Welcome to UKSO? Did you buy this from Nottinghamshire on Saturday? Pretty sure I saw you following a silver bug eye impreza on Ilkeston bypass near the shell garage?
Yeah if they weren't needed then turbo companies wouldn't put them there, a lot of non Performance turbos are only oil cooled. Most Performance stuff is water cooled as it's recommended to run the water lines. So I personally would run them.
Ah no worries then was going to say that my old Zisco kit and turbo went to string and that might be why the turbo made good power ;) but it's not so ignore me! Also I hated my yellow stuffs!
Does look like the turbo has gone to me mate, shouldn't be that much oil around that part, unless it's from a oil leak that's blowing it onto the turbo.