If forced to sum up 2023 in one word, we might opt for “uncertainty”.
In the renewables sector major changes in inflation, financing costs and turmoil amongst the supply chain made for an increasingly uncertain climate – and major impacts to some of the industry’s biggest names.
In North Sea oil and gas, the effects of the windfall tax continued to be felt, though the sector did not experience quite the record highs of 2022 as commodity prices receded.
Yet amongst that we have seen bright spots, with several key projects brought online and progress on other major developments – both in the conventional oil space and in new sectors such as carbon capture.
Many will hope that 2024 brings stability – but with a general election looming, will that wish come true?
Rosebank approved
Ending a years-long wait, September saw the approval of Rosebank – the largest untapped oilfield in UK waters and a major climate battleground.
Equinor (OSLO:EQNR) and Ithaca Energy (LON:ITH) confirmed a final investment decision on the 300m barrel field in tandem with a greenlight from government regulators – together setting the stage for around $3.8bn worth of investment over two phases.
The news was a boon to the UK industry and widely seen as a litmus test for future developments in the basin – but legal challenges and protests are unlikely to subside even as work begins this year.
Windfall price floor
In June the government announced its controversial Energy Profits Levy would be removed if oil and gas prices fall to “historically normal levels”.
This would see taxes – currently set at 75% of profits, including the 35% levy – return to a headline 40% should prices fall for a sustained period. For the tax rate to drop, both average oil and gas prices need fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters.
It was a hard-fought victory for the oil and gas sector, but under current forecasts it’s expected the levy will go unchanged until its sunset in March 2028.
Looney’s shock departure
BP (LON:BP) announced in September that former CEO Bernard Looney had resigned after allegations around personal relationships with colleagues and misleading the company’s board.
The announcement shocked the market and the industry, with a subsequent investigation determining he had committed “serious misconduct” in his failure to disclose relationships.
It also leaves further questions over BP’s choice of leadership, with Looney becoming the third of four recent BP CEOs to step down in scandal. It follows Tony Hayward’s departure in 2010 over his handling of the Deepwater Horizon blowout and the exit of John Browne in 2007 after he was found to have lied to a court about a relationship.
For now interim CEO Murray Auchincloss steers the ship, with a formal announcement of a long-term appointment expected around BP’s year-end results in February.
AR5 washout
For many the results of the fifth Contracts for Difference (CfD) round (AR5) had been apparent for some time, but their arrival in September was nonetheless shocking.
Despite success for solar power, onshore wind, tidal and geothermal energy projects, offshore wind – supposedly the UK’s clean energy powerhouse – was entirely absent from the final awards, as developers eschewed the round amid rampant cost inflation.
Widely seen as a wake-up call for government, plans for AR6 saw strike prices uprated and a more optimistic outlook emerging for 2024. But with a 50GW offshore wind target looming, the sector can ill afford a lost year of capacity-building.
Merger plots
Despite the uncertain environment, the scope for M&A has remained relatively healthy in 2023 – including some major transactions that will reshape the landscape in 2024.
The US saw a brace of mega-deals as Exxon laid out a $60bn bid for Pioneer, while Chevron paid $53bn to acquire Hess.
In the North Sea, Italian supermajor Eni (MI:ENI) announced a takeover of Neptune Energy, under which, with Eni-owned Var Energi (OSLO:VAR) simultaneously taking on its Norwegian assets in deals worth nearly $5bn in combination.
Not to be outtdone,North Sea giant Harbour Energy (LON: HBR) closed the year with the announcement of an $11.2bn deal to buy German oil and gas firm Wintershall DEA.
The portfolio covers upstream oil and gas assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt and Libya.
Green shoots at Acorn
In July the Acorn CCS project in Aberdeenshire was officially selected as one of the first four carbon capture clusters in the UK, ending years of wait.
Funding will be awarded as part of “Track 2” of a £1bn competition, after the project lost out to rivals on England’s west and east coasts during the “Track 1” process.
Prime Minister Rishi Sunak later gave the scheme formal backing during a trip to Aberdeenshire as part of the UK Government’s “Energy Week”.
Around 21,000 jobs are expected to be created at peak, say developer Storegga, which is partnered with Shell, Harbour Energy and North Sea Midstream Partners on the carbon capture scheme. However, the consortium is yet to take an FID as negotiations around policy and its support package continue.
HSE lays bare backlogs
In July EV reported that North Sea operators were warned by the Health and Safety Executive over a catalogue of safety failings across more than a dozen platforms, including a “shocking” maintenance backlog.
Data obtained through a freedom of information request yielded a series of 28 inspection letters from the Health and Safety Executive (HSE) to North Sea firms since October 2022, with serious issues flagged across 15 platforms.
Inspectors found individual assets with thousands of hours of “safety-critical” work left outstanding, alongside other issues including uncertified lifejackets, asbestos and legionella risk, concerns over workers fitting into lifeboats, and even a helideck fire extinguisher being held together with tape.
The weight of responsibility
The health of the offshore workforce has been in focus throughout this year, amid data that showed the average weight of offshore workers has increased from 75kg in 1975 to 99kg in 2023.
While myriad factors are responsible, the changes have profound implications ranging from lifeboat capacity and medical stretchers to diet and exercise plans.
That is even more evident by further findings – including HSE data that suggests more than one-third of workers are in excess of the 100kg maximum load design per person for most lifeboats used in the sector – while an estimated 5% are above 125kg.
Industry has indicated it is undertaking a “rigorous approach” to dealing with the complex issues, but further action is a necessity in 2024.