Chairman calls on radical changes if offshore industry is to survive

OGN Group building at Wallsend.
OGN Group building at Wallsend.

Radical changes are needed if the North Sea’s oil and gas industry is to survive.

The stark warning came from Dennis Clark, chairman of Wallsend-based OGN Group, the region’s leading engineering contractor and fabrication company.

Speaking at a meeting of the Advance Manufacturing Forum (AMF), he said a number of measures were needed to ensure the future health of the North Sea offshore industry.

Mr Clark 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’. 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 for the industry to survive then development costs must be reduced by 30 per cent, the sector needs Government help, 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.

Mr Clark said training young people and giving them the skills, that will be passed onto the next generation, was vital.

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.”

One issue facing the industry is 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. “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.”