As so many have commented, 2022 continues a trend of unforeseen circumstances for us all, both personally and professionally. Whilst the global pandemic appears to be thankfully on the wane, its ramifications are still felt on many levels and none of us can fail to have been affected in some way by the ongoing crisis in Ukraine.
As the saying goes, “no man is an island” and at the time of writing, the offshore energy industry - which is always susceptible to external forces - is operating under the unusual double hit of a significant materials and personnel shortage at a time when the need for both is becoming unprecedently high.
Let’s take a chronological look at how this situation came about…
Unsurprisingly, the on-set of COVID-19 threw most offshore IRM campaigns into disarray. Considerable effort went into “keeping the lights on”, so to speak, with day-to-day operations a priority when logistics and HSE were playing a whole new ballgame due to restrictions. We might have expected maintenance activity to come back online during 2021, but on the whole that did not happen. Buoyant oil prices mean that continued production and shareholders’ results were top of the agenda.
However, over the past few months, we now find that there has been somewhat of a rush from the operators, looking to re-ignite their IRM campaigns. This landslide of activity would be hard to service at the best of times, but following that long-term drop in activity, the required workforce volume simply isn’t there.
That’s a fundamental issue. And when demand outstrips supply, what happens? Costs rise. By that I mean the cost of materials, the cost of manufacturing, the cost of workshop time and… the cost of personnel.
This is not a first for the offshore energy sector, but cycles like this are damaging to our ability to maintain a sustainable supply chain throughout the energy transition. My concern is that too many bright, capable individuals are leaving the oil and gas industry in search of the stability – or relative stability – of other industries, renewable energy included. This puts the price of the remaining workforce at an unsustainable high and perhaps this time around, the workforce won’t come back to steady that price, as it has already moved on.
So that’s the first issue – a supply chain which may find it increasingly hard to survive the hard times and capitalise on the busy times. And whilst “capitalise” is never a word we’d want to use in the context of war, we do find ourselves in a situation right now where the demand for Norwegian gas is greater than ever. As a country which exports almost 100% of the gas it produces, Norway is in a unique situation when it comes to plugging the European gas shortfall created by the conflict in the Ukraine.
In other words, we need to focus on maintaining – and indeed increasing – our supply of gas to the rest of Europe. We need more people to do so, we need to purchase the materials and manufacturing equipment which is currently at an all-time high price and whilst gas prices are also peaking right now – that’s not filtering down to the supply chain…yet.
And in the meantime, planned production shutdowns (to allow IRM campaigns to proceed) are starting to be offset in order to maintain that vital flow of gas flowing.
Do you see a vicious circle emerging here…?