First Oil: A moment in the UK like no other
With great solemnity, we send our sincere condolences and heartfelt sympathies to our many industry friends in the United Kingdom, as well as the general British public, upon the passing of Queen Elizabeth II on Sept. 8. She was a remarkable woman of character, strength, wisdom, stoicism and selfless service. Throughout her remarkable, unparalleled reign of just over 70 years, she embodied these traits on a daily basis, serving as a role model for doing things well and with purpose. As a number of television commentators remarked after her passing, it (her reign) was never about her—-it was about what she could do to better things for her fellow citizens.
During her many years heading the Royal Family, the Queen worked with 15 UK Prime Ministers and met 13 U.S. Presidents, as well as countless thousands of officials and dignitaries from numerous countries. Her steady hand as Britain’s head of state for 70 years provided the UK with the type of continuity that is in short supply these days.
Queen Elizabeth’s last official act was to receive Foreign Minister Liz Truss on Sept. 6 and ask her to form a government as the newly chosen leader of the Conservative Party and fulfill the role of Prime Minister. And then, just two days later, the Queen passed away, gone in a moment. But she will remain in the memories and hearts of British citizens, as well as the global community. As the events and processions leading up to, and including, her state funeral have shown, there are different ways to measure and appreciate the Queen’s 70-year tenure and her effectiveness. But that most visible indicator, the public’s massive turnout for viewing her coffin, as well as the lining of streets to celebrate her life, is the best measure that she will hold a special place in history, having led an extraordinary life that earned her the public’s ever-lasting affection.
Effects on UK energy policy. The Queen’s appointment of Liz Truss as Prime Minister is a fitting close to Elizabeth II’s performance of her duties, and one that will have lasting impact, including effects on UK energy policy. Just days after taking over as PM, Ms. Truss said she would “end the moratorium on extracting our huge reserves of shale,” which went into effect across England in November 2019. In addition, within a day of becoming Prime Minister, Ms. Truss pledged to support new oil and gas development in the UK North Sea. She also reiterated her goal to cut taxes, with the idea of encouraging long-term supply security, and acknowledged that she does not support further windfall taxes on operators.
Ah, but will she lift the “energy profits levy” that the predecessor regime of former PM Boris Johnson put on upstream production revenues? It raised the top rate of tax from 40% to 65%. Right now, it remains in place, with a "sunset clause" mandating its cancellation by the end of 2025.
Optimism pervades our mid-year forecast update. Per usual practice, we have assembled our annual Mid-year Forecast for global E&P activity. And yes, if you perceive that things have been getting better for the upstream of late, our forecast confirms it. In the U.S., we predict that drilling will grow 12.1% in second-half 2022 from the first half’s level. Indeed, by the end of this year, we expect U.S. drilling to reach 18,600 wells, a resounding 34.0% gain from 2021’s figure of 13,877 wells. For more on the U.S. outlook, please turn to page 32.
Similarly, we expect Canadian activity to jump 31.7% higher. Spending plans across Canada have increased over the course of 2022, on the continued strength of oil prices. Please see page 39 for Canadian details. Meanwhile, we estimate that international drilling outside the U.S. and Canada will rise 9.7%, with seven of eight regions posting increases. But if the U.S. and Canada are included, the global total is up 18.4%. For more international details, turn to page 41.
