Reflecting on offshore’s past, present and future
The Offshore Technology Conference (OTC) in Houston is the world’s largest gathering of energy industry professionals and next week’s theme is “Celebrating 50 Years”. As always, many of the delegates will be from Aberdeen or have strong connections to the UK Continental Shelf (UKCS), which next year also celebrates a golden milestone, the discovery of the Arbroath Field, the North Sea’s first commercial oil field.
The OTC remains a vital platform for the exchange of ideas and opinions and to advance scientific and technological knowledge for offshore resources, with more than 70,000 delegates, industry leaders, investors, buyers and entrepreneurs taking the opportunity to forge business partnerships and develop new markets.
Many will be cognisant, and perhaps a little nervous, of the disrupted world in which we operate in terms of the geopolitical complexities around the globe. Increased tensions in the Middle East, changing relationships with Russia, ongoing climate change challenges and ensuring security of energy supply, are just a few of the factors that oil and gas operators and the supply chain will be debating as OTC gets into full swing.
Those same issues, aligned to Opec intervention, have undoubtedly played a part in the oil price recovery, which following a six-day streak saw the price of Brent crude oil climb as high as $75 a barrel, the highest level in more than two years. It is hoped a continued upswing will bring relief to the supply chain in improved margins and it could also create a better environment for investing in new technologies.
However, at Pinsent Masons, we have consistently stated that the oil industry will benefit more from a steady and stable commodity price than a fluctuating one. While an oil price beginning with a seven appears to be good news, I can recall not too long ago that it began with a two, and that sort of volatility makes long-term strategic planning challenging. A heightened oil price also affects merger and acquisition activity, raising the possibility that assets will not change hands so readily because pricing becomes an issue.
At OTC, delegates are sure to be struck by the remarkable surge in activity in the US onshore oil industry which has transformed international energy markets and now has a significant impact on the global economy. If conference stalwarts cast their minds back ten years or so, they would find it difficult to imagine that the US is now exporting record levels of hydrocarbons and is to become a net exporter of oil and gas by 2022. On our side of the pond, only the bravest of crystal ball gazers would predict how our own shale gas industry will evolve over the next half century.
The offshore sector, and in particular, the Gulf of Mexico, continues to face challenging times, illustrated by the drastic reduction in offshore utilisation rig rates. The Trump administration has pledged to open up almost all US coastal waters to offshore drilling but overwhelming bipartisan opposition – against a background of a reduction of health and safety regulation – begs the question of whether the “Master of the Deal” holds a winning hand that will regenerate a traumatised offshore sector.
Those UK companies visiting OTC will recognise the need for access to a strong export market and be constantly looking for global opportunities – now it is more clearly understood that a presence in global markets is not an option but an imperative. As part of a fivestrong Pinsent Masons team, who have been visiting OTC for more than 20 years, we look forward to supporting a global client base of operating companies, supply chain service specialists, entrepreneurs and the new wave of technology start-ups, as they make the case for growing their businesses in the new energy landscape, and maximise opportunities for exporting the skills and technologies for which the UK in particular is renowned. Bob Ruddiman is partner and head of oil & gas at law firm Pinsent Masons
The oil industry will benefit more from a steady oil price than a fluctuating one