North Sea energy prospects brightening again
They came, they saw, and they learned that the North Sea is in better shape than it has been for many years and is ripe for renewed investment which will reap significant returns. That is the message the majority of this week’s 50,000 visitors to Offshore Europe (OE) in Aberdeen will take away. The biennial event, the second largest energy conference in the world after Houston’s Offshore Technology Conference, provided a welcome reminder to energy sector professionals that Aberdeen is re-emerging after several extremely tough years.
It would be wrong to gloss over the pain experienced by many who lost jobs and careers, estimated at 185,000 since 2015 according to Oil & Gas UK, and the countless businesses directly and indirectly associated with the oil and gas industry which failed as cash flow dried up in tandem with the declining price of crude oil. Paradoxically, the industry needs to attract the young talent who must be recruited and inspired over the next few decades, especially in a new era where big data and digitalisation will play a central role in exploration and production.
My impression from walking the floors at the Aberdeen Exhibition & Conference Centre was one of cautious optimism and a belief that the cost-cutting regimes of recent years, allied to the determined focus on innovation and collaboration, has reshaped a UKCS basin which will be deserving of investment for years to come.
It spoke volumes that industry heavyweights, BP chief executive Bob Dudley and Shell CEO Ben Van Beurden, both participated in the plenary session, each stressing the importance of oil and gas in a lower carbon environment and the relevance of the North Sea to their respective businesses.
Mr Van Beurden set the tone saying the North Sea needs to “earn its right to grow” by competing internationally for investment. If we focus on stripping out unnecessary spending and continue to innovate, “the world will still be relying on the work done here in the North Sea for a long time to come,” he said.
Oil & Gas UK chief executive Deirdre Michie emphasised the UKCS was again being viewed as an attractive basin in which to invest and further M&A activity was expected. Our firm has been at the centre of a large number of oil and gas deals this year, experiencing this uptick in acquisitions, and it underlines Aberdeen’s place as an oil capital with still a great deal to play for.
Decommissioning was a strong theme at OE and with a forecast expenditure in the region of £60bn between now and 2050, we of course should be in the vanguard of securing the bulk of this work. But I would counter that it’s premature to be planning the “wake” when there is such potential to invest and harvest. Twenty billion barrels is a prize worth pursuing and we need to devote as much energy as possible to securing investment to capitalise on all opportunities.
The inability to transfer an asset’s tax history is an issue which deters potential new entrants to the North Sea so it was encouraging to hear Exchequer Secretary to the UK Treasury, Andrew Jones, tell OE delegates the government would further simplify the tax system to encourage investment in late-life assets.
Even more reassuring was his pledge that the government understands the importance of certainty and predictability around the fiscal regime governing oil and gas, and that investors can expect a “competitive and stable environment” when planning future investment.
By taking the best from the past, leveraging the cumulative knowledge of five decades, facing up to the future with a fresh perspective and harnessing young talent, we can manage the North Sea and continue to expand our exports of skills and services. We have a “world class” industry and now is the time to demonstrate that.
It would be wrong to gloss over the pain experienced bym any who lost jobs and careers