The Press and Journal (Inverness, Highlands, and Islands)
Net-zero and transition seen as sector deal keys
Neil Sims is encouraged by the “horsepower” behind the new sector deal application.
Sims, who is on the boards of Oil and Gas UK (OGUK) and the Oil and Gas Technology Centre (OGTC), said the submission would be “all about” net-zero and the energy transition.
The application will lay out a “roadmap of potential” developments that industry and government could co-fund, such as carbon capture and hydrogen.
It will also show supply chain companies which parts of the transition they can “start pinning their hats on and investing in”.
Sims, product line vice-president at oilfield service firm Expro, said: “Companies are already looking at that, but they’re dancing in the dark at the moment. Once we get this over the line we will have more light.
“It’s never going to be perfect or all things to all people, but it will give more light to a subject which to a lot of people seems quite dark – they can’t get their hands on it or their heads around it.”
The industry previously submitted an application for a sector deal – a par tnership be tween the UK Government and industr y which aims to boost productivity, employment, innovation and skills – in 2018.
It estimated that total spend of £ 176 million would have the “potential” to deliver £110 billion for the UK economy by 2035.
That application didn’t lead to a formal sector deal, though the industry’s wish list was partly fulfilled through, for example, the creation of the National Decommissioning Centre in Newburgh, near Aberdeen.
In June this year an “outline” of revised proposals was presented to UK Energy Minister Kwasi Kwarteng, who said he would work “tirelessly” to deliver a deal for the industry, as pledged in the Conservative Party’s 2019 election manifesto.
Government has made it clear to the oil and gas industry that the proposals would need to have decarbonisation at their core.
Sims said this demand would be fulfilled, and then some, and that the value of the oil and gas sector to the UK economy would also come across.
He said: “The UK oil and gas industry is the first to really sign up to and get after the net- zero challenge, and that’s testament to people like Deirdre Michie and Mike Tholen at OGUK and Colette Cohen at the OGTC.
“Once it’s in the public domain it will be impressive because no other basin will have done that.”
Sims did acknowledge that many oil sector companies with footprints in the UK had already made big moves to diversify into renewables.
“They’re not all sitting around waiting for a sector deal, they’re getting on with it,” he said.
Sims also feels there is plenty the UK can learn from other oil and gas provinces, and vice-versa.
He always knew that to be the case but his new role at Expro, which is global in scope, has proven to be “enlightening” all the same.
He spoke with enthusiasm about a project Expro worked on to monetise flared gas at a facility in Algeria and said firms in the US were investing far more in green technologies than most people realised.
But Sims said sustainability wasn’t just about the environment – people and profits come into the equation.
“Those three things are comfortable bedfellows which often get mixed up,” Sims said.
“When people hear the word ‘ sustainable’ they think of the environment, but if you only concentrate on that your business will fail so you need all three.”
That said, the energy transition is now “front and centre” of industry’s thinking, which wasn’t the case a few years ago when conversations on the subject were in their infancy.
Sims said Greta Thunberg’s movement had helped accelerate industry’s pivot towards net- zero, as had decisions by certain funds to stop investing in companies with no environmental, social and corporate governance policy.
Covid-19 has also “changed the dynamic” by showing businesses what can be achieved without flights around the globe and daily commutes to the office.
“I’ve sat in rooms and have been flabbergasted by people’s naivety and lack of willingness to change, but now I’m surprised at how much that has changed,” he said.
“We are at a turning point for this industry. I’ve been working in it for 30 years and this time it really does feel different.
“It’s fascinating to see how those around us are reacting. The good, the bad and the ugly, they will be changed for the good, but that does mean there’s going to be some pain to come.”
The pandemic has certainly caused a lot of pain. Working from home has increased some employees’ productivity, but also created real challenges for single parents and people caring for the elderly and those in shielding.
“The idea that people are being workshy and walking dogs and playing with kids during work is not what’s going on,” Sims said.
Those out in the field have been making real sacrifices, too. Sims spoke to workers in North Africa who haven’t been able to crew change for 150 days, while others have been stuck in the Saudi desert for months on end.
The virus outbreak also led to a slump in demand which, combined with Saudi Arabia and Russia falling out in March, caused a crude price rout and a collapse in activity levels.
Sims said Expro was less exposed than some of its competitors as a large part of its offering is designed to help customers maintain existing production while keeping operating expenditure in check.
It has products that help companies save money and shrink carbon footprints by making well intervention possible without the use of a rig.
Expro also timed its chapter 11 bankruptcy “immaculately” and, according to quotes attributed to chief executive Mike Jardon and chief financial officer Quinn Fanning in May, has money in the bank and no debt.
Sims said: “That’s not to say we are sitting here thinking things are rosy. The main thing for any business is to earn enough to pay the bills and we’re putting a lot of time into that.
“Constantly focusing on that takes a lot out of people, but that’s the world we live in. It’s the new normal.
“We’re in good shape compared to many other companies, but we should not be complacent and we’re not.”
Expro, headquartered in Reading and with regional bases in Aberdeen, Dubai, Houston and Kuala Lumpur, has not been able to avoid job cuts, but Sims said the company had done its best to minimise the reductions.
“We pride ourselves on doing the right thing. That sounds awful, but to protect the business we have to right-size it,” he said. “We do try to hold off as long as possible and don’t go straight to redundancies.
“In one part of the business we needed to reduce our costs by a certain number and got 75% of the way there without touching a single head.
“That meant we had to curtail all sorts of things, whether those were management salaries, expenses, leases, rental and travel.
“We go for that first, always. We do what we need to do and see how it goes, then if we need to do more, we do more, so it’s softly-softly.
“We try to do the right things. We won’t always get it right and some individuals may feel we did them a disservice, but that would never be our intention.”
People close to Sims were recently made redundant, which he described as an “eye opener” in terms of how their mental health suffered.
“It feels like a grieving process; for some it’s like the death of their hopes and aspirations,” said Sims, who went through the mill of redundancy in the 1980s.
The latest downcycle has also resulted in further pressure being placed on the supply chain to cut costs, even though there is little fat left to trim.
Sims said: “We’ve seen price pressure coming from everywhere, but what’s different this time is we’ve had reasonably good conversations with most operators around our challenges.
“There are exceptions and a couple are in the UK. It’s the usual suspects who for whatever reason apply draconian measures.”
Expro is still in a position to invest in the research and development of “extraordinary” technologies and will carry on doing that, though some projects have been deferred.
He said Expro was always hungry for partnerships and that he had seen some “really cool things out there”, including among the latest cohort of TechX pioneers at the OGTC, which is focusing more on the energy transition and net zero than before.