A consortium of North Sea drilling firms has warned of an offshore rig exodus from the UK amid “minimal opportunities” for its sector.
The group, representing more than a dozen drilling firms, hit out after industry bosses last week described an upcoming clutch of offshore work as a “golden opportunity” for the UK.
Those 12 projects actually “represent a fraction of what is truly needed to meet growing UK energy demands, as well as strengthen regional energy security”, the consortium said.
The group – the North Sea chapter of the International Association of Drilling Contractors (IADC) – told Energy Voice there is “already a migration” of rigs and equipment leaving the North Sea, threatening firms’ ability to carry out work to support the energy transition and energy security.
More than 30 jack-up rigs have left Europe, Asia and the Americas for better opportunities in the Middle East in the last year, it said.
In the rare statement, the IADC called on the UK and Scottish Governments to lead on cooperation to “ensure the sector takes a balanced, long-term approach to the energy transition”.
The move comes following publication of a Scottish Energy strategy which presumes against any new North Sea exploration, and a UK Government windfall tax which levies 75% of industry profits, threatening to undermine investment in low carbon areas like CCUS.
A spokepserson for the UK Government said it is taking steps to support the industry and “boost homegrown energy supply” via support of the North Sea Transition Authority (NSTA) new licensing round for oil and gas.
They added: “Our UK oil and gas sector is well-positioned to enable the production of low-carbon hydrogen at scale and roll out new carbon capture projects, investing in clean technologies, whilst protecting jobs and expertise.”
The Scottish Goverment said its draft energy strategy shows the only course of action to protect jobs and the economy “given the North Sea basin is mature and production is already in decline”.
A spokesperson said: “Independent research based on industry projections finds that production in the North Sea will be around a third of 2019 levels by 2035 and below 3% of the 1999 peak by 2050. Independent analysis also suggests that existing sanctioned fields will contribute over 80% of Scotland’s future production.
“Reducing our energy consumption while ramping up our energy generation capabilities through renewables and hydrogen will mean that, in a net zero Scotland, we will not only be less reliant on importing oil and gas, but a net exporter of cleaner and greener energy to the rest of the UK and beyond.”
The IADC said the lack of opportunity threatens energy and the transition to cleaner fuels as the “experience, knowledge and ingenuity of workers from the far north of Scotland to the south of England” is driving that clean energy shift.
‘Golden opportunity’ or ‘minimal opportunity’
Last week the North Sea Transition Authority (NSTA) regulator and industry body Global Underwater Hub (GUH) estimated a dozen upcoming UK projects will deliver thousands of rig days, much of which will come over 2023 and 2024.
Steps are also being taken to highlight longer-term projects, such as through the regulator’s pathfinder portal.
The IADC said it agrees with the report’s general findings, but chair of the North Sea chapter Darren Sutherland said this “frustratingly only amounts to minimal opportunities for drilling contractors”.
He added that business conditions need to improve for “ensuring we have a viable sector and burgeoning economy”.
Mr Sutherland said the industry recognises environmental pressures and the need to change its operations, but a longer-term approach is needed.
“The transition to cleaner energy has to be done safely, sensibly and securely in terms of the national economy, national energy supply and protection of jobs across the UK.”
He added: “The UK Net Zero Strategy states that energy security can be attained through a reduction in the requirement for imported fossil fuels.
“We believe the success of the transition can only be delivered by maintaining that security, which includes an active drilling and production programme on the UK Continental Shelf.
“The offshore sector is predicted to employ 200,000 people in the UK over the next decade, and the long term implications of changes in this industry make it vital to undertake this process at a pace that is cognisant of the job security and retraining required of this highly specialised workforce.”
Change of fortunes
The call to action comes amid a serious change of fortunes for offshore drilling firms in recent years.
Amid the pandemic, they were among the worst-hit as opportunities were non-existent both in the UK and overseas, with major firms slumping into Chapter 11 bankruptcy.
But now, as the world seeks to replace gas supply from Russia, exacerbated by major underinvestment in the oil and gas sector in recent years, these contractors are getting booked up fast – and see better prospects overseas.
Meanwhile the IADC warned about the skills exodus which is likely to take place as rigs leave.
Regional director Stuart Clow said: “We are already seeing a migration of drilling rigs and equipment to other areas of the world which in turn reduces drilling and decommissioning capability in the North Sea and other areas. Data shows more than 30 jack-up rigs have migrated from Asia, the Americas and Europe to the Middle East over the past year.
“That is partly why encouraging business, responsibly developing all forms of energy and supporting the offshore supply chain in the North Sea are of the utmost importance.”
The NSTA and the GUH, which conducted the study published last week, had no comment when asked to respond to the IADC.