European Economic and Social Committee
CCMI/135
European offshore industry
Brussels, 16 September 2015
OPINION
of the European Economic and Social Committee
on
Prospects for long-term smart, sustainable development of European offshore industry and its
relations with the EU's maritime sectors
(own-initiative opinion)
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Rapporteur: Marian Krzaklewski
Co-rapporteur: José Custódio Leirião
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CCMI/135 – EESC-2015-01459-00-01-AC-TRA (EN) 1/14
Rue Belliard/Belliardstraat 99 — 1040 Bruxelles/Brussel — BELGIQUE/BELGIË
Tel. +32 25469011 — fax +32 25134893 — Internet: http://www.eesc.europa.eu
EN
On 22 January 2015, the European Economic and Social Committee, acting under Rule 29(2) of the
Rules of Procedure, decided to draw up an own-initiative opinion on
Prospects for long-term smart, sustainable development of European offshore
industry and its relations with the EU's maritime sectors.
The Consultative Commission on Industrial Change (CCMI), which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 15 July 2015. The rapporteur was
Marian Krzaklewski and the co-rapporteur was José Custódio Leirião.
At its 510th plenary session, held on 16 and 17 September 2015 (meeting of 16 September), the
European Economic and Social Committee adopted the following opinion by 132 votes to 1 with
3 abstentions.
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1.
Conclusions and recommendations
1.1
The offshore industry comprises the sectors of energy production, and extraction of gas, oil
and minerals from the sea. The EESC believes that some of the most rapidly developing
markets are linked to these sectors, offering potential for long-term, sustainable and smart
growth.
1.2
The EESC is convinced that, in order to ensure the sustainable development of the offshore
industry, a framework is needed for a coherent European strategic vision, providing advanced
technologies and innovative solutions for this industry. Technologies are at the core of such a
strategic framework.
1.3
The Committee believes that there is currently no comprehensive European strategic vision
for offshore industry as a whole or its component sectors. Although the Commission and
Council are gradually expanding the scope of regulation for this industry, particularly for the
offshore oil and gas sector, these actions appear to lack a consistent and comprehensive
vision.
1.4
The EESC feels that the lack of a strategic framework for offshore industry also stems from
insufficient cooperation between offshore industry, EU institutions, Member States and civil
society organisations. The Committee therefore feels that the idea of creating and
implementing a European strategic vision for offshore industry would make it possible to
achieve an effective level of cooperation that would benefit stakeholders, including other
industries (e.g. tourism) that use offshore resources.
CCMI/135 – EESC-2015-01459-00-01-AC-TRA (EN) 2/14
1.5
Regarding previous proposals, the EESC is concerned about the absence of Commission
representatives both at the two study group meetings and at the public hearing in Aberdeen,
held as part of the preparatory work on an own-initiative opinion on European offshore
industry.
1.6
Comprehensive analysis of the relations between offshore industry and the European
maritime industry confirms that offshore industry generates very strong, often green, drivers
for the European maritime industry, particularly for the shipbuilding, repair and equipment
sectors. It could be argued that the European shipbuilding industry has avoided the loss of
critical mass that had until recently been threatening it thanks to demand from offshore
industry.
1.7
The Committee considers that, in the light of the ongoing process of implementing the Safety
of Offshore Oil and Gas Operations Directive, the European Commission, in cooperation with
the Member States, should organise a system of verification and indicate ways of increasing
the financing capacity of economic operators in the sector to cover remedial measures taken
in response to accidents.
1.7.1
A "safety culture" programme should be prepared and implemented and action taken to
promote and support the accreditation of training institutions by offshore industrial firms to
carry out more extensive training in the field of safety and environmental protection. The
EESC notes that achieving a high level of safety in offshore industry also depends on
ensuring good working conditions at sea.
1.8
The EESC proposes that the Commission and the Member States concerned, in cooperation
with the ILO and the social partners, take steps to assess the possibility of extending the
Maritime Labour Convention (MLC) to workers employed in the offshore oil and gas and
offshore wind energy sectors in the EU and the EEA.
1.9
The Committee believes that the Commission and the European sectoral social partners
representing the offshore industry should use the good example of the 2008 Directive
implementing the Agreement concluded by the European Community Shipowners’
Associations (ECSA) and the European Transport Workers’ Federation (ETF) on the
Maritime Labour Convention.
1.10
In view of the forecast shortage of qualified workers and skills in offshore industry in the EU
and the EEA, the EESC considers that this problem should be addressed by ensuring good
working conditions (enforcement of Maritime Labour Convention regulations) and applying
policies for adapting skills and training and encouraging young people to work at sea.
1.11
In connection with offshore industry, the Commission and the Member States should promote
cooperation and public-private partnership (PPP), including: joint ventures, guarantees, and
arrangements for sharing production and concessions. Coordination should cover the legal
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framework, spatial planning, geological surveys and environmental protection in relation to
the question of the sustainable use of energy resources.
1.12
The EESC considers that one of the dimensions of the Europeanisation of the offshore
extractive sector should be the Commission's involvement in a broad programme of
geological surveys using ICT to provide data for more sustainable – current and future –
exploitation of marine resources.
1.13
The EESC believes that the major challenges for offshore industry in the face of global and
European competition and regulatory requirements are:
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1.14
extraction in deep waters, and – in the offshore wind energy sector – the move towards
siting installations at greater distances from shore and in deeper open waters;
procedures for horizontal drilling and hydraulic fracturing in offshore mining in
compliance with environmental requirements;
management of ageing offshore installation infrastructure;
discovery, inventory and exploitation of resources in Arctic areas;
response to the green impetus of the Marpol Convention, the Ballast Water Management
Convention and the Ship Recycling Regulation.
The EESC encourages cooperation networks of offshore industry sectors, coastal regions and
businesses in the supply chain with research centres and universities in the framework of the
Horizon 2020 programme and projects in the area of “smart specialisation”. Within this
cooperation, issues concerning innovation and ecology should have a greater role and use
should be made of the opportunity created by the European Fund for Strategic Investment.
1.14.1 The EESC calls on the Commission to consider making adjustments to the Structural Funds
or the Juncker plan to support investment in innovation in the offshore industry.
1.15
The Committee believes it is necessary to update the Europe 2020 strategy (review) to meet
the EU requirements relating to maritime activities, projects, resources, a skilled workforce,
and financing and promoting sustainable development, bearing in mind the wide range and
variety of the types of work and skills that are necessary in the area of offshore activities.
1.16
The EESC calls on the European Commission to promote a debate on the potential for a
specific strategy for the North Sea covering the challenges for sustainable and competitive
offshore industries in Europe.
2.
Background
2.1
The offshore industry mainly comprises offshore energy production and the gas, oil and
mineral extraction sectors. Taking account of the supply and services chain, the industry is
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linked with the following maritime sectors: shipbuilding, ship repairs, maintenance and
conversion as well as shipping equipment and supplies and offshore industrial installations.
2.2
Linked to offshore sectors, European industry has both specialist expertise and the requisite
human potential to enable it to effectively reap the benefits of participating in markets
associated with all offshore sectors.
2.3
The following were presented in the analysis of the state of the European offshore industry
and assessment of its prospects for long-term and sustainable development:
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the situation of the offshore oil and gas industry in the global context and the challenges
and driving factors;
general characteristics of the offshore wind energy sector in the EU;
relations between the European maritime industry and offshore industry;
analysis of the need for innovation and sustainable development in the context of current
challenges and potential areas for development of the European offshore industry;
the proposal to ensure that there is a social, sustainable development dimension in
employment matters in offshore industry;
the EU regulatory framework for European offshore industry;
the idea of promoting an EU North Sea strategy addressing the challenges facing a
sustainable and competitive offshore industry.
3.
The European offshore oil and gas extraction industry: current situation of the sector
3.1
Petroleum products and gas accounted for 26% of Europe's energy mix in 2012; the largest
contribution came from nuclear energy - representing 29% - and renewables, including
hydroelectric power, at 22%.
3.1.1
The EU is the world's largest energy importer, importing 53% of its energy at an annual cost
of EUR 400 billion. 88% of oil and 66% of gas is imported, mainly from Russia.
3.2
The main problem for the offshore oil and gas sector in Europe is the question of whether the
traditional European offshore oil and gas industry will grow, against a background of
diversification and the challenges arising from the development of renewables and the
efficient management of these changes in the sector.
3.3
The offshore oil and gas industry in Europe is characterised by:
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high operating costs;
high environmental risks and a high level of regulation;
the need to operate at greater depths;
tax risks - low prices leading to high investment risks;
potential problems with cheap products from the USA.
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3.4
Current challenges facing the European offshore oil and gas industry include:
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3.4.1
New challenges for the industry include:
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3.5
the need for seismic surveys in order to update the maps of geological deposits;
lack of harmonisation and sharing of data, which slows down the pace of development;
pressure from producer countries on the discovery of new deposits;
problems with tenders for extraction involving national and international companies;
management
of
the
sector's
lifecycle
in
successive
stages:
1
prospecting/discovery/FEED /production/decomposition.
a reduction in available resources;
the fall in oil prices and competition from new, cheap, related raw materials;
issues related to entrepreneurship and government support for new businesses;
boosting growth through innovation and internationalisation of the industry;
the question of growth driven by the ‘green economy’.
The European offshore oil and gas industry deserves support, because:
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it exhibits the characteristics of a sustainable industry that takes the EU regulatory
framework into account;
it provides, directly or indirectly, almost 600 000 jobs (including Norway);
it is one of the main drivers of the EU maritime industry;
it contributes to positive social transformation in the regions;
it makes a significant contribution to the budgetary revenue of the Member States;
it plays a leading role in innovation and technological progress in engineering;
it is characterised by substantial and growing exports from companies in the supply chain,
which compensates for possible loss of revenue from the production of fuels.
3.6
The results of a SWOT analysis of the offshore oil and gas industry were presented at the
hearing in Aberdeen2; these, together with the proposals put forward during the discussions,
have been set out in Appendix 1.
4.
The offshore energy market in the EU
4.1
There are approximately 2 500 turbines operating in EU seas, with a total capacity of over 8
GW in 11 countries. The EU's share in global production is almost 90%. After the 12 current
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2
FEED - Front-End Engineering Design.
Liam Smyth – Aberdeen & Grampian Chamber of Commerce.
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projects are completed, the installed capacity will rise to 10.9 GW. Wind power currently
provides 7% of the EU's energy, 1/7 of which comes from offshore wind energy.
4.2
Current development and innovation trends in this sector concern: turbines, foundations and
installations at greater depths and greater distances from shore.
4.3
Financial planning is becoming an increasingly important tool in the development of offshore
wind energy. In 2014, this industry took out non-recourse loans of EUR 3.14 billion3, which
is the largest amount received in the history of this industry. Financial partnerships are the
key to success.
4.4
The outlook for the coming years is for a further increase of installed capacity. As for the
more distant future, the European Wind Energy Association (EWEA) estimates that
construction is already authorised for new farms with a total capacity of 26.4 GW and longterm plans refer to an increase of 98 GW.
4.5
According to EWEA data, at the end of 2011, 192 000 people were employed in the wind
energy sector in Europe, of which approximately 30-40 000 were employed in the offshore
wind energy sector.
4.6
Installed ocean energy capacity in the EU is approximately 1.5 GW (one sixth that of offshore
wind energy, but it is predicted to reach 3.6 GW by 2020). Installations using energy from
ocean waves, tides and currents and salinity gradients and conversion of ocean thermal energy
into electricity contribute to this.
5.
Economic relations between the European maritime industry and offshore industry
5.1
In 2014 the global value of contracts for ships was USD 370 billion, of which 170 billion was
for offshore vessels. Global demand for various offshore vessels in 2014-2025 is estimated to
be between 1 230 and 1 970 vessels. Demand for industrial submersibles will increase by
180%, and between 50 and 60% for installation vessels or those serving wind farms or
floating offshore installations.
5.2
Contracts for all types of vessels are predicted to increase by 3.7% by 2025, which, compared
to the much higher forecasts for offshore vessels shows how powerful the offshore industry is
and will be as a driving force for shipbuilding. In Europe in 2014 the share of offshore vessels
in total shipbuilding production was 30%.
5.3
The European maritime equipment industry, which is the world leader in production of
drilling modules, engines, winches, cranes and electronics for the offshore sector, is similarly
closely connected with the offshore industry.
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The European offshore wind industry – key trends and statistics 2014.
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5.4
Offshore energy is a green driving force for maritime industry. Its total global potential is
estimated at over EUR 19 billion in 2012-2022 (approximately EUR 2 billion per year). These
estimates are based on the number of ships and equipment required to build and use the
planned wind farms.
5.5
A new kind of demand for products and services from the European maritime industry is also
appearing in connection with moving operations to greater depths, mainly in the offshore oil
and gas sector and offshore energy.
5.6
Melting in Arctic areas is creating prospects for extraction of raw materials and waterways
(although this is not a particularly "green" driving force). This trend is linked, among other
things, to the anticipated demand for construction of ice-breaking vessels and icestrengthened transport and service ships.
5.7
The relatively new ocean energy sector will also be an increasingly significant green driving
force for the European maritime industry, mainly in sectors associated with SEA Europe.
5.8
The range of products of the shipbuilding sector for the offshore oil and gas industry is linked
to the lifecycle of this industry as follows:
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exploration and identification of deposits creates demand for support vessels,
offshore drilling ships and installations are needed for drilling,
managing the deposits creates the need for specialised construction vessels,
floating installations for extraction and storage are needed when the fields are in use,
when decommissioning fields, vessels are used for installing wind turbines or other
offshore equipment.
5.9
The amount of offshore drilling needs to be increased significantly to ensure future supplies
of oil and gas. This is linked to the significant demand for technically advanced platform
modules and for repair and conversion of different types of installations and offshore drilling
towers. These services are an important source of profit for the EU shipbuilding and repair
sectors.
5.10
A new specialist area in shipbuilding is bringing interesting prospects — ships not only for
transporting floating liquefied natural gas (FLNG) but also providing various services for the
offshore oil and gas industry, including replacing LNG land terminals with mobile ones. This
concerns the FPSO LNG (floating production, storage and offloading of liquefied natural gas
support vessels) and FSRU (floating storage and regasification unit) versions.
5.11
European ports can also take advantage of the driving factors related to the offshore industry.
This applies to handling general cargo and components for offshore wind energy: segments of
towers, generators and rotor blades and other equipment ordered by the offshore industry.
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6.
The need for innovation and sustainable development in the context of current
challenges and potential fields for development of European offshore industries
6.1
European investment in innovation has continued to lag behind its larger competitors (the
USA) in the past decade. This impacts all industrial sectors, including offshore oil and gas.
6.2
One of the main challenges for the oil and gas sector is to ensure the safe exploitation of its
ageing assets. On average 30% of platforms in the world have been in operation for more than
20 years and many of them have exceeded their original planned lifespan.
6.3
The main areas requiring action in the context of ageing assets in the offshore oil and gas
sector are:
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monitoring and understanding of the integrity of materials;
understanding of corrosion under insulation;
the problem of inspection, repair and maintenance issues in the context of the
management of ageing;
recovery of old equipment.
6.4
Growth of the sector depends on innovative technologies to support extraction, making it
possible to "squeeze" as much as possible out of ageing installations and extend the lives of
some production fields.
6.4.1
New technologies also play a key role in deep-sea prospecting and production, which require
billions of euros in investment. The development of new technologies aims to reduce costs
and operational risks and the exploitation of wells in high temperature and pressure
conditions.
6.5
The EESC believes that the Commission should consider making adjustments to the
Structural Funds or the Juncker plan to support investment in innovation in the offshore
industry, mainly in the areas of:
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ageing infrastructure and ensuring continuity of production;
new technologies for "squeezing" production out of older oil and gas fields;
the increasing complexity of production wells.
New areas of development
6.6
Developing shale gas while meeting environmental requirements is becoming an increasingly
attractive prospect for the offshore oil and gas sector too. This is due to significant
improvements in the technology for hydraulic fracturing of underwater rock. Sequestration of
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CO2 at sea could be another green growth factor for the offshore industry in the race to
develop a low-carbon economy.
6.7
Other new development areas are production of multifunctional industrial platforms after pilot
projects (7th Framework Programme) and construction of complete installations and
equipment for obtaining energy from ocean waves and tides.
6.8
The challenge for EU policymakers is to harness the potential of Horizon 2020 to maximise
research and innovation4 within the European offshore industry.
7.
The EU regulatory framework for European offshore industry
7.1
Europe's offshore industry operates against a background of continuously increasing
regulation. The main provisions affecting these industries include:
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EU directives on: emissions (IED), integrated pollution prevention and control (IPPC)
and the limitation of emissions of pollutants into the air from large combustion plants
(LCP Directive);
the Directive on the limitation of emissions of certain pollutants into the air from medium
combustion plants (MCP Directive), which affects the production of oil and gas;
the Emissions Trading System (ETS);
the directive on maritime safety.
7.2
The Directive on safety of offshore oil and gas operations entered into force in 2013 and is to
be incorporated into national legal systems by July 2015; the industry must adapt to new
standards by July 2016.
7.2.1
In order to have a global impact and be able to monitor major accidents in Europe and further
afield, there must be cooperation between the Commission, Member States and specialised
companies in the following areas:
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4
publication of a guide to the impact on risk;
creation of a safety culture in this area;
accreditation of training institutions by mining companies to provide more extensive
training;
drawing-up of a code of best practice;
promotion of partnership between investors and Member States;
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee
and the Committee of the Regions – Innovation in the Blue Economy: realising the potential of our seas and oceans for jobs and
growth, COM(2014) 254 final, OJ C 12, 15.1.2015, p. 93.
CCMI/135 – EESC-2015-01459-00-01-AC-TRA (EN) 10/14
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cooperation between Member States and investors in sensitive strategic areas and in
offshore projects promoting PPPs for sustainable development and to allow the offshore
industry to influence other industries, such as for example tourism and fisheries;
cooperation in protecting critical offshore infrastructure against terrorism and piracy.
7.3
Representatives of the industry currently consider the work on the reference document
(BREF) on the exploration and production of hydrocarbons in the EU using high-volume
hydraulic fracturing to be a delicate regulatory issue.
7.4
Also in the context of the impact of regulation on the development of all sectors of the
offshore industry, compliance is required with the most recent (July 2014) Directive
establishing a framework for maritime spatial planning.
7.5
Communication COM(2008) 699 on raw materials policy, which maps out a path to greater
international cooperation between national geological surveys with the aim of increasing the
EU’s knowledge base, should also have an indirect impact on the offshore extractive industry.
7.6
The following are also no less important regulatory and political issues with an impact on the
entire European offshore industry:
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the impact of the Maritime Labour Convention;
the impact of the MARPOL Convention (SO2 and NO2 limits) and the Ballast Water
Management Convention.
8.
How can the difficulties in ensuring that there is a social, sustainable development
dimension in employment matters in the offshore industry be overcome?
8.1
The great diversity of the European offshore industry and the significant impact of
globalisation on this sector of the economy, as well as the still unresolved problems with
social dumping and achieving a level playing field in this industry, have resulted in a complex
situation with regard to labour issues. This is compounded by problems in the areas of social
dialogue, collective labour relations and social standards.
8.1.1
These issues could be addressed comprehensively on the basis of the 2006 Maritime Labour
Convention (MLC), which is currently entering into force, and the EU Regulation
implementing it.
8.1.2
Unfortunately, opportunities for the broad application of this Convention in the offshore
industry are still limited. This stems both from the lack of precise provisions in the MLC
relating to offshore workers and the attitude of governments, operators and owners. This
situation is further compounded by the existing problems in the EU with the registers of
vessels and floating industrial equipment.
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8.2
The EESC believes that the Commission and the European sectoral social partners
representing the offshore industry should use the 2008 Directive implementing the Agreement
concluded by the ECSA and the ETF on the Maritime Labour Convention, which is a good
template.
8.2.1
The collective agreement of the International Transport Workers’ Federation (ITF) could be a
model solution for the offshore industry. Currently, its implementation is hampered by a lack
of willingness on the part of national authorities, the situation regarding the registers of
vessels, the unsatisfactory state of social dialogue and the high rate of participation in the
labour market of people employed on "junk" contracts and the false self-employed.
9.
European Strategy for The North Sea
9.1
The oil and gas industry has been 50 years in the making with estimates of another 50 years to
go and it is facing a significantly changing energy environment as follows:
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an increased share of energy generated from renewables,
an increased share of energy generated locally and from a mix of locally based sources,
challenges in the ability of the current transmission system to balance supply with
demand,
EU 2030 Carbon Goals.
The question is: is the traditional O&G sector up to the major challenge of diversifying into
the renewables sector and of managing such a change?
9.2
The North Sea Commission is intended to work with the House of Lords to involve the UK
Government in promoting an integrated approach to maritime spatial planning in the North
Sea Basin and to developing a communication document and strategy to identify the benefits
to the public of a North Sea energy grid.
9.3
The EESC calls on the European Commission to promote a debate on the potential for a
specific strategy for the North Sea covering the challenges for sustainable and competitive
offshore industries in Europe, involving:
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product and design
society
production
legislation
financing.
CCMI/135 – EESC-2015-01459-00-01-AC-TRA (EN) 12/14
Brussels, 16 September 2015
The President
of the
European Economic and Social Committee
Henri Malosse
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N.B.: Appendix overleaf.
CCMI/135 – EESC-2015-01459-00-01-AC-TRA (EN) 13/14
Appendix 1
Results of the SWOT analysis of the European offshore oil and gas industry
S – Strengths
W – Weaknesses
 Experience gained in difficult operating
 High production costs
conditions and in deep waters
 Production is less efficient than expected
 Globally acknowledged know-how
 Uncertain tax position
 Highly qualified and experienced workers
 Ageing infrastructure
 The clustered nature of the industry
 Poor cooperation
O – Opportunities
T – Threats
 Discovery of new mining areas with lower
 Fall in global oil prices
operating and development costs
 Job cuts in the sector in response to the sharp
 Export of products, equipment and knowledge
drop in oil prices in late 2014/early 2015
to new markets
 Large-scale retirements of skilled workers
 Cooperation in the areas of: common
within the next 10 years
design/standardisation, use of infrastructure
 Falling prices following the growth in
and knowledge exchange
extraction from tar sands and shale in the
USA
 "Reaching an agreement" on a sensible and
realistic adjustment of remuneration levels
 Slowdown in economic growth in Asia
 Making use of the EU's reindustrialisation
 OPEC approach to production limits
programme
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