Oil & Gas UK’s chief executive, Deirdre Michie warned today that the UK offshore oil and gas industry must become sustainable ‘in a world of $60 oil’.
The rallying call was made before an audience of more than 500 people in Aberdeen at the opening of the leading trade association’s annual conference.
First Minister of Scotland, the Rt Hon Nicola Sturgeon MSP, and chief executive of the Oil and Gas Authority, Andy Samuel also addressed delegates.
Michie commented: “Here in Aberdeen and throughout the UK, from Teesside to Truro, from Aberdeen to Anglesey, we have built an industrial powerhouse for the UK – the offshore oil and gas industry.
“In terms of our economic contribution and value to the country, this industry stands head and shoulders above the rest. We have paid more to the Treasury than most other industrial sectors, we generate hundreds of thousands of skilled jobs, we have a vibrant supply chain, at home and abroad, and make a key contribution to the UK’s security of energy supply.
“However, we now face real and present threats that are challenging our future. At $60 oil, 10% of our production is struggling to make money and there is a shortage of capital and a shortage of investors willing to place their money here.
“While demand for our products remains strong, critical for our transport, heating our homes and a whole host of everyday products, our productivity as an industry has fallen – and fallen rapidly.
“In relation to our escalating cost base, we know that as an industry we have been part of the problem; now we need to be part of the solution.
“Over the past 20 years, the price has averaged at $62 per barrel and the forward curve is between $65 and $75. Therefore it’s not unreasonable for the North Sea to set out its stall at being sustainable in a $60 world.
The chief executive called for a change in mindset: “We must avoid doing the same things in the same way and expecting a different outcome. We have had a decade of escalating costs, so we can be sure that our current approach doesn’t work.
We need to think about this from an investor’s point of view. Given that we compete for investment dollars on a global basis, we must ensure the UK is a commercially attractive and predictable place in which to invest.
“Learning from our mistakes, we know that our focus cannot merely be on cutting costs, but must more fundamentally address the efficiency of the basin. Focusing on efficiency means that, if or when the oil price bounces back, we will be best placed to seize new opportunities.
“We must work together to secure the future of this industry – for this country. There is a role for everyone – client, customer, employer and employee. For unions, for governments, for regulators and for trade associations. This is not a time for conflict or entrenched positions.”
She concluded: “With over 20 billion barrels of oil and gas still to play for, there’s plenty of opportunity to ensure an indigenous supply for the country.
“On a global-scale we might be a small player, but we’re also a world-leader. Our technical expertise is unsurpassed and reflected in the quality, the capability and the success story that is our supply chain.”