Orkney Islands Council
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OIC Marine Services Report Shows Business is Brisk

OIC Marine Services Report Shows Business is Brisk
15 November 2018

The Council’s Marine Services team has released their Annual Report for 2017/18 – and it shows that Harbours activity and income is in very good shape.

The report was presented to Councillors at a recent Harbour Authority Sub-Committee and gives an overview of service operations and income.

Income generated by harbour activity is essential to cover the full costs of running the Service’s activities and the supporting harbour infrastructure and vessels and is split across two accounts - one for activity related directly to the Scapa Flow Oil port, ando ne for all other activity – an account known as ‘Miscellaneous Piers and Harbours’.

Any surplus from running costs, repairs and maintenance and future investment such as tug replacements raised through the Scapa Flow Oil Port activities – for example cargo uplift from Flotta, Ship to Ship transfers and offshore platform moorings in Scapa Flow - is transferred into the Strategic Reserve Fund.

Money raised through ‘Miscellaneous Piers and Harbours’ – for example freighters, ferries, cruise ship calls fishing and yachting – has to, by law, be transferred to a specific Repairs and Maintenance Budget to help pay for the upkeep of Orkney’s 29 council-owned piers and harbours.

The majority of Orkney’s harbours, whilst providing lifeline links to the county’s island-based communities, do not generate sufficient income to cover the costs of maintaining and operating them individually.

The cross funding of the full pier estate through increasing activity at certain ports is therefore essential to maintaining these lifeline assets without having to impact on other council budget areas.

As such, the harbours are self-financing and Orkney is in a fortunate position that its piers and harbours are a benefit rather than a burden to the broader Council budget.

The report shows that in 2017/18 just over £4m came from the Scapa Flow Oil Port back into the Strategic Reserve Fund, whilst £80k was passed into the Repairs and Maintenance budget.

The annual performance report highlights that the success of the Scapa Flow Oil Port income is in part due to 33 ship-to-ship transfer operations taking place in the Flow in 17/18, against a target of 12. This generated £1.27m, compared to a projected income of £420,000 – an increase of 123% from the previous year.

Cruise liner traffic brought in £1.96m, an increase of 21.4% on the previous year. The vast majority of this has been spent on essential running costs for the piers and harbours infrastructure, for example the accelerated low water corrosion protection works for all our piers.

The 2019 season looks to be even more successful, with 170 port calls planned compared to 140 booked for this year.

The 2019 season will also see considerable growth in the smaller explorer ship market with 71 vessels having under 500 passengers (54 in 2018) and less ships carrying over 3000 passengers (down from 8 to 4).  The benefits of this change could be widespread across Orkney with smaller explorer vessels tending to favour an itinerary which is ‘off the beaten track’ and a willingness to explore options in the north and south isles of Orkney such as Sanday, Westray and Hoy.  As a consequence of this, the economic benefit of cruise ship spend reaches a wider spectrum of tourism providers.

Overall, across both accounts, revenue has increased with the Miscellaneous Piers and Harbours Account demonstrating an increase of £380,000 and Scapa Flow Oil Port showing an overall revenue increase of £453,000.

Marine Services also continues to explore business opportunities for providing anchorage for offshore accommodation platforms. While this gives a modest income to the Harbour Authority they provide considerable and sustainable benefit to the local supply chain with over £2m being spent in the local economy over the reporting period.

Gavin Barr is Executive Director of Development and Infrastructure Services. He said: “The challenge in this reporting period was, once again, to maintain, if not increase, the gross revenues on both the Miscellaneous Piers and Harbours and Scapa Flow Oil Port accounts and this has been soundly achieved.

“I am extremely proud and grateful to the Harbour Master and his team for the comprehensive services which are provided 24 hours a day, 365 days a year to keep our lifeline ports open, and to generate substantial new marine activity which not only ensures that we cover costs and provide a return to the council reserves, but also contribute to creating new opportunities and benefits for private business across the Orkney supply chain.

“We are mindful that, although oil related activity in the Scapa Flow Oil Port has shown strong growth performance with regards to STS operations and offshore platform moorings, the bedrock of traditional Flotta operations is expected to potentially decline slowly over the next decade or so. The diversification into STS, deep-water mooring and a range of other possible opportunities such as LNG bunkering and supply has to remain an essential area of our business development.”

Councillor Graham Sinclair is Chair of the Council’s Development and Infrastructure Committee.  He said: “The figures presented in the annual report are a strong reflection of the benefits that can be reaped by making the most of all the business opportunities that are available through harbour operations in Orkney – market conditions and strong marketing and business development functions have come together to make this possible.

“I’d also pay tribute to our hardworking harbours staff, who’s strong record of safe and successful operations has cemented Orkney’s reputation as a force to be reckoned with in highly competitive international marine services circles. This is exemplified right across the team – from harbour operations staff who respond, often at just an hour’s notice, for STS services - to the Environmental unit who are often asked to report internationally on their work.

“The current surplus levels indicate that the Harbour Authority will continue to be in a financial position to contribute substantially to the reserves -  but it is vital that we also use our funds to develop and maintain our harbours infrastructure to ensure that operations remain safe, that lifeline services and the more remote piers are not forgotten and to diversify activity to ensure that the harbour continues to be a major driver for Orkney.”

The Harbours Authority Annual Performance Report is available on the Orkney Islands Council website.