At the recent ITF technology showcase in Aberdeen BP’s
North Sea regional president, Trevor Garlick was reported as saying “If new
technology is not developed fast enough the life of the North Sea oil and gas
industry could be shortened”.
Without being cynical I know many will have heard this
before so let me give Garlick a history lesson and some advice.
Between the early 80s and middle 90s the Marine
Technology Directorate (MTD) used to invest £10-12million every year in R&D
programmes involving the universities, operators, contractors and particularly
SMEs.
Around £5m of that came from the Engineering and Physical
Sciences Research Council and the remainder from industry. MTD was the only
private sector organisation managing Research Council funds.
Then, shortly after the Blair-led Labour Government was
elected in 1997 EPSRC advised MTD that it intended to pull that funding back in
house. Despite MTD’s success this was a political decision as it was to protect
jobs within EPSRC, which was undergoing a “reorganisation”.
MTD’s membership included most of main oil/gas operators
and it was hoped they could be persuaded to lobby the Government to reverse the
EPSRC decision and reinstate MTD’s funding.
Instead though the operators – or a few of them – thought
it would be a much better idea to merge MTD with the Petroleum Science and
Technology Institute (PSTI) of Aberdeen and Edinburgh to form a new
organisation called the Centre for Marine and Petroleum Technology (CMPT).
PSTI was also a membership based research enabler but its
work was mainly aimed at sub-surface issues. It was just as successful
and invested roughly the same amount as MTD.
The aim with CMPT was to have a properly financed
organisation that would act as a broker/agitator/catalyst working with
operators, contractors large and small, the DTI (now DECC) and the universities
to develop appropriate research projects some of which CMPT would manage.
Unfortunately, CMPT’s interim management team (drawn from
the DTI, operators, universities and so-forth. did not take into account the
actual costs of the start-up (severances, legal fees, headhunter fees, etc).
In addition, they did not properly take into account the
inherited costs of on-going projects. Consequently CMPT started life with an
£800,000 collar around its neck.
The interim management team also agreed – under pressure
from some but not all operator members – to reduce the subscription to CMPT
from the joint £75,000 that its predecessors MTD and PSTI received to £30,000.
The interim board then further bemused many in the
industry by appointing a CEO from a military background who had absolutely no
experience of the oil and gas industry, no experience in running what was a
small company and no direct experience of technology development. He was
a really nice bloke though.
Despite this CMPT was able to get some useful projects
going including a number of so-called Pathfinder projects which were low cost,
short term feasibility type programmes quite a few of which later evolved into
much larger projects and eventually commercialised.
Regrettably though, this all coincided with the collapse
in the oil price to $10 per barrel during the late 1997 through early 1999
slump and the resultant, crisis-driven setting up of the Oil and Gas Taskforce
the role of which was – in part – to develop better ways of ensuring a flow of
new technology into the North Sea.
Of course the oil price was actually only at $10 a few
days and in fact recovered fairly rapidly from March 1999 to comfortably pass
$21 before the end of that year. The barrel has of course been on the up pretty
much ever since,
Sadly for me, 25 of my then colleagues (yes, I was a
director at CMPT), the R&D programmes we were running and the network of
university technology centres CMPT was involved with, one of the outputs of the
Oil and Gas Taskforce was that our organisation should be killed off and
replaced with the Industry Technology Facilitator (ITF). It was a triumph of
process over progress.
Trevor Garlick may like to know that the BP manager
involved in that decision said to me at the time that BP didn’t actually need
ITF or any other third party-type R&D organisation and that if BP wanted to
do some R&D the company would just do it anyway.
This arrogant and patronising statement told me that the
whole deal of setting up ITF was essentially politically expedient.
The proof of the pudding is of course that since its
inception ITF has only secured project funding of around £50million.
That’s £50million over 12 years, or an average of less
than £5million per annum.
That’s a third or a quarter of what MTD and PSTI were
investing before the “suits” came along and probably less than the cost of
maintaining BP’s board. To say the least it’s shameful.
ITF’s chairman, Melfort Campbell, also said that, despite
the oil and gas industry being the largest industrial investor in the UK for 25
years, less than 0.5% of government spending on research and development had
been in the sector.
Energy readers knew this of course because we’ve talked
about the UK’s lousy record on energy technology R&D often.
But we also know that in Brazil firms are ordered to
spend 1% of their revenue on R&D. Even in Newfoundland there’s a diktat.
But here in the dear old UK where so many of our assets
are foreign-owned to boot, there is no such requirement. Why? Because Whitehall
puts ideology ahead of national and economic logic and ignores what our
competition does.
So Trevor, if you’re really serious about the technology
issues you’ve raised then the answer is in your hands and the hands of the
other operators.
Stop repeating the old and well worn “we need new
technology” mantra, start doing some real innovating and above all get your
corporate wallet out and be prepared to fund it properly.
Then you might actually see some results and
get what we all want. A longer-lived North Sea industry.
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