A boss at Baker Hughes is looking with “slight optimism” towards late-2021, early-2022 and the prospect of a pick-up in North Sea activity.
Romain Chambault, European vice president for oilfield equipment, said several stars appeared to be aligning to drive exploration and development work.
Chambault said oil and gas prices had improved, but needed to remain steady to give customers confidence to invest.
He also said the North Sea Transition deal meant industry chiefs now know where they stand, though the finer details still have to be worked out.
The decision not to ban future exploration licensing rounds came as a relief to the sector. However, the withdrawal of funding for UK exporters of products and services for international fossil fuels projects was probably the “one downside” to March’s big announcements from Westminster.
The buying and selling which generated a wave of M&A activity in the first quarter is a good omen for the supply chain.
These transactions should be settled by mid-year or year-end, at which point the new owners will be looking to invest in their recently acquired oil and gas fields.
“If all those things align, we are seeing some activity pick-up towards the end of this year and into 2022,” Chambault said.
This would be a welcome boost for Baker Hughes and the supply chain, given how “tough” 2020 turned out to be, while 2021 is “still not easy”.
© SYSTEMChambault said the company was committed to the north-east and to supporting its traditional oil and gas clients as much as possible.
“We have made big investments in the UK in the last 10-15 years,” he said.
“Here, we have north of 4,000 people and are by far the biggest tier one equipment manufacturer and service provider. And we intend to stay here.”
Equally, the business is committed to cutting its emissions in half by 2030 and reaching net-zero by mid-century, meaning it is in sync with the UK Government’s climate goals.
Chambault said the North Sea Transition Deal, agreed between government and industry, would have a positive impact for suppliers that still want to support oil and gas activity while transitioning.
He said: “The deal is pushing activity in the energy transition, which we’re fully aligned with.
“It supports the oil and gas industry and makes sure we go the right way without rushing through things.
“The financial models and details around these pledges are still to be defined and the UK Government is working through them at the moment.
“I would not say there is complete clarity yet, but there is intent, which is good.
“This is a long term game, not a two year stint. It’s about the next 10-20 years.”
The deal anticipates that industry will invest billions in carbon capture, platform electrification and hydrogen.
For its part, the government will provide commercial and regulatory frameworks aimed at making these investments more attractive to companies.
Most of the work on these action points lies ahead of the policymakers.
Chambault admitted he was “not a huge fan” of the withdrawal of UK Export Finance support for the fossil fuel energy sector overseas.
But he understands why the UK Government has taken the decision and said Baker Hughes would still be able to use export support for low carbon projects like carbon capture and storage.
Baker Hughes sees “great potential” in leveraging its technology for carbon capture and has been doing a lot of “engagement and investment” around hydrogen.
Overall, Chambault said the big announcements made in March represented a “step forward”, and an exciting one at that.
“If you look at the competence and talent we have in the North Sea, we have very strong engineering companies that know how to execute big projects in harsh environments,” he said.
“We’ve used that to overcome big challenges over the last 30-40 years and we’ll put that to task in the next 20-30 years.
“To me, that’s exciting. Two or three years ago there was concern about how we can transition. Now we’re truly at the point where companies are embracing it.”
Geothermal also presents expansion opportunities, but more likely in other parts of Europe.
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