Call for urgent change to oil & gas industry

SENIOR EXECUTIVES in the North Sea oil and gas industry are calling for urgent reforms to leadership to ensure the industry’s future, in a new report.

Interviews conducted by multinational professional services network PricewaterhouseCoopers (PwC) for its report, A Sea Change, revealed that 58% of North Sea executives in the UK, Norway and the Netherlands still feel positive about the future despite the present threat of decline. They say there is a two-year transformation window to ensure a “productive and profitable” future.

In order to secure the optimistic view of the future, PwC’s report proposes a “super joint venture” between the offshore operators. The recommended collaboration would involve: consolidating smaller and fragmented assets under a single operator for better co-ordination and cost-efficiencies; sharing risk and reward to build capital for new projects; and approaching respective governments to back decommissioning funds so companies can concentrate on production for the remaining decades.

The report also calls for new leadership in the industry, perhaps even from outside the oil and gas industry, to re-invigorate innovation and to lead the industry into new ways of thinking. PwC said in a statement: “A change of guard at the top is essential if the industry is to successfully disrupt its ‘we’ve always done it this way’ mentality and become a force for innovation.”

While the report also welcomes the launch of the new UK regulator Oil and Gas Authority (OGA), based in Aberdeen, it notes the industry is keen for the OGA to be more assertive and use its £40m (US$56.7m) government funding for surveying the frontier areas to provide a roadmap for the short- to long-term sustainability of the North Sea basin.

Alison Baker, oil and gas leader at PwC, said: “The majority of respondents want [the UK] 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.”

The report says progress has been made in tackling cost-efficiencies and implementing a more conservative approach recommended by the 2014 Wood Review to help stabilise the industry, however the report believes any bad decisions taken at this pivotal point could lead to “decline at an exponential rate”.

The UK oil industry has already undergone a steep decline, with around 84,000 jobs already lost in 2015, with another 40,000 positions predicted to be lost in 2016. UK oil executives say the low price of oil, as well as a lack of access to capital and technology and innovation have been significant factors for the period of decline. Today, BP axed a £500m project – due to economic conditions – that would have seen around 30 jobs return to the industry.

Despite the recent downturn, PwC says there is still cause for optimism in the industry, provided it is led in the right direction.

Kevin Reynard, PwC senior partner in Aberdeen, added: 'The North Sea still has a strong couple of decades ahead of it but the decisions to sustain it in that period need to be taken quickly…No one company standing alone can weather this but if all interested parties join forces to address the issues then there is hope for the North Sea.”