Sea Change

31 August 2007 (Last Updated August 31st, 2007 18:30)

The Association of British Offshore Industries has come a long way from its roots in the North Sea three decades ago. It has successfully adopted an international dimension and a wider industry role as its members have developed new oil and gas interests around the globe. Will Hawkes reports.

Much has changed in the world of offshore oil and gas in the 30 years since the Association of British Offshore Industries (ABOI) was founded. Back then ABOI was all about North Sea oil. Today the organization operates around the world, from Nigeria to Venezuela, and from Indonesia to Brazil.

Of course, this means ABOI members have to deal with a host of new transport and logistical challenges that were not issues when they were based only in the North Sea. While extracting oil in the North Sea was never plain sailing, the new sites have asked new questions of operators.

Ken Gibbons, director of ABOI, says: "In the North Sea you have a nearby home base, but on the other hand you have an extremely hostile operating environment. Many of these new overseas locations have the logistics problems – the methods of project control and project management are open to question.

"There are lots of new issues for the industry, because it has been building various commodity facilities all around the world. It is just the logistics of working in a different place that are difficult. The production atmosphere is relatively benign.

"There are some very tough areas – Venezuela, for example – but I think it's not so much a problem with the production environment as with product execution. If you are running a major contracting facility, setting up a field operation is not too big a task, but it does stretch management resources if you have four or five of those dotted around the world."

Developments in the last 30 years have helped ABOI deal with hostile environments and logistical problems. Gibbons says: "One of the major challenges we have faced has been the engineering of floating production storage and offloadings vessels and the conversion of existing vessels.

"Initial vessel conversions were disasters and crippled some of the contractors, who did not have experience of the detail that was required. Sometimes the construction phase was extended for an inordinately long time, and as a result, the commercial attraction of the venture disappeared. However, today that is not the case."

NEW HORIZONS

What is the case, Gibbons says, is that there are several exciting areas in offshore exploration at the moment. While ABOI’s main business is in South-East Asia and Africa (north and west), parts of South America pose very interesting questions in terms of culture and logistics. "Brazil is fascinating," says Gibbons. "The way the Brazilian economy is developing now is quite something. It is worthwhile people overcoming barriers – cultural and logistical – and getting
involved in Brazilian development.

And the same is true of Venezuela. It is an interesting country at the moment, but in the long term, it will always be one of the principal supply opportunity areas, as a result of its production facility." Gibbons believes that, although production may be difficult in Venezuela, the current global economy makes it a very interesting proposition. "Venezuela has the very heavy crudes, and as long as energy prices are the way they are, as long as they stay in that region, difficult production of extremely heavy, asphaltic crudes from Venezuela is much more attractive financially – but you've really got to have a high price to justify it."

EXPANDING ROLE

One of the challenges ABOI faces as it develops internationally is becoming flexible enough to do business in very different parts of the world. But it is a challenge that the organization has risen to. Gibbons says: "We have had to develop an international dimension for ABOI's operations, so it has had to have specialists in geographical areas as well as projects. To work in Latin America, one has to be a specialist with a Latin American background and experience.

"When it comes to dealing with difficult crude oils, one has to have people with experience in that area of business. It is no good just popping along and asking how it is going, one has got to get involved. This means that the number of companies involved is smaller, but the quality is very high."

ABOI's emergence in an international role – with all the transport and logistical issues that presents – came in the 1990s. Gibbons believes that this represented a quantum shift from the organisations’ early days in the 1970s.

"The North Sea was the Klondike of 30 years ago."

"The North Sea was the Klondike of 30 years ago," he says. "Everybody in engineering, regardless of their backgrounds, joined the oil sector. The only qualification you had to have was that you had to be good enough to do it – not that you had done it before. ABOI was the single trade association to harness all that activity. It was the only organization representing the oil and gas production industry in the UK."

Now ABOI has developed a different role. Gibbons says: "From the mid-1990s we had to go out and seek opportunities. Instead of acting as a true liaison organisation, which is what we were, we had to set ourselves up as a marketing organisation. Like every organisation now, ABOI has a fundamental marketing element."

FUTURE DEVELOPMENT

So far, so good. But what does the future hold for ABOI and the industry? With concerns over global warming growing and 'cleaner' sources of energy much in demand, the industry is under pressure as never before. However, Gibbons believes the future is brighter than it might appear to be at first glance.

"ABOI has got to say to itself that oil will always have a very high value," he says. "Certainly in the next decade or so, one must assume that oil values will continue at more or less their current level, that production opportunities will be driven by this oil price level and that many areas that do not develop in a major way will develop in a smaller way." This, Gibbons believes, means that the industry is about to see big changes in terms of logistics and transport. "I think the era of small production systems, as well as major international production systems, is something that we all need to move into," he says.

"ABOI has got to stay close to the developing LNG industry on shipping, safety considerations and security."

"It is attractive to think supermajor. If you think supermajor or supernational, just look at the major projects and get involved with those. That is marvellous. Do that. But increasingly there are going to be smaller enterprises driven by a high oil price. It might not be profitable for an international supermajor, but it will be very profitable for a local national or a local regional organisation. I think ABOI has got to get involved with both of those."

The LNG industry is growing and, Gibbons believes, presents new challenges in terms of production and transport safety. He says: "ABOI has got to stay close to the developing LNG industry on shipping, safety considerations and security.

"Security, I'm afraid, is part of life, and we have to work very closely with operators on all aspects of security, while safety in gas development, particularly LNG, is paramount." Equally interesting will be new research and development. Gibbons believes smaller groups may be the future in this area. "What is going to be interesting," he says, "is working with organisations that are sponsoring R&D but are not directly involved in its wider exploitation.

"It is quite possible that large production organisations won't want to carry the R&D organisations that would be ideal for them. So the R&D factor may come out of academia, and it may come out of small institutions. But their products will have to be commercialised and exploited in the most judicious way."

Gibbons sees ABOI having a big role in liaising with all parties concerned, from the small research facility to the big producer. He is also keen to stress that the future of the industry is secure, despite the current political climate. "This is a growing business, not a declining one – it's not even on a plateau – and one fails to participate at one's peril."