Dreams of innovation and knowledge transfer

Innovation and knowledge transfer in maritime are a new concept for Malta. Surely this poses a number of challenges as it is essentially an initiative linking together all segments of the maritime industry, with education and research at the centre as a main driver in the future development of the industry.

The spoils are rich but the task may be daunting unless all stakeholders pull the same rope. Therefore it is encouraging to read the announcement last year by the economy minister that Ablecare Oilfield Services Group has been invited to be the preferred bidder to develop part of the 175,000m2 former Malta Shipbuilding site into a regional maritime, oil and gas industry hub.

The preferred bidder is a leading local oilfield services company. It is an open secret that Ablecare plans to invest a substantial amount to develop the derelict Marsa site to lay the foundation stone for a maritime knowledge hub.

Only time will tell if this ambitious task succeeds to lift off the squalid state of the site but one thing is certain – we have to strike while the iron is hot. During the term of the lease the bidder will invest up to €55 million. It has 14 years of experience in this field so one augurs that together with other stakeholders it will start the challenging task of building a centre for maritime knowledge.

The company has plans to develop the site as a centre for oil rig maintenance, storing heavy machinery and equipment, as well as logistic support for the oil and gas exploration industry. The government wants to attract the attention of investors wishing to turn Malta into a hub, servicing the needs of operators requiring maintenance and upgrading of rigs, and in particular, building advanced subsea modern structures.

To capitalise on this significant opportunity, the solution for a local industry is to start the search for talent attraction, innovation and bold contracting/procurement strategies. The obvious question to ask is: is there a market for such services and are we competitive?

The market does exist, particularly in specialised engineering work, and opportunity knocks if we are quick to tool up our workshops and develop training facilities for apprentices /tradesmen. Being proactive, we may succeed not to miss the bus.

To start with the Mediterranean is busy with a number of rigs which are looking for a service centre (even though right now with oil at $54 a barrel there may be some redundancies) and of course the future decommissioning work currently being contemplated in the North Sea oil platforms will lead to the potential offering of ample structural work.

It stands to reason that since many assets are reaching the end of their field lives in the North Sea these will require decommissioning. Malta is witnessing a modest growth in repair work on rigs carried out by the Freeport and at Palumbo Drydocks.

In this context, Medserv director Anthony Duncan said Malta could well become a ‘mini-North Sea’ if all the oil and gas activity being planned in the Mediterranean takes off, and reiterated that decommissioning in the North Sea is a huge opportunity for Malta.

Quoting reliable sources one reads how the UK decommissioning market will require upwards of £30bn of expenditure before 2040 which in turn offers a significant socio-economic opportunity in terms of job creation in the Scottish, UK and other European ports. To take full advantage of this opportunity, the maritime industry in Malta must build on its existing capacity to service the complex and demanding nature of work in the North Sea and other operators in the Central and Eastern Mediterranean.

According to the Oil & Gas UK Economic Report 2013, in the UK continental shelf – an area of the North Sea with large resources of hydrocarbons – some 475 installations, 10,000km of pipelines, 15 onshore terminals and 5,000 wells will eventually need to be decommissioned. With hindsight we note how the UK government tried to balance its huge national deficit following the onset of recession in 2008/9 so that in 2011 it further increased taxation on North Sea operations.

Some observers criticised the UK government for squandering the oil bonanza and for not having set up a posterity fund in the early days of production to cater for rapid depreciation of such assets. In fact by comparison Norway had set up a Government Pension Fund Global in 1990 initially to help cope with the rising costs of pensions for a population that was living longer, and create a buffer kitty for future days when oil extraction falls to a trickle.

It is being assessed that the huge decommissioning costs needed to clean the North Sea seabed of a number of detritus is massive. In passing it is good to remember that as the primary material used in the oil and gas industry is steel (this forms the basic fabric for platforms) this is widely recyclable and such steel lends itself to generate a huge amount of fabrication work in shipyards.

For instance the topsides of any oil platform, that is the “upper half” which makes up the production plant, accommodation block and drilling rig, together with substructures are often designed for specific environments which can minimise interchangeability to other locations. Readers who are familiar with the subject may agree with me that key areas of the supply chain include inter alia, rigs resources, together with repairs of removal vessels for topsides and substructure. Quoting FT sources it reports that Royal Dutch Shell will shortly set out ambitious plans to decommission the North Sea’s Brent oilfield – one of the UK’s biggest – in a multibillion-dollar project over the next 10 years that could be followed by other closures after the plunge in oil prices.

The energy group will start a disposal plan for the “topside” of Brent Delta – one of four platforms in the field that gave its name to the international crude price benchmark. It faces the task of how best to decommission a range of platforms and subsea structures on the Brent field.

The decommissioning of Brent Delta will involve lifting its 23,500 tonne steel superstructure that stands high above the waves – and includes the drilling rig and multistorey accommodation block on to a giant ship. Almost all the North Sea’s remaining 470 platforms, as well as 10,000km of pipelines and 5,000 wells, will be decommissioned over the next 30 years, with companies expected to spend £30 to £40 billion by 2040.

Typically Maltese shipyards, if properly equipped, can bid for part of the massive decommissioning work in UK where in the near future there will be need for many engineers and steel construction workers for the removal of redundant assets.

Economy Minister Chris Cardona hopes to attract the attention of investors wishing to turn Malta into a hub, servicing the needs of operators requiring maintenance and upgrading of rigs, and in particular, building advanced subsea modern structures.

Malta was always proud of its engineers and skilled tradesmen who in the past faced many engineering challenges at the naval drydocks. Now that the docks have been privatised and drastically scaled down one argues that the maritime hub concept cannot succeed unless adequate training facilities are started for new engineering staff and adequate investment is sourced (ideally from venture capital) to secure operational resources serving all aspects of the sector.

Can Malta afford to miss this opportunity? Looking ahead, there are opportunities for knowledge transfer and this is what Ablecare is planning to do when it announced that it will be soon launching an academy with the help of specialist engineers.

To capitalise on this significant opportunity to reactivate the maritime sector it is imperative for stakeholders to start the search for talent attraction and innovation based on solid contracting/procurement strategies. The killer of similar initiatives in the past was unnecessary bureaucracy and the plague of short sighted policies. Therefore the obvious question to ask is – how long will the window of opportunity remain open? As always the early bird catches the worm.