BY Richard Summerfield
The oil & gas industry has endured a turbulent and troubled couple of years and, according to a new report from PwC, there may be more pain on the way unless radical and urgent changes are made within the industry, most notably in the North Sea basin.
PwC’s report 'A Sea Change: The future of the North Sea Oil & Gas' has called on those companies operating in the North Sea to implement a comprehensive programme of reform in the basin in order to meet short term energy needs. For the industry to undergo the necessary changes, however, it will require both government intervention as well as the input of industry organisations.
Given the deficiencies displayed by the industry it is unsurprising that there is a dearth of optimism permeating the oil & gas space; the report found that less than three in five senior executives interviewed by PwC were positive about the industry's future. A fifth of all respondents were pessimistic about the future.
Regardless of the gloomy outlook for the industry, there is a willingness within the space to change, according to Alison Baker, PwC’s UK and EMEA oil and gas leader. When interviewing respondents, PwC “picked up a real sense of urgency to create one last cycle of success that will retain and generate jobs, stimulate growth and ensure security of energy supply. But this was matched by a level of frustration at the fundamental issues that need tackling to avert the risk of rapid and premature decline. Part of the solution is for government agendas across Treasury, DECC and the OGA to be much better aligned to the needs of the whole industry, from super majors to smaller oil field services firms. The majority of respondents also want government to take a lesson from Norway and Saudi Arabia and be bold in setting out their blueprint for the future. This must incorporate onshore activity as well as defining how the North Sea basin will evolve in the short to medium term and, crucially, how the end game - and subsequent transition to a low carbon landscape – will be managed.”
One of the key measures proposed by PwC is the creation of a “super joint venture” comprised of a number of offshore operators which would not only share the risk of operating in the space. They would also split the returns. By combining their efforts under one joint venture banner, it would be easier for organisations to create greater cost efficiencies; indeed, a joint venture approach could see costs fall by around 15 percent, according to PwC’s projections. By pooling their efforts, they would also be in a better position to negotiate with suppliers in the long-term.
Such is the state of the sector, industry leaders have also proposed the transfer of certain assets, including pipeline infrastructure to a third-party company to ensure cooperation. The nationalisation of certain assets has also been mooted.
