The chief executive of Subsea UK has warned the oil and gas industry that it must think long and hard before embarking on cost-cutting measures when awarding contracts for decommissioning work.
Alistair Birnie, speaking yesterday at the seventh annual DecomWorld North Sea Decommissioning Conference in Aberdeen, said the industry must be even more vigilant to cope with the growing pressure and scrutiny arising as a result of the Macondo oil spill incident in the Gulf of Mexico.
The leader of the trade body, which represents the country’s £5billion-a-year revenue subsea sector, outlined the issues and challenges that impact on future decommissioning work.
He said: “Competition is going to be fierce for subsea resources and there is no doubt that day rates for specialist vessels and services will rise to pre-2008 pricing.
“There will inevitably be a temptation to drive costs down by looking for cheaper alternatives but companies must be prepared to pay more to ensure experience, safety and environmental protection.
“The priority must be on safety and the environment. Failure in these areas could be hugely detrimental to our industry which is already under intense scrutiny, whether in drilling, operations or in decommissioning.
“We cannot afford to let incidents happen. Get it right and we will demonstrate to the world the competency of our people, our technological excellence and our high standards in safety and environmental protection. Get it wrong and we could well pay a very high price.”
The substantial market for subsea decommissioning will involve subsea engineering, certification, survey and inspection, pipeline operations, removal of subsea structures, excavation, subsea wellhead cutting and removal and barge operations.
Mr Birnie pointed to the future forecasts for both subsea oil and gas projects and marine renewable work, which are set to rise in the next 10 years, with work in renewable energy rising more sharply. This would, he said, put pressure on availability of specialist equipment and skilled people.
He added: “The industry must accept that the cost base will rise and we should seek savings by driving out inefficiencies, improving contracting relationships and attitudes, reducing operation requirements and re-apportioning work to better balance potential rewards with risks.”
The UK’s subsea sector employs 40,000 people.