Oil and gas is an industry poised for transformation. The current challenges are the possible impact of Brexit and the need to fulfil targets to reduce carbon emissions and move towards renewable energy. Far from being a threat to the industry, these changes present an opportunity for companies within the oil and gas industry to innovate and take the lead on the world stage.
What will happen after Brexit?
Trade association Oil & Gas UK has already raised the issue of future EU regulatory changes. The UK is currently the largest EU producer of offshore oil and gas and as a result has significant influence on decision-making. Going forward, the priority is to maintain a strong voice in the EU and beyond, and this means taking the lead in new initiatives and setting standards. Another concern is the introduction of added friction in trade. According to a report from consultancy firm PWC, the UK oil and gas supply chain exports nearly £12 billion of goods and services around the world. The ability to carry out frictionless trade both within and beyond Europe will be a priority, and the UK is well-placed to take the lead on developing the commercial and regulatory integrity of any new internal energy market across the UK and the EU as well as looking at markets beyond Europe.
What about climate change?
The industry isn’t ignoring climate change. A film screened at the OGUK’s 2019 conference was titled ‘An Industry in Transition’ and highlighted how playing a role in the introduction of a lower carbon energy mix will be essential to maintain a competitive edge. The need to address climate change is urgent both on an industry and organisational level. The government has pledged to deliver net zero emissions by 2050 and companies across the UK are rising to the challenge. Deirdre Michie, Chief Executive of OGUK stated,
“With world-leading engineering skills, infrastructure and energy expertise, our industry stands ready to work with sectors across the UK economy to enable the UK to achieve its climate change goals.”
The changing face of the oil and gas industry
In part due to these twin challenges, as well as falling revenues, a taskforce of senior figures within the industry has been assembled to address a wide range of issues. From exports and the supply chain to skills, culture, technology and diversification the aim is to achieve transformation to meet the demands of the current commercial landscape. The industry currently employs 37,000 between onshore and offshore staff, according to a report from OGUK and there are a further 127,000 across the supply chain. Data from the Office of National Statistics says in 2017 there were 40,000 people employed directly in the industry and its subsectors. Companies have three choices – to forge ahead with fossil fuels until the market runs dry, pivot to all-renewable energy or diversify with a plan to move towards zero carbon solutions. Smaller companies have fewer resources, but there are opportunities to merge with or acquire renewable companies or develop strategic alliances to share skills, knowledge and resources. The bigger players have already started this trend with BP and Shell acquiring EV charging companies, Total taking over an alternative power supplier, Direct Energie and Chevron investing in EV charging company ChargePoint.
Embracing the global opportunity
Companies within the oil and gas industry also face the challenge of addressing currency fluctuations which can impact revenues and profit margins. As companies seek new partnerships, acquisitions and mergers, it may be that newly created companies have offices in multiple countries or have partners all over the world. This may mean there is a need for even more currency transactions, with the associated risk. At moneycorp, we help oil and gas companies manage their international payments and address currency risk with a range of specialist currency tools and guidance to share our expertise on the market.