In late 2022, I attended the World Energy Capital Assembly in London, where leading energy executives, financiers and investors gather to look at the future of the oil and gas industry. Coming at the tail end of a year largely characterised by doom and gloom – war, and political and economic uncertainty – it offered a chance to gauge the mood of the sector.
For an industry facing a host of challenges there was a lot to discuss, but one theme that emerged was just how unfriendly the UK is considered to be for exploration and production (E&P) at this time. It’s an event where dealmakers get together, and it’s fair to say that the mergers and acquisitions (M&A) folks were not feeling much love. The changes to the UK’s tax regime have affected E&P companies to varying degrees, some much more than others, but it’s hard to ignore the flight of capital from the UK Continental Shelf.
Some of the US contingent noted the approach to our industry was anathema to their thinking. If you effectively stop development capital, it’s not good for a long-term industry which we must accept has a part to play in the world tackling a long term climate challenge. That’s the reality, and the feeling was that it shouldn’t be hostage to the ebb and flow of politics.
© Supplied by Addleshaw GoddardFortunately, there was a flip side. There is a lot to be positive about and the industry has the expertise and the people to keep and create jobs in the UK. For example, we are making huge strides in areas such as clean tech, which offers the chance to massively reduce our carbon footprint in the short and medium term, and far more accurate analysis of emissions. This accurate benchmarking can give us something that everyone can trust, investors included, and can be improved upon to lower the carbon footprint of the sector.
Perhaps one of the industry’s main tasks in 2023 is to better share the story of its positive contribution to our way of life. It is an industry that has so much value, not just in monetary terms, yet I don’t think there has been a clear voice for that story. Some leading figures who have tried to engage have found themselves shouted down by those not willing to listen to anything it has to say, but that shouldn’t prevent it from trying.
The industry, and government, can do so much better when it comes to making sure that the wider public understands where their energy comes from, the benefits of continued investment into the North Sea as part of our net zero commitments and the cost of failing to do so. While the energy transition continues, failing to invest responsibly in domestic oil and gas will result in higher-carbon intensity resources being imported from elsewhere. Continued domestic production is not incompatible with net-zero. We really need to be having an honest public conversation about that.
We are seeing more and more projects which show how the industry is transitioning; projects combining elements including carbon capture, technology and power generation. There is a convergence of those involved in power generation with the wider supply chain – this is an industry moving forward sustainably at pace and we need to tell that story and raise awareness of everything that is going on.
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