July 2020

Executive Viewpoint

Forging the UK oil and gas industry’s future
Gareth Wynn / Oil and Gas UK

The oil-and-gas (O&G) industry is confronting fundamental questions on its place in the world, in the face of climate change, the Covid impact, and the nature of the economic recovery to follow. The pandemic continues to take its toll on demand and our ability to operate safely. As we emerge from lockdown in the UK, we also see calls for any economic stimulus to be directed toward a “green recovery.”

Challenges. Yet, the pandemic has underlined how hard delivering emissions reduction will be. Even lockdown has only saved 17% of emissions, so getting to net zero is going to take time and a scale-of-change few understand. In the UK, we still rely on O&G for 75% of primary energy. We produce the equivalent of about half of what we use, and we remain an important sector in terms of jobs and GDP.

The UKCS is a mature basin, producing for over 50 years. Although we expect production to decline over the coming years, we remain active in every stage of the lifecycle, from exploration to decommissioning.

This makes for comparatively high production costs. Following the previous oil price crash, industry here transformed itself, halving production costs. Together with supportive tax and regulatory regimes, the basin regained its global competitiveness as an investment destination. In the face of this latest crisis, we need to work hard to retain our competitiveness.

Covid-19 impact. The hard-won cost reductions mean that our supply chain operates on very thin margins and fragile balance sheets, so it is here that the Covid impact is felt most acutely. The immediate industry response—moving to minimum safe staffing levels offshore and suspending non-essential maintenance work—for health protection reasons was tough. When combined with the price collapse and consequences for new projects, it has pushed many companies into a battle for survival. So, how are we responding to the immediate challenges and laying foundations for the future?

We are following a three-phase strategy of protect, recover and accelerate to net zero.

The UK industry is balancing the need to produce O&G to meet our own needs as much as possible, while avoiding increased reliance on imports and showing we are playing a part in enabling a transition to net-zero emissions. Achieving an energy transition cannot be done overnight without dramatic, damaging impact on jobs and the economy, especially in communities where our industry is concentrated. This fact is increasingly understood among our key stakeholders.

Future vision. As an industry, we have developed a vision for the future—Roadmap 2035: A blueprint for net zero. This already has proved valuable in helping us reposition the industry as part of the climate change solution. It shows how domestic production can sit alongside tackling emissions.

But our story is more than words. The industry is acting and supporting OGUK in our work. On protecting our people during the pandemic, OGUK has coordinated a significant collective response involving government, regulators, industry, and trade unions. In February, when virus transmission across Europe accelerated, we mobilised a pandemic steering group (PSG) to develop advice and guidance for the industry. The PSG identified four key themes: reducing the risk of transmitting COVID-19 offshore; maintaining helicopter operations; ensuring the health and safety of offshore workers; and dealing with logistical issues. Coordinating an industry-wide response also included regular communication with journalists, our members, and the wider workforce.

Our protocols on helicopter travel and designation of categories have been adopted globally for safe removal of personnel with suspected COVID-19 from offshore facilities.

The PSG delivered six key guidance documents, including roll-out of safety-tested face coverings for offshore flights; pre-flight screening practices; advice on vulnerable people; and testing for symptomatic essential workers. We also collated accommodation options to enable safe passage of our people, and ensured government understood industry needs and factored these into business support.

In supporting a recovery, our focus has been on ensuring the viability of supply chain and jobs, stimulating activity, and boosting competitiveness. Working with operators and contractors generated over 80 industry ideas on tools and initiatives to support this effort. We are now working together on safely keeping important maintenance projects on the table for this year, to keep work flowing.

A clear voice. As we think about accelerating industry’s role in achieving net-zero emissions, our proactive approach has helped us carve out a clear voice. When the UK adopted net-zero emissions as a legally binding target in 2019, we were the first industry to respond positively with an action plan: Roadmap 2035: A Blueprint for Net Zero. It outlines 60 actions over five key areas that will help the sector meet demand; develop people and skills; drive technology; grow exports; and support net zero.

In June this year, we published basin-wide targets to cut operational emissions 50% by 2030, and 90% by 2040. These will require significant operational improvements, as well as capital investment in new technology.

Delivering our protect, recover and accelerate strategy—linked to Roadmap 2035—will secure the future of a new-look UK offshore oil and gas industry, meet UK energy needs from domestic resources as much as possible; support hundreds of thousands of jobs; make a significant contribution to the UK economy; and, through a fair transition, play a key role in delivering net-zero energy.  

About the Authors
Gareth Wynn
Oil and Gas UK
Gareth Wynn is Stakeholder & Communications Director at OGUK. In his career, he has served as Communications Director for several large international companies. He is co-chair of Chartered Institute of Public Relation’s Energy Leadership Platform think tank.
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