When asked to explain just how important North Sea oil and gas remains, it doesn’t take Malcolm Webb, chief executive of Oil & Gas UK, very long to respond with what I think you will agree is a pretty conclusive response. “Today the UK is reliant on oil and gas for approximately 73 percent of its primary energy supply.”
This falls into three main categories, electricity generation, the heating of homes and workplaces, and transportation. From an electricity perspective, some 40 percent of that comes from the burning of gas, while 80 percent of the energy we use to heat our homes comes from natural gas and the transport sector remains overwhelmingly depend on oil. “With these factors in mind,” Webb continues, “it is easy to see how the oil and gas that we produce will remain essential to the UK’s energy supply for many, many years to come.”
Oil & Gas UK is the leading representative body for the UK offshore oil and gas industry, and therefore you are unlikely to find another association better placed to give a complete perspective on the state of the sector today. Nevertheless, the association that exists today is a far different entity to that which existed as recently as ten years ago.
“Ten years ago we were an organisation called the UK Offshore Operations Association (UKOOA) and we represented the major oil companies operating within the North Sea,” Webb states. “These tended to be the larger, household name players, of which 32 were members of our association, yet none of them actually operated within the supply chain of the sector. It was in 2006 that we decided that this model did not represent where we wanted to be and thus we set about changing our constitution and our name in 2007, subsequently opening up our membership to the whole of the industry, embracing the supply chain as well as the companies that hold licenses to explore.”
This radical shift in focus proved hugely successful with Oil & Gas UK now boasting around 370 members, with its ranks continuing to swell at a rapid pace. “It has certainly been interesting how we have gone from being what was essentially a trade association representing a sub-sector of the industry to being a whole industry association,” Webb says. “However, we have retained many of the traits that we have always held dear. These include the fact that we remain a not-for-profit organisation, one that is owned and led purely by its membership and one that operates under a strong, professional directorate.”
At its core, Oil & Gas UK exists to do three things. The first is to help maximise the recovery of oil and gas resources from the UK offshore area, in which The Department of Energy and Climate Change (DECC) estimates state that there are probably at least 20 billion barrels of oil equivalent yet to be produced, on top of the 41 billion that have already been recovered. The second is to promote the long term sustainable future of the UK’s oil and gas supply chain, a magnificent success story in its own right, while the third is to continue to raise awareness of the industry.
“The UK was one of the first countries in the world to actively explore the production of oil and gas in offshore areas and as such we have built up a fantastic degree of expertise in that field and are rightfully revered as being a centre of excellence in terms of offshore engineering and a global leader in subsea engineering,” Webb enthuses. “One of the by-products of this has been the growth of the UK supply chain. While today it is turning over around £21 billion a year in the UK, a further £6 billion is being made through the exporting of oil field goods and services elsewhere throughout the world. This figure is only expected to increase further and could even outshine the production aspect of the sector in the very long term.”
“One of the things we are aware of,” Webb highlights, “and maybe this is in part down to the fact that our operations take place offshore, is that our industry is not always at the forefront of people’s minds. In fact, rather curiously, some people seem to have forgotten that the North Sea is, and will for some time remain, a major part of the British economy. Therefore it is our goal to make sure that the public realises this.”
It is the importance of oil and gas in the UK’s energy equation that Webb, and many others, sees as being one of the primary drivers for the continued success of the sector. Indeed, without the UK oil and gas industry the UK’s balance of trade alone would be at least £30 billion a year worse off due, in part, to the need to import resources. Then of course there is the fact that this is an industry that provides for around 440,000 high paid, highly skilled jobs in UK, making it one of the country’s more important employers.
While the association is very much focused on the future of the oil and gas sector, 2013 has proven to be a year of reflection also, specifically in light of the fact that this July marked the 25th anniversary of the Piper Alpha disaster, which claimed the lives of 167 men. In marking this, Oil & Gas UK hosted Piper 25, a three-day event held at Aberdeen Exhibition and Conference Centre, aimed at bringing together people from across the oil and gas industry to reflect on the lessons learnt from the tragedy, review how far offshore safety has evolved since and to reinforce industry commitment to continuous improvement.
“For the event,” Webb says, “we brought not only leading voices from the UK, but from all around the world, together with union representatives, regulators, academics and industry figures. We also had a very well attended workforce engagement day as part of the conference. We were also delighted to have Lord Cullen, who ran the public inquiry and produced the Cullen Report, as the keynote speaker. I think for me the most important thing that came from the conference was that there was an absolute lack of complacency. No one is complacent about safety, and the point we made was that we need to remain uneasy about our safety record because we certainly haven’t reached the point where we want to be yet; and that is where absolutely no one is getting injured during our operations offshore. I am delighted to say that our safety record is hugely impressive on both a national and international level, but I don’t think we can be happy until we get to the point where nobody is injured and there are no unplanned hydrocarbon releases from our operations at all.”
Turning again to the future, Webb has a pretty clear vision of where the industry is headed, at least in the short-to-medium term. “We are now advancing on what some might refer to as being the last frontier area, the West of Shetland, which is a very significant development. Meanwhile some of the more mature areas also remain hugely important, for example the Central North Sea area as well as the Northern North Sea, while at the same time we also have to make sure we get all the gas we can out of the Southern North Sea. There is a huge production challenge remaining and that will keep us engaged for many decades to come. The other area for growth is of course going to be the UK’s supply chain, which we believe has the potential to conquer the world market in the years ahead.”
As far as Oil & Gas UK goes, the future looks equally as exciting. “While we are extremely proud to have grown our membership to almost 370 members we still see much more room for growth,” Webb concludes. “My personal opinion is that, with 3,000 supply chain companies spread across the UK, there is no reason why we can’t become a member organisation of more than 1,000 in the fullness of time.”