988.
In the rest of my remarks I want to look at three things:
- how the future of energy is shaping up – with these three issues in mind
- how the US energy industry has come to terms with all three issues in recent years,
- and the prospects for the world as a whole in getting energy right in the coming decades.
Projecting the Future
Let me start with the global energy future.
John F Kennedy said: “Change is the law of life. And those who look only to the past or present are certain to miss the future.”
Each year at BP we produce reports which look both ways.
The BP Statistical Review looks to the past to document the previous year’s data while the BP Energy Outlook 2030 provides a series of forward projections based on current and expected trends of demand, supply, policy and technology. This is our contribution to “not missing the future.”
In the Outlook, we estimate that global energy demand is likely to grow by about 35% between now and 2030 with emerging economies like China and India likely to account for almost all that growth - over 90 per cent of it.
The latest data shows that in 2011, oil made up 33% of the world’s commercial energy consumption, with coal at 30%, natural gas at 24%, hydro-electricity at 6%, nuclear at 5% and renewables at 2%.
Going forward, gas is expected to be the fastest growing fossil fuel, at around two per cent annually. It is clean, affordable and increasingly available.
We believe oil will grow more slowly, at around 0.8 per cent per year. But that still means the world will need around 16 million barrels a day more in 2030 than today – or more than the current production of all of North America.
And we expect coal to grow by around 2.4% a year this decade, slowing dramatically to 0.5% after 2020.
Non-fossil energy – nuclear, hydro, biofuels and other renewables – will grow faster as group than any fossil fuel. But they start from a very low base.
The net effect we believe is that oil, coal and gas are each expected to account for around 26 to 28% of total energy consumption by 2030. This happens as gas competes more strongly in power generation and oil continues to act as an essential transport fuel.
A similar pattern of convergence is taking place among the three types of non-fossil fuel - nuclear, hydro and renewables – which are each expected to have shares of around 6 to 7% by 2030 – the big rise coming from renewables other than hydro – wind, biofuels, solar and geothermal.
Technology is playing a key role on the demand side, facilitating many advances in efficiency: from advanced car engines and better insulated buildings to more streamlined industrial processes and electricity load management.
This is helping to reduce the world’s energy intensity – the amount of energy required for one unit of GDP. It came down around 20% in the last two decades and we expect it to come down a further 30% by 2030.
To put it another way, in 1988, 196 tonnes of oil equivalent were consumed for every million dollars of wealth generated. In 2010 that figure had come down to around 150 tonnes and by 2030 we expect it to be close to 100.
As well as this fall in the energy intensity of GDP, there is also a decline in the carbon intensity of energy – the amount of CO2 emitted for each tonne of oil equivalent of energy that is used. However, there has been less progress in decoupling the growth of CO2 emissions from the growth of energy use than there has been in decoupling the growth of energy use from the growth of GDP.
Since 1988, the amount of CO2 produced for each tonne of energy used has fallen only slightly - from 2.6 to 2.5 tonnes - and it is expected to fall to 2.3 tonnes by 2030.
We recognise more action is needed. As we always say, this outlook is a projection, not a proposition. And indeed BP supports additional measures being taken to limit carbon emissions including a widely applied carbon price.
Turning to supply, thanks to new frontiers such as shale and the deepwater, our industry is now producing an enormous amount of previously untapped oil and gas. Again, technology is critical – from hydraulic fracturing in shale formations and the latest techniques for enhanced oil recovery to advances in processing heavy oil and biofuels.
At current consumption rates, the world has over 50 years’ worth of proved oil reserves and over 60 years’ worth of proved gas reserves in place. Unproven oil and gas resources constitute a much larger potential source of fossil energy. So the 1995 peak never came. Instead we are working in a world with ever more diverse sources of supply. And diversity, of course, increases energy security.
However, these supplies may be plentiful – and they may be diverse – but they are also in places that are hard-to-get at: shale oil and gas, tight oil and gas, heavy oil, the deepwater and so on.
And typically some of the biggest issues are often not below ground in the geology, but above it - factors such as fiscal regimes, geo-political tensions, regulatory requirements and land ownership considerations.
The US Experience
And this is where the US experience is instructive. Many lessons have been learned here over the past 25 years – and the US is poised to reap considerable benefits.
US demand for oil peaked in 2005 – partly due to the economic slowdown but also due to the rapid advances in energy efficiency that have been achieved here.
And carbon emissions are falling here too, partly to do with lighter vehicles, partly economic activity, partly power generators switching from coal to gas.
On the supply side, Hubbert was wrong about the world and ultimately wrong about America too because its long run decline in production post-1970 has been halted and production is rising again; this time propelled not by conventional oil such as that traditionally produced across the US but by unconventional shale oil and gas.
US oil production has risen from 6.7 million barrels a day in 2008 to 7.8 million today. Gas production has risen from 511 billion cubic metres in 2005 to 651 billion cubic metres now. While there are ten countries with larger reserves of oil and gas combined, the US is the world’s number two in terms of production of oil and gas, behind Russia but ahead of Saudi Arabia.
The net effect is dramatic. Demand is falling, supply is rising and America is headed for self-sufficiency in energy by 2030.
It is a far cry from 1988.
As well as shale, deepwater Gulf of Mexico exploration and production scarcely existed 15 years ago. Today, it provides about 18 per cent of US daily oil production.
This is not just an energy phenomenon but an economic one. Natural gas prices are currently 70% lower than their peak in 2008. This is attracting manufacturing capacity back to the US.
Energy is the number one job-creating sector in the US economy, with oil and gas employment rising a remarkable 27 per cent since 2008.
Energy-related jobs are being created beyond traditional energy regions in ‘Rust Belt’ states like Pennsylvania and Ohio. BP has just started exploration in Ohio for example. Oil and gas taxes are pouring into the Government’s coffers. This sector is turning round America’s balance of trade, helping it compete with China, and breathing new life into its economy.
Why is this happening?
As I mentioned earlier, the resources below ground are a prerequisite, but favourable conditions above the ground are essential. I would sum those conditions up as being a culture of enterprise in the private sector and an enterprise-friendly public sector.
And America has such conditions to a unique degree.
In the land of Apple, Yahoo, Google, Microsoft, Ford, Wal-Mart and countless small businesses, it goes without saying that the culture of enterprise is alive and well. In our own sector, America also has a vast oil and gas industry infrastructure – which by the way is itself a high tech sector. For example, in Houston we are building one of the world’s most powerful supercomputers to process seismic data.
In such a culture, we find a cycle of progress occurring. Competition drives innovation and investment, which in turn drive increased supply which makes energy more affordable. Meanwhile, similar forces act to deliver more efficient solutions, which help make energy more sustainable.
But there is also a distinctively enterprise-friendly public sector at work – which is not simply one administration’s policy choices, but a culture of supporting people’s efforts to build businesses and achieve their goals, going right back to the Constitution.
For example, almost uniquely among the nations of the world, the US allows private citizens to own the mineral rights beneath their property which incentivizes entrepreneurs to compete with each other to access the wealth that lies underground.
This country has a huge advantage in understanding its native geology because of the hundreds of thousands of wells that have been drilled over more than 100 years. State geological surveys have required companies to submit geological records. As a result, the United States has an unmatched geological record.
It is no surprise that the world-changing technologies that have come online over the last two decades were developed or advanced in the US – from horizontal drilling and hydraulic fracturing to deepwater equipment and of course the 3D and 4D seismic that we and others have used to great effect.
America’s culture of enterprise and its enterprise friendly public sector have underpinned an extraordinary revolution.
And bearing in mind what I said at the start, even if countries make major changes now to institute the right conditions, then those changes will take decades to filter through to innovation, investment and production.
China - the world’s biggest energy consumer - is making major efforts towards sufficiency, security and sustainability: all the ingredients for getting energy right.
Just last week, it was announced that China overtook the US to become the world’s biggest oil importer last December. Hence, China is investing heavily in exploration for oil and gas. Indeed, BP is exploring in the South China Sea, as we are in locations from Brazil to Angola to Australia and many others worldwide.
China also has aggressive targets to substitute natural gas for coal and it has launched a massive programme to explore for shale gas. Russia is the world’s top producer and reserve holder of oil and gas. We see this first hand because we have been working in Russia for many years and we are in the process of a deal in which we will take a near one-fifth share in Rosneft. I think the scope for oil and gas development there is extraordinary.
In each country’s case, companies need to work with governments to arrive at fair and mutually beneficial solutions. And these are not always simple. Countries are at very different stages in their energy journeys.
Take two countries – the one we are in now - and the one I come from, India.
In both the US and India natural gas prices are currently low. Good news for consumers. Natural gas is a key part of getting energy right. It is plentiful. It helps countries attain energy security. And it is a cleaner alternative to coal.
However, the low level of prices in the two countries arises from very different factors. In the US, open competition and liberalised prices have encouraged investment. Investment has ramped up supply and increasing supply has driven prices down. Rigs are now being shifted from gas to shale oil production and if gas supply shrinks again the price will rise, encouraging fresh investment. The market regulates the sector to the mutual benefit of consumers, government and operators.
In India, by contrast, the prices have been held down by regulation, from the laudable motive of enabling people to access energy – but with the unintended consequence of discouraging investment so that gas needs to be imported and the subsidies that keep prices low effectively reward exporters in Australia and Qatar.
However, there are now encouraging signs. India is considering proposals to move - as China has already done - towards market pricing - moves supported by many including the Indian Prime Minister.
Conclusion
Getting energy right is a question of sufficiency, security and sustainability.
It was so in 1988 and it remains so today.
Energy tends to exhibit these three characteristics when the right conditions exist – a culture of enterprise and an enterprise-friendly public sector.
Those conditions exist in spades here in the US and they have led to a remarkable turnaround – with a rapid increase in energy production that is now feeding through into economic benefits.
The challenge for other countries is whether they can create or extend similar cultures of enterprise.
I end on this observation.
It took a while for the world to wake up to the American energy revolution and it will take a while longer for the drivers behind it to be understood.
But when they are, I think there will be a global surge to replicate the culture of enterprise that distinguishes this country.
That can only be a good thing.
It will be good for our industry.
More important, it will be good for national economies and the global economy.
And most important – whether we are talking about sophisticated and affluent graduates or the villagers striving to improve their lot in the developing world – it will be good for progress of society as a whole.
Record demand for UK oil and gas services
Companies delivering drilling, completion, testing and maintenance for oil and gas wells last year generated record gross revenue of £1.9 billion ($3.05 billion) in 2012, a survey by industry association Oil & Gas UK shows.
The sales figure, the highest since records began in 1996, reflects increasing activity on the UK Continental Shelf (UKCS). This has also led to a rise in the total number of technicians and graduate engineers employed by well services contractors rose to 2,200 and 1,700, respectively.
The sector continued to invest in future capacity with spending on equipment and technology rising by around five per cent from $178 million to $186 million. Technological innovation remained a priority for well services contractors, some of whom spent up to 90 per cent of their annual capital investment on developing new technologies.
The higher than expected rise in gross revenue could be attributed to a number of factors ranging from increased exploration and production activities since 2011 to the growing number of technically complex wells that require the specialist knowledge of well services contractors, said Oonagh Werngren, Oil & Gas UK’s operations director.
“The sector is, however, competing with other booming oil and gas provinces around the world with respondents reporting a 19% rise in the number of UK employees working overseas to deliver well services outside the UK," she noted. "Attracting, retaining and engaging skilled personnel here in the UK represents a challenge to the industry, one which is being addressed, together with Government, to ensure that this sector, alongside others, can continue to flourish.”
Well services providers forecast that gross revenue will rise by around 5% in 2013, but business growth may be hindered by continuing concerns regarding the limited supply of skilled personnel and the availability of equipment.
Noble wins $655m Statoil contract in N Sea
Noble Corp. has won a $655m drilling contract with Statoil for a new-build jackup for use in the UK sector of the North Sea. The initial contract is for four years and is anticipated to commence during the third quarter of 2016.
The ultra-high specification jackup is an enhanced version of Statoil's "Cat J" specifications and will be designed to operate in water depths of up to 150 meters in harsh environment conditions, with a maximum total drilling depth capacity of 10,000 meters.
The award was made by Statoil as the operator of the Mariner project, which is located on the East Shetland Platform, about 150km east of the Shetland Isles, said ZUG, Switzerlandd-based Noble.
Statoil's partners in the Mariner project are JX Nippon Exploration and Production (U.K.) Ltd and Cairn Energy PLC. The rig will be equipped for operations in harsh environments and capable of deploying either a surface or subsea blowout preventer when drilling wells in these challenging environments.
Noble is in the final stages of negotiating a contract for the construction of the new jackup and expects delivered costs to be approximately $690 million, including project management, spares and start-up costs, but excluding capitalized interest.
"We believe that the fundamentals of the high-specification jackup market segment will continue to be strong in the decade ahead," said David W. Williams, chairman, president and CEO of Noble.
"This unit is designed to meet some of the industry's most stringent operating requirements and supports Noble's ongoing commitment to increasing the technological and operational capabilities of our fleet."
The rig will be based on the Gusto MSC CJ-70-150 design, with enhancements that include a number of features that are designed to further improve the rig's operating capability.
The rig was designed for operations over a very large platform or in a subsea configuration in water depths of up to 150 meters in the Norwegian sector.
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Process Industry Match (PIM) addresses the need for better dialogue and communication between investors, engineering firms, specifiers, integrators, suppliers and end users in the industrial process sector – internationally.
To achieve this, the PIM Website and Newsletter majors on developments that enhance the performance of process facilities. There is, therefore, a particular focus on investment, engineering & construction and plant upgrade activities, as well as on new operational and maintenance programmes.
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IIggesund Paperboard invests in biofuel
In March Iggesund Paperboard’s new biomass CHP plant in Workington, England came online. The company’s paperboard mill has thereby switched its energy source from fossil natural gas to biomass. The new biomass boiler involves an annual reduction of fossil carbon emissions equivalent to the emissions from more than 58,000 cars, each driven 20,000 kilometres per year. As well as now being self-sufficient in electricity and heat, the mill will also be able to supply both green electricity and heat to local residents. On 28 May the new biomass plant will be inaugurated in the presence of the board of directors of the Holmen Group, the forest industry group to which Iggesund Paperboard belongs.
With its 400 employees Iggesund Paperboard in Workington is the UK’s only producer of folding box board. Incada, the paperboard made at the mill, is constructed of a central layer made of mechanical pulp produced on site, which gives a low weight combined with high stiffness. The outer layers are made of purchased chemical pulp to create high whiteness and good printability.
“For more than a decade now Iggesund Paperboard has invested to raise the standard of what was originally a very ordinary paperboard mill to one that is state of the art,” comments Ola Schultz-Eklund, the mill’s managing director. “Including the 108 million pounds spent on the CHP plant, we have invested more than 200 million pounds in this transformation.”
Step by step the investments and renovations have raised both the quality and quality consistency of Incada. As a result the mill has found new end uses for its products and gradually improved its profitability.
“At the same time our emissions of fossil carbon dioxide from the production process have now fallen to almost zero, which should reasonably make us an even more interesting option for the large end users, who have more or less promised consumers that they will both declare and reduce the emissions created by the products they sell.”
Incada is used for packaging, book and brochure covers, and other graphical applications. Paperboard packaging is a competitive method of protecting goods throughout the distribution chain from producer to consumer.
“We base our production on a renewable raw material that can later be recycled either in material or energy form,” Schultz-Eklund concludes. “Our manufacturing process meets high environmental standards and our paperboard is an excellent fit in a society which is increasingly moving towards greater sustainability.”
Sizewell A now 50% defuelled
Progress towards decommissioning Sizewell A nuclear power station has passed a significant milestone, with more than half of the 52,945 fuel elements now removed from Sizewell A’s twin reactors.
Defuelling is due to be completed at the site in September 2014.
“Removing spent fuel from reactors and transporting it to Sellafield for reprocessing is a complex process, but Magnox is using all its experience and expertise to deal with the legacy of this first generation of nuclear power stations," said site director Tim Watkins is confident his team will hit that target.
“It is good news that with defuelling recently completed at our Chapelcross site, Sizewell A now has priority for flasks and is making steady progress with fewer than 160 flasks of fuel left to dispatch, he added. “Once all fuel has been dispatched, we will have reduced the radiological hazard on site by more than 99%.”
Dr Brian Burnett, head of programmes for the Nuclear Decommissioning Authority (NDA), which owns Sizewell A, said: “This is an important milestone on the site’s journey towards Care and Maintenance and a vital step in reducing hazard on the site.”
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