OGUK, an industry body representing interests of the UK offshore oil and gas industry said Monday that the country's energy transition could be under threat unless the government can provide vital support for the sector grappling with the after-effects of the pandemic.
"Securing and sustaining investment in the sector is now critical to help the UK quickly realize a net-zero future," OGUK said.
OGUK’s 2021 Business Outlook shows the industry "is facing a period of extreme uncertainty as it grapples with the after-effects of the pandemic, which has led to a significant decline in offshore activity levels and overall levels of expenditure falling by more than a quarter in the last year alone."
OGUK chief executive Deirdre Michie said: "£3bn worth of investment has been deferred from company plans in 2020 and 2021 – and the effects of COVID-19 have really undermined energy communities, causing a rise in unemployment and a slump in activity.
"A climate-friendly future needs significant investment in indigenous opportunities so companies right across the sector can continue to develop low-carbon solutions. That is why we are working with the government to deliver a transformational North Sea Transition deal, which will drive forward Carbon Capture and Storage, hydrogen, and low-carbon projects across the UK.
"This is an industry which continues to play a critical role in the economy, supporting hundreds of thousands of jobs in industrial heartlands across the nation, generating affordable energy for millions, and providing billions in value to the economy.
“But we cannot continue on this trajectory without vital support. Companies are in a fragile state. We need the recognition that our industry is a key player in a successful energy transition – one which won’t be possible without the inclusion of our sector.”
OGUK said that despite the challenges of the pandemic and the severe economic downturn, production from UK waters still managed to meet around 70 percent of the country’s oil and gas needs in 2020, "evidencing the continued need for an indigenous supply."
"There are also some early signs of improved sentiment emerging, with new investors continuing to be attracted by the remaining potential of the North Sea," OGUK said.
"To realize the UK’s shared climate goals, as well as maintaining affordable energy and a strong base for the UK’s energy supply chain to build from, OGUK reinforced that government policy and regulation must continue to prioritize domestic production over imported energy," the body said.
Deloitte: “Fast-forward” scenario
Graham Hollis, Office Senior Partner for Deloitte in Aberdeen, commented on OGUK's Business Outlook 2021:" Today’s report is a clear account of the challenges and opportunities facing the oil and gas sector, as firms shift their mindset towards recovery.
“While the industry is used to the highs and lows of economic and price cycles, the last twelve months have been like nothing ever seen before. Firms have been in survival mode, responding to both the downturn in oil price and the difficulties associated with COVID-19.
“However, the pandemic has also turned into a “fast-forward” scenario for the industry, which brings with it a number of opportunities, and it is vital to capitalize on this. Pivoting towards a new energy future remains key, and the sector has a critical role to play, working with the UK and Scottish Governments to help build a sustainable recovery on the road to net zero. The UKCS also remains an attractive asset for investors, and alongside this, there are new opportunities emerging across the energy and emissions reduction landscape.
“Looking forward, firms will need to look for ways to bolster their operations through investment and transformative strategies as they navigate the lingering impact of the pandemic. Ultimately, as the Outlook notes, while road ahead will not be easy, the challenges are surmountable with collaborative working, commitment, and a bold vision for the future.”
Worth noting, OGUK plea for government support comes just days after it was reported that UK ministers were considering a ban on new offshore exploration licenses, a move seen as a beginning of the end of the UK North Sea oil and gas industry. Read More Here.
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