The subsea oil and gas sector is renowned for its innovation and forward thinking approach to operations. Subsea companies have had to adapt through several economic downturns, identifying and developing new products, technologies and processes to sustain their businesses. As the industry transitions into new energy projects, companies must consider the benefits and risks involved as they shift the emphasis of their business models.
Companies, contractors and stakeholders entering transitional energy projects may have limited experience in the offshore environment and establishing relationships with subsea oil and gas companies may be beneficial for such entities. Legal and commercial colleagues experienced in subsea operations will be well placed to advise on the established commercial and contractual arrangements frequently used. Engagement from the wider business will also be useful in terms of drawing out the innovation and expertise required to develop offshore projects. Bespoke commercial arrangements should be developed for new energy projects which will allow all parties to input, adapt, benefit and progress offshore operations. The importance of these relationships cannot be overstated if the transition is to be a success in the long term.
By their very nature, subsea operations require a high degree of collaboration. The construction, operation and maintenance of offshore wind projects pose many challenges for developers, operators and contractors. By 2026, offshore wind is projected to become the UK's largest renewable energy source. To transition effectively, potential exists for increased collaboration between the offshore wind and subsea oil and gas sectors.
The 'Energy Transition Alliance', formed by OGTC and Offshore Renewable Energy Catapult, is one example of a collaborative initiative across differing energy generation groups. Similar initiatives could see both the renewable and oil and gas sectors joining forces to become 'subsea energy companies' in a collective shift towards a green economy. The North Sea could ultimately see a complete makeover with the creation of green energy hubs using existing infrastructure, fuelled by offshore windfarms.
The allocation of risk is an essential consideration when drafting and negotiating contracts and even more so when addressing the high risk offshore, subsea environment. The expertise within subsea companies should be drawn upon to create properly drafted indemnity provisions backed-up by appropriate insurance cover. These are essential components for increasing contract certainty for offshore wind projects and are already commonplace in oil and gas operations. If companies familiarise themselves with the indemnities and mutual hold harmless arrangements, appropriate drafting will allocate liability in a comprehensive way and should avoid the need for detailed investigation and insurance wrangling should an incident occur. As a result, such provisions can encourage the mutual establishment and operation of improved safety practices, for the benefit of all parties involved.
People & Skills
Subsea sector personnel have a wealth of skills, knowledge and experience to support the energy transition. Decommissioning could be used as a stepping-stone to upskill and retrain other industry professionals as the transition develops. Retaining and motivating this talent should be a top priority for those companies seeking to diversify their energy offering.
The energy transition is here. As strategies and plans for transitioning operations and business models develop and challenges and risks are assessed the skills and experience across the oil and gas industry will play a vital role in its ultimate success.
This article first appeared in OGV Energy on 4 February 2021