Member Article

‘Radical changes’ needed in UK’s offshore industry

THE man at the helm of a leading engineering contractor and fabrication company says “radical changes” are needed if the North Sea’s oil and gas industry is to survive.

Dennis Clark OBE, of multi-million pound company OGN, spoke at the November meeting of the Advanced Manufacturing Forum (AMF) – an organisation which represents and supports the region’s industry.

Mr Clark, originally from Hartlepool, told manufacturers that a number of measures must be taken to ensure the future health of the offshore industry operating from the North Sea.

He said: “The most frequent question I get asked over here in the UK is, ‘is the North Sea finished? It’s empty, it’s dry, it’s finished.’

“There’s several answers you can give to that. “I could say, ‘yes it’s finished as a major area of industrial investment’ – bearing in mind for the last 30 years it’s been the biggest area of industrial investment in the UK.

But, yes, it’s finished, unless the industry itself goes through a radical change.

“The way we behave, and the way we do our business, is not conducive to $40/50 oil.

“That means we’ve got to do something if we want to explore what’s left in the North Sea.”

Mr Clark said that for the industry to survive then development costs must be reduced by 30 per cent, the sector needs Government help, change of the industry’s “high-cost culture” to reflect lost revenues of around 60 per cent, and a fair tax regime for all companies involved.

The longstanding businessman said the industry had been thrown a lifeline in the past with a rise in the price of oil.

But, “is it going to save the industry this time? I don’t think so, we’ve really got to change,” he told the meeting at the AMF headquarters in Eldon Street, South Shields.

Mr Clark said a report into the offshore industry proved that out-turn costs from the UK for major facilities in the North Sea, were as competitive as anywhere in the world.

But he said we are “stagnant as far as new talent is concerned”, due to the highly-publicised issues of the ageing workforce and the skills gap.

Mr Clark believes in training young people and giving them the skills that last a lifetime, and that will be passed onto the next generation.

He said: “I believe in real apprenticeships, ones that leave genuine skills with a person.

“To do that you need to have apprentices, and you ultimately need business.”

Business figures are difficult to boost, however, at a time when only 17 per cent of the facilities that have gone into the North Sea over the past five or six years have been built in the UK.

More than half of the work went to South Korea – purely as a result of cost.

“That is appalling in my view,” said Mr Clark, who grew up in Bell Street – now Stotfold Street, in Hartlepool, before moving to the Fens area of town until he moved to Scotland in 1979.

“Unless we get our act together, unless we get motivated, I can see the decommissioning of oil rigs becoming a reality which is a bad thing for potential future investment.

“Estimates of the oil left in the North Sea continues to rise as technology improves.

“For example 3D seismic surveys can now identify reserves that were invisible 10 years ago.

“Once a field has been decommissioned it is very difficult, if not impossible to drill it again.”

Businesses were told that in the 70s there were 21 fabrication yards in the UK – half of which were in the North East. Twenty-five-thousand people were directly employed as a result, with a further 25,000 engaged in the industry.

Today’s figures make for more bleak reading, with just 15 fabrication yards in Britain, and only 5,000 direct employees, and another 5,000 with employment linked to the sector.

Jack Hanwell, Manager, at AMF, said: “Having had the pleasure to work with Dennis over almost 20 years I know him to be both caring and committed to an industry he has devoted his career to.

“Having dealt with over 30 energy ministers in his time he has continually fought the corner of manufacturing for the region and his vast knowledge and experience needs to be heeded by the latest policy makers.”

This was posted in Bdaily's Members' News section by Felicity Collinson .