8. Market consultation
- In order to gauge market sentiment on the development of an UDW port a series of 25 interviews were conducted.
- The key messages from the market were:
- There is a lack of clarity on the future market, with no commonly recognised programme and timescale for decommissioning platforms.
- The ability of a port to offer a comprehensive onshore disposal and recycling capability, and to effectively manage the associated risks, such as fulfilling the safety and regulatory requirements, was considered a key advantage during the selection process.
- No organisations viewed an UDW port as an attractive investment opportunity for them, neither did they believe that guaranteeing a number of projects to a specific port would be possible.
- The number of direct jobs created by a project was considered to be up to 50.
- One multi-use opportunity identified which would be supported by an UDW Port: 6th and 7th generation drilling rigs would be able to come direct to shore for maintenance and capex.
- Views will be based on the experience and commercial priorities of each organisation and accordingly should not be considered a definitive description of the market but rather as a range of opinions.
In order to gather views from across the market on the development of an UDW port we conducted a series of interviews. This section summarises the results of the views expressed, identifying the top five points and providing further detail across broad areas of location, market, multi-use opportunities and technical alternatives, appetite for investment and other points of note.
8.2 Participating organisations
At the outset of the study a list of suitable organisations was prepared in conjunction with SG, HIE and SE. This resulted in 25 organisations participating in interviews as presented in the table below:
Table 12: List of market consultation participants
|Platform operators||7||To drive insightful discussion during the consultation process it was agreed that all conversations would remain confidential and the participating parties would not be disclosed. As such, these names have been removed from this document.|
|Port operators and onshore recycling and disposal contractors||6|
|Renewable energy sector||2|
Interviews were conducted by telephone and typically lasted an hour. In order to encourage an open dialogue the commitment was made that comments would not be directly attributable to individuals or their organisation. In order to maximise the short period of discussion an interview template with questions was sent to the interviewee beforehand, with the questions agreed in advance with SG. The interview questions are set out in Appendix G.
8.3 Key points arising
We identified five key points from the market consultation:
1. There is a lack of clarity on the future market, with no commonly recognised programme and timescale for decommissioning platforms. Currently, the market for ports is considered highly competitive, with a large number of locations and few projects coming to the market. However, it remains unclear what impact an increase in decommissioning activity, especially for large scale projects, would have on market dynamics.
2. The ability of a port to offer a comprehensive onshore disposal and recycling capability, and to effectively manage the associated risks, such as fulfilling the safety and regulatory requirements, was considered a key advantage during the selection process. For the physical location the east coast of the UK was considered preferable due primarily to the shorter transit times to the NNS and CNS basins.
3. No organisations viewed an UDW port as an attractive investment opportunity for them given that this would not align with their existing business model. Neither did they believe that guaranteeing a number of projects to a specific port would be possible.
4. The number of direct jobs created by a project was considered to be up to 50, with the market investing in mechanical approaches to reduce labour costs. The UK market was viewed as a lower cost base for onshore activity compared to its North Sea competitors.
5. Regarding specific multi-use opportunities, an UDW port could allow 6th and 7th generation drilling rigs to come straight to shore for maintenance and capex. However, there was no particular need identified for an UDW port from offshore renewable industry.
In terms of general feedback for the development of a UK UDW port:
- Platform operators were generally cautious about open support for a specific UK development. However, several operators did recognise that if there was another port in the market which was cheaper than alternative options and it could perform all the required recycling and disposal processes, this would be beneficial for them.
- One UHLV operator was supportive of the development and another unsupportive. SLV operators, who do not need an UDW port, were unsupportive of the development.
- Onshore contractors provided a range of views which were generally supportive of the development. The exception to this were interviewees with current ports focusing on the decommissioning sector, who opposed such a development as it would have a negative impact on their business.
8.4 Areas of discussion
The interviews focussed on five broad areas of discussion, with the level of detail on specific areas varying between organisations dependent on the circumstances of that organisation. In Appendix G we provided detail on the questions used during the consultation. The following table sets out further detail on the views raised across the five areas:
Table 13: Market consultation areas of discussion
Multi-use opportunities & technical alternatives
Appetite for investment and guarantee of throughput
The views in the table represent the main discussion points emerging from the interviews. It is important to recognise that the views will be based on the experience and commercial priorities of each organisation. Accordingly, the views should not be considered as a definitive description of the market but rather as a range of opinions.
- Our CBA analysis was developed in line with HM Treasury Green Book and Scottish Government Guidance.
- Three scenarios - low, mid and high - were used to provide a range of quantifiable benefits.
- Under the scenarios considered, the range of economic benefits equates to:
- £184m to £522m of total output impact (i.e. direct, indirect and induced impact)
- On average between 58 and 165 average FTE positions per year
- Total GVA impact of between £81m and £229m.
- All scenarios across Dales Voe and Nigg show a CBR of greater than 1. This assumes no private financing costs are considered in the analysis.
- The NPV across both locations and scenarios ranges from £4m to £112m.
- Including private financing costs and £10m of public sector support, Dales Voe would need to attract more than 10 projects over the 20 year period in order for the CBR to be greater than 1, with Nigg needing to attract slightly more.
- The overriding differentiator is the capex required to develop each port into an UDW facility. We currently estimate Nigg is 20% more expensive than Dales Voe.
- A number of key risks have been identified. These will need to be addressed and mitigated during the subsequent Business Planning phase.
Email: Claire Stanley