From continental shelf to high street

Stud­ies for Oil & Gas UK map­ping the sup­ply chain of the sec­tor as a whole have shown it to be a £35-bil­lion indus­try, sup­port­ing some 450,000 jobs in total across the UK. It is this large and long eco­nom­ic reach that is link­ing plat­forms off­shore, sup­pli­ers on land, indi­vid­u­als in employ­ment and the local retail out­lets in which they spend their dis­pos­able income.

In the case of the Cygnus field, even before the actu­al gas first starts flow­ing towards the end of 2015, the eco­nom­ic ben­e­fits of the project are already stream­ing through the sup­ply chain to UK busi­ness­es and their com­mu­ni­ties, with more oppor­tu­ni­ty in the pro­cure­ment pipeline.

In terms of ener­gy gen­er­a­tion alone, the Cygnus project is a big sto­ry, rep­re­sent­ing the UK’s largest South­ern gas field dis­cov­ery for 25 years. At peak out­put, Cygnus will pro­duce enough gas to meet the demand of 1.5 mil­lion homes, yet these num­bers tell only part of the tale.

Accord­ing to a report by lead­ing con­sul­tan­cy Oxford Eco­nom­ics, the Cygnus project will add a total of £1.29 bil­lion to the UK econ­o­my and sup­port more than 4,820 skilled jobs dur­ing its five-year con­struc­tion peri­od. The ini­tial suc­cess of the scheme is imme­di­ate­ly man­i­fest­ed through­out the exten­sive sup­ply chain dur­ing project lead-in time, accord­ing to Adri­an Coop­er, chief exec­u­tive of Oxford Eco­nom­ics.

“The Cygnus North Sea project is already sup­port­ing valu­able income and employ­ment oppor­tu­ni­ties in the North East, in Scot­land and through­out the UK, even though the gas pro­duc­tion process itself has yet to start. The ben­e­fits are being felt not just by those direct­ly involved in the design and build of the required infra­struc­ture, but also by sup­pli­ers of goods and ser­vices of all kinds to those con­trac­tors in turn,” he says.

Pro­vid­ing a geo­graph­ic break­down of rev­enue and employ­ment ben­e­fits, the report has cat­a­logued a range of pos­i­tive eco­nom­ic impacts:
• In Scot­land, where a top­side, sup­port­ing struc­tures and sub­sea infra­struc­ture is being built in Fife and Inver­gor­don, £323 mil­lion will be gen­er­at­ed in the econ­o­my, secur­ing 1,450 jobs includ­ing 15 appren­tice­ships at yards in Fife;
• Across the North-East coast, direct and indi­rect effects of the Cygnus project will bring near­ly £90 mil­lion to the local econ­o­my and more than 400 jobs, with par­tic­u­lar ben­e­fit to be felt in Hartle­pool, where the con­tract for three plat­forms con­sti­tutes the third con­sec­u­tive off­shore project for Cen­tri­ca Ener­gy won by the town;
• Invest­ment in off­shore oper­a­tions, includ­ing trans­port­ing and installing the infra­struc­ture for the Cygnus field, and bring­ing it into pro­duc­tion, will boost rev­enues fur­ther by almost £225 mil­lion and employ­ment oppor­tu­ni­ties by near­ly 300; plus
• Across the rest of the UK, the over­all spend­ing of peo­ple employed by the Cygnus part­ners and con­trac­tors will sup­port some 1,540 addi­tion­al jobs, adding £315.8 mil­lion to the nation’s econ­o­my.

The Cygnus North Sea project is already sup­port­ing valu­able income and employ­ment oppor­tu­ni­ties in the North East, in Scot­land and through­out the UK, even though the gas pro­duc­tion process itself has yet to start

The cas­cad­ing ben­e­fit of the scheme to domes­tic indus­try rep­re­sents a win-win sce­nario for Cygnus and its UK sup­ply chain, says Ruud Zoon, man­ag­ing direc­tor, GDF SUEZ E&P UK Ltd. “As oper­a­tor of the Cygnus field, we are very pleased with the suc­cess of UK-based com­pa­nies in secur­ing over 80 per cent of the con­tract work in com­pet­i­tive ten­der. This is tes­ta­ment to the tech­ni­cal and com­mer­cial excel­lence of the UK sup­ply chain. Good progress is being made with the 2014 instal­la­tion cam­paign now com­plete and drilling under way,” he says.

For Colette Cohen, senior vice-pres­i­dent for the UK and the Nether­lands at Cen­tri­ca Ener­gy, the research study cap­tures the extend­ed sup­ply-chain val­ue of the project. “This report under­lines how sig­nif­i­cant an impact the Cygnus project is hav­ing across the UK both in terms of invest­ment and jobs, as well as strength­en­ing our secu­ri­ty of gas sup­ply. This is a great exam­ple of what can be achieved when we invest in skilled peo­ple across the UK, cre­at­ing thriv­ing ener­gy coasts and secur­ing gas for the UK,” she says.

Bay­ern­gas UK man­ag­ing direc­tor Ger­ry Har­ri­son adds: “This report high­lights the sig­nif­i­cance of our oil and gas indus­try, and its effec­tive rela­tion­ship with the UK sup­ply chain. We are delight­ed to be part of the Cygnus project and will con­tin­ue to invest, with our part­ners, in oth­er oppor­tu­ni­ties off­shore UK.”

On a pro­gramme of the scale and dura­tion of Cygnus, the roll-call of pro­fes­sion­al and trade inputs ranges from design and engi­neer­ing, through pro­cure­ment and con­struc­tion, to fab­ri­ca­tion and com­mis­sion­ing of every­thing from plat­form top­sides, bridges and flare tow­ers, to jack­ets and piles, export pipelines and sub­sea struc­tures.

The Cygnus project is led by oper­a­tor GDF SUEZ E&P UK with a 38.75 per cent inter­est, plus part­ners Cen­tri­ca Ener­gy (48.75 per cent) and Bay­ern­gas (12.5 per cent). The devel­op­ment was sanc­tioned in 2012, fol­low­ing the UK government’s deci­sion to intro­duce allowances for new large gas fields in shal­low water, which pro­vid­ed project part­ners with the cer­tain­ty and con­fi­dence to go ahead.

Big projects typ­i­cal­ly require big play­ers and Cygnus is no excep­tion. GDF SUEZ, through its sub­sidiary GDF SUEZ E&P UK Ltd is an increas­ing­ly sig­nif­i­cant name in oil and gas explo­ration and pro­duc­tion in the UK Con­ti­nen­tal Shelf. Since enter­ing the region in 1997, the com­pa­ny has built up a sub­stan­tial port­fo­lio of assets in the Cen­tral and South­ern North Sea, and West of Shet­land, com­pris­ing more than 50 licences.

Major part­ner Cen­tri­ca is a top 30 FTSE 100 ener­gy com­pa­ny with a grow­ing explo­ration and pro­duc­tion busi­ness, includ­ing oper­a­tions in the UK and Nether­lands, Nor­way and West­ern Cana­da.