We need to look ahead

Alasdair Freeman, partner at Burness Paull
Alasdair Freeman, partner at Burness Paull

As many prepare to head across to Houston for 50 years of OTC,
it’s worth noting that, while there will be a Golden Anniversary Gala Dinner to mark that milestone, the opening session of the conference is about the next 50 years for our industry.

So while it’s good to celebrate what has happened in the past, it is more important to focus on the present and the future.

Energy Voice and Burness Paull will host a “Changing of the Guard” breakfast briefing at OTC to look at how our industry is changing right now and look at where opportunities for companies lie.

From the UK perspective we are now more than five years past the publication of the Wood Review with its recommendations on how to maximise the UK’s remaining offshore oil and gas production.

We have also seen the establishment of the OGTC as part of the Aberdeen City Region Deal and more recently the offshore wind Sector Deal announced by BEIS, both marking major opportunities for businesses in the energy sector.

The industry has faced a number of fundamental challenges and had to adapt and diversify to survive.

Nevertheless progress has been made on a number of fronts since 2014 with a focus on lower operating costs and efficiencies, the embracing of new technologies and a greater willingness to look at new ways of working – to the extent that we saw UK production in 2018 reach its highest level since 2011.

This has opened up opportunities for some oil and gas operators to dispose of non-core assets in their portfolios in favour of newer entrants established to operate in the current business environment. And it has made a number of fields viable which in the past were not.

A key to unlocking the future potential within the UKCS is to get the right assets in the hands of those best placed to develop them. A good example that highlights the opportunity was Serica’s recent success in boosting profits following its acquisition of interests in BP’s Bruce, Keith and Rhum fields. However there is still plenty to be done to ensure the longer-term viability of the industry.

The collaboration and innovation seen at operator level needs to be extended across the whole industry to include the supply chain where there continues to be a challenge to revenue and margin.

There are signs of progress with the use of more innovative contracting structures designed to incentivise the supply chain by sharing upside for outstanding delivery or contract performance – but this is not yet being applied across the board.

And investment is critical, by operators in terms of locating and developing new opportunities and by the supply chain companies to ensure there remains a skilled resource and capability in the UK.

Companies need to see there is sufficient return on that investment and there is still work to be done to ensure all parts of the industry are able to benefit from the progress made over the past few years in improving the competitiveness of the UKCS.

The businesses attending OTC this month travel to hear about the latest opportunities as well as the long term trends that may affect their strategies.

While there is still work to be done, five years on from the Wood Review there is an increasingly positive story to tell from the UK.