The continuing importance of oil and gas as part of a balanced energy mix to achieve energy security and net zero ambitions

Posted on 04 September 2023

The continuing importance of oil and gas as part of a balanced energy mix to achieve energy security and net zero ambitions

The renewable energy revolution may be at the forefront of many people’s minds but it’s important to consider the ongoing role oil and gas plays in the energy mix.

Oil and gas currently meet 75 percent of UK energy demand and will still be required in 2050. It’s clear that oil and gas production will be with us for many years to come, even if production will naturally decline.

“There’s still enormous demand in the UK for oil and gas,” says Bill Cattanach OBE, Head of Supply Chain at the North Sea Transition Authority (NSTA), which regulates and influences the oil, gas and carbon storage industries and helps to drive North Sea energy transition. “At the moment the UK produces nearly 50 percent of the oil and gas we use, which is a strong position to be in. We can see from recent and ongoing geopolitical events the importance of energy security.”

The NSTA also says that as long as demand for oil and gas exists, it’s preferable to use the UK’s own cleaner supply than emission-heavy imports. The average carbon intensity of imported Liquefied Natural Gas (LNG) is almost four times the carbon intensity of UK production.

What’s in the pipeline?

Since 2022, the NSTA has approved seven projects which are capable of producing almost 100 million barrels of oil. It is working with operators to progress a further 21 projects targeting 1.5 billion barrels, which will include a mixture of large and small-scale projects.

In the long term, there is potential for £200 billion of expenditure in the North Sea by 2030, with oil and gas operations accounting for about half of that total, and the rest going to offshore wind, carbon capture and storage (CCS) and hydrogen.

What are the supply chain opportunities?

With continued investment in the oil and gas sector, there will be opportunities for the supply chain to support operators as they embark on new projects.

The opportunities will come from managing declining oil and gas production from the UK Continental Shelf (UKCS) as cleanly and efficiently as possible with a drive to utilise low carbon technologies and solutions.

One of the key emerging opportunities, according to Bill, is well enhancement – getting more output from existing wells. “Medium-sized supply chain companies could get a good share of work from well enhancement. The UK is well placed to supply products, services, innovations, and expertise in key areas including subsea engineering, vessels, port infrastructure and support services are all needed.”

The operator landscape is changing, too. The number of operators in the UK Continental Shelf has grown in the past 25 years as smaller companies, often backed by private equity, have entered the basin by acquiring assets from the “majors”.

So what does that mean for the supply chain?

According to Bill, this provides “greater opportunities” for smaller companies to participate directly with operators, and for more productive relationships to flow from this.

“Big operators have big teams of people,” he explains. “They tend to specify everything down to the last nut and bolt. The smaller operators, however, are looking at more innovative, agile ways to deliver their projects. And they can do that by leveraging the expertise of the supply chain.

“Also, smaller operators need certainty around delivery times and cost, as they are often dependent on equity funding. The new generation of operators need a supply chain they can depend on. That enhances the opportunity for UK suppliers, as operators can source products and services locally, rather than from halfway across the world.

“The future is looking good for the UK supply chain.”

At a global level, Bill says oil and gas projects in Norway, Brazil, the Middle East and Australia are all “powering ahead”.

Support for the supply chain

An excellent tool that complements NOF’s business development focus and support is the NSTA’s Energy Pathfinder. This online, freely-available resource provides real-time visibility of activity for new oil and gas field developments, decommissioning and projects to support the energy transition on the UKCS. Both suppliers and operators are using this tool to forge new relationships.

The authority has also rolled out its Supply Chain Stewardship Expectation which provides guidance on collaboration and cooperation, and addresses issues such as payment terms.

Bill comments: “We are using our influence to create a better climate between the operators and the supply chain. We're trying to get it much more towards a collaborative relationship.”

Access Energy Pathfinder here: www.nstauthority.co.uk/supply-chain/energy-pathfinder/

Moving into the future and net zero

NOF, the business development membership organisation for the energy sector represents over 450 businesses working in the oil and gas, offshore wind, nuclear, CCS and hydrogen sectors. Undoubtedly, we are seeing a changing energy landscape, the focus on net zero and energy security, and with these changes come both opportunities and challenges.

As strong advocates for supply chain diversification and partnering ethos with energy and non-energy related businesses, NOF is committed to helping its network win new business in the energy sector and contributing to the UK’s net zero ambitions. Through proactive partnerships with non-energy related businesses the organisation encourages new entrants into the sector bringing with them new technologies and solutions to benefit generations to come.