A life raft sails down the Tyne

David Bowen visits a revitalised industry in the North-east

The south bank of the Tyne at Gateshead is lined with reminders of our age: housing estates and light industrial units that cluster on the neatly landscaped graves of the old shipyards. Head east to Hebburn, though, and you may get a surprise. A large red ship rests in a dry dock, the flashing of welding arcs and the swinging of cranes providing evidence of buzzing activity.

Across the river at Wallsend are more surprises. Workers crawl over a huge blue vessel, the Solitaire, moored alongside the Swan Hunter shipyard. Next door at the AMEC yard half a dozen top structures for oil platforms - looking like misplaced Pompidou Centres - are at various stages of construction. This is traditional Tyneside and it seems alive enough.

George Mavin, regional marketing director of AMEC Process and Energy, confirms the impression. "Tyneside is incredibly vibrant at the moment," he says.

Only three years ago the doomsters were predicting that the North-east's heavy marine industry was about to disappear down the slipway. The AMEC facility, which had grown mighty building fixed oil platforms, was coming to the end of a big contract and the days of the mega-structures were numbered. The celebrated Swan Hunter was building its last warships and was in the hands of receivers. The ship repairer A&P, once Austin and Pickersgill, had run up losses of pounds 6m in 1992 and 1993, and had just cleared out its top management.

There was some talk of a new type of oil production vessel - a ship/platform hybrid known as an FPSO (Floating, Production, Storage and Offtake) - but the Spaniards seemed to have hoovered up that business. "There were gloomy predictions," says Alastair Rodgers, director of the Northern Offshore Federation.

As ever when times are tough, the nomadic tribe of skilled Geordies headed off to their diaspora: the South, the Continent, offshore to the rigs. Then, suddenly, things started to go right. Two weeks before the contents of the Swan Hunter yard were due to be auctioned in June 1995, a wily Dutchman called Jaap Kroese offered to buy it, selling the yard he owned at Hartlepool at the same time. Six months later Swan Hunter won a contract to decommission four oil platforms; and in January last year, it landed Solitaire.

Solitaire, a bulk carrier, was being converted into the world's biggest and most advanced pipe-laying ship in Singapore. But the owners had decided the Singaporeans could not finish it, and Swan's won the job against worldwide competition. As a result the yard, which started 1996 with 40 people, ended it with 2,700 and a turnover of pounds 65m.

A&P's revival started with the Stena Challenger, a car ferry that had run aground in the Channel. A&P repaired it fast, and has been busy ever since. AMEC meanwhile picked up a juicy fixed platform contract by looking outside UK waters: its Pompidou Centres make up the top of Phillips' Ekofisk platform in the Norwegian sector of the North Sea. Recently, with Heerema of Hartlepool, it won a contract to build the Shearwater platform for a Shell and Elf gas field - one of the last big fixed installations in UK waters.

Most important, local firms have managed to get their act together on FPSOs which have production rigs in the middle and are increasingly used to extract oil from fields that do not justify a full-scale platform. The big red ship in the yard at Hebburn is the Maersk Curlew, formerly the Maersk Dorset, a 100,000-tonne tanker that is being converted into an FPSO for Shell's Curlew field.

A&P has kept 800 people busy for six months on the job. The ship is now being towed across the river to AMEC, where it will be fitted with the processing equipment.

The Tyne, and the Tees down the coast, are cashing in on their ability to bring ship conversion and offshore skills together - but both industries acknowledge that they were slow off the mark. "It took a while to get ourselves correctly positioned," Mr Mavin says. Nevertheless, half a dozen FPSOs have been completed and Tyne-Tees can now claim to be the European centre for this sort of work. "We are building the same reputation as we have in platforms," says Mr Rodgers.

This is just the beginning. Barry Johnson, managing director of A&P Tyne, says three FPSO tenders are in the offing and this could reach double figures by the end of the year. If companies can work together to juggle facilities, he says, it should be possible to convert three vessels simultaneously. The imminent arrival on Tyneside of Wellstream (the US-owned world leader in the piping that connects FPSOs to the seabed) will boost the region's reputation as a "one stop shop".

The cheapness of the North-east is one of the reasons it is winning so much FPSO work. Labour costs 50 per cent more in Spain than on Tyneside, and even Singapore is more expensive. China and Croatia can offer cheaper labour but these do not have the skills FPSOs require.

Skills are both a strength and a concern. The North-east still has a huge pool of highly-trained workers who have been through traditional shipbuilding apprenticeships and are therefore well-versed in the old skills that are useful in conversion work. "Some of the skills may be out of date but they are what are needed," Mr Johnson says. For example "lofting" - building a full scale replica for design purposes - would never be used for a new vessel but could be the best way to solve a complex conversion problem.

The flexibility of the local workforce is another strength. In the 1960s and 70s, when there was plenty of work building tankers, it was difficult to find anyone who would take a permanent job because they might find a better one next door. That flexibility paid off when times got tough. While some skilled workers became minicab drivers, most headed out of town - but at the slightest flicker of local work they flood back.

"When we announced we had a contract, we were inundated with calls from wives saying: 'Can I bring my husband back from Germany or the south coast?'," Mr Johnson says. As a result A&P managed to increase its workforce from 230 to 1,500 in one month in 1995.

However, this pool will gradually drain. "The average age of skilled workers here is 47," says Jan Vonder, project manager at Swan Hunter. "There will definitely be a serious shortage of skilled tradesmen." This is not a universal view - Mr Rodgers is more relaxed and points to the efforts to make up the shortfall - but there is cause for concern.

The problem is that the shipbuilders stopped training in the 1970s when their business evaporated, and the offshore industry failed to pick up the baton. "It has never trained as much as it should because the project nature of its work stops it taking a long-term view," Mr Rodgers says. No one yet knows whether the 16 training enterprises set up in the past few years will be sufficient to close the gap: the more successful local industry is at winning orders, though, the more likely there will be a shortfall.

You will not find many Geordies enthusing about the local economy. The area has some of the UK's highest unemployment, and the uncertainty of marine projects means long-term forecasting is unwise. In any case, Geordies are not much given to enthusing. But we can say that, for the moment at least, things look good. If the optimists are right about training, it is conceivable that the last neat housing estate has been built on the banks of the industrial Tyne.