GE taps into Scottish expertise in subsea oil and gas equipment

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When the head of General Electric’s subsea oil and gas equipment unit visited the small northeast Scottish town of Montrose recently to celebrate the completion of a $16m expansion of the US conglomerate’s local factory, he did not arrive empty-handed.

Rod Christie, chief executive of GE Subsea Systems, told assembled workers and dignitaries including Scotland’s cabinet secretary for finance that the near doubling of the Brent Avenue plant’s capacity was not enough to meet demand for new kit from oil and gas companies.

“Just yesterday we agreed that . . . we are going to put another $15m into continuing to expand the machining capability and finishing capability for this facility,” Mr Christie announced.

GE’s good news for Montrose highlights a global boom in the equipment used to extract offshore oil and gas, a bonanza that brings particular opportunities to the Scottish businesses that grew up with the development of North Sea fields.

New technologies are allowing energy companies around the world to tap undersea reserves that would previously have been too difficult to exploit, creating strong demand for more sophisticated and robust versions of products such as the subsea “Christmas trees” produced by GE in Montrose.

The trees – so called because of the resemblance that earlier models owed to decorated festive pines – control the flow of oil or gas out of a well, making them a vital link in the equipment chain that bring hydrocarbons to market.

Quest Offshore Resources, a consultancy, forecasts that spending on subsea trees alone will hit a record $4.7bn this year, more than double the amount in 2005, with sales growing another 29 per cent by the end of 2017.

Quest says GE Oil & Gas had orders for 126 subsea trees in 2012, while rival FMC Technologies had orders for 159 and Cameron had 83.

This month, FMC announced a $500m order from Petrobras of Brazil to supply 49 subsea trees and associated tooling and controls.

Mr Christie of GE Subsea says energy companies’ overall capital expenditure on subsea technologies is on course to total about $64bn in 2012-15, roughly double the amount budgeted in 2008-11.

“If you look long-term, and you look at the oil and gas production projection, then this business between today and 2030 should grow on average [annual] 30 per cent,” he says.

To meet demand, GE Subsea expects to add up to 1,500 jobs to its 6,300-strong global payroll over the next 18 months or so.

With its expansion, the Montrose plant now has new machines and 25-tonne overhead cranes that allow the manufacture of larger subsea trees, needed for some of the most challenging wells.

These can be located up to 3,000 metres under the surface of the sea and subject to temperatures of over 176 degrees Celsius, pressures equivalent to 1,000 times the atmosphere at sea level, and the highly corrosive fluids and gases that emerge alongside the oil.

Mr Christie says GE considered trying to use other group facilities around the world to help ease a backlog of orders for subsea trees, but found none offered the extraordinarily precise machining required. The size deviation allowed in some valves made at Montrose is just zero to plus two millionths of a metre.

“We are working to metal-to-metal tolerances that are tighter than any other requirement of any other machine shop in the organisation – including gas turbines, aero-engines, nuclear and medical,” Mr Christie says.

GE’s Montrose expansion offers support for Scotland’s hopes that oil-related services and manufacturing nurtured during the North Sea oil boom can prosper as the offshore oil sector globalises.

Mr Christie warns that Scotland will have to work hard for future success, as demand shifts to nations such as Brazil, Angola and Australia. And Norway’s stronger push for operators to use new technology to eke more energy from ageing fields means Scotland has already lost some of its lead in higher-end technologies, he says.

Yet, the future still looks bright for the Montrose plant. Even the newly announced investment will leave plenty of room for future investment, Mr Christie told this month’s unveiling ceremony. “We still have another three and a half acres to the north of us to go,” he said.

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