Energy Industries Council stresses importance of oil and gas

Britain is producing the smallest amount of energy on record (source: OEUK), leaving it more reliant than ever on imports.

About 40% of oil and gas used in the UK is imported, and 11pc of electricity is brought in using undersea cables linked to the Continent.

Yet only a small chunk of the £80bn of offshore and onshore energy investment heading to the East of England will be in the upstream industry where its strong network of expert companies has worked for more than five decades.

This world-leading supply chain needs a cocktail of ‘C’ words from policymakers and operators to survive and thrive, says the Energy Industries Council (EIC) – consistency, clarity, certainty and communication.

And the workforce and communities that have relied on the oil and gas sector since the 1960s must have a just transition to net zero.

Market intelligence by the EIC, which acts as the voice of the energy supply chain, shows that the East of England will snare 10% of the UK’s £800bn energy capital expenditure. Almost half will go to build Sizewell C’s nuclear reactor which, with the new government’s clarity on its support of nuclear, looks a certainty.

Offshore wind will take another quarter, with an accelerated pipeline to meet the government’s quadruple capacity ambitions, offering opportunities for businesses to adapt their offshore energy engineering heritage to renewables.

The remaining quarter is split between upstream and nuclear decommissioning, transmission and distribution, hydrogen, energy storage, carbon capture, sustainable aviation fuel (SAF) and midstream oil and gas.

“Where we are not seeing a huge amount of investment is in the upstream oil and gas sector specifically, and we wait to see what will happen going forward with the new government,” said Neil Golding, of the EIC market intelligence.

“If we want a just transition, and to secure energy supply, there is still a role for development of upstream oil and gas fields and production in the UK.

“The UK supply chain has a huge reliance on having a strong domestic industry. We want a prosperous well developed supply chain and will make sure its voice is heard with Chris Stark [the climate expert appointed to lead the UK’s clean energy taskforce] and DESNZ [Department for Energy Security and Net Zero] to make them aware of and why we still need oil and gas, and we need an oil and gas supply chain to help develop these ambitions.”

Its data shows 3,700 companies with a revenue of more than £1m are working in the energy supply chain.

Neil Golding says there must be a ‘just transition’ to net zero (Image: EIC)
“Many of those companies are also involved in other sectors and have transitioned over into the offshore wind sector and help deliver CCS and hydrogen. They use the same equipment, the same services, and we need these projects to move forward as well to ensure CCS and hydrogen move ahead to keep these companies going.”

Energy and net zero Secretary Ed Miliband must listen to what is needed to ensure that the supply chain is not forgotten about.

“These businesses supporting the energy production and transmission need to be at the forefront of policy makers’ minds,” said Neil.

“It is so important. The supply chain are those SMEs that are critical and that can help us deliver these projects for the future.”

Consistency was vital for a strong and thriving supply chain after multiple changes of ministers and messages, Neil added.

“The supply chain requires certainty, and that certainty is in the hands of the policymakers. The supply chain needs to be ready for opportunities coming up. If they get it right, the supply chain will be able to scale up, but they need the capital to do this.”

And to be ready, they need communication from operators of work ahead.

“We need a high-quality supply chain to develop these projects and be aware of the value of supply chain. We run the risk that unless we continue to support it, companies will go elsewhere, and we will potentially lose them.”

The EIC highlights opportunities around the UK, so that the supply chain is ready to get involved in these ‘first of a kind’ projects.

The prospect of the CCS and hydrogen hub at Bacton with the North Sea Transition Authority (NSTA) was an excellent initiative involving familiar industry names like Petrofac, said Neil.

But data doesn’t point to much oil and gas activity in the SNS or North Sea.

“There were a number of developments about a decade ago providing work for the supply chain now, but new announcements have been very slow.”

There are opportunities in the wider North Sea and huge potential overseas in emerging and established markets in West Africa, Namibia, Brazil and Guyana.

In UK waters, Shell’s Pensacola gas prospect in the SNS is believed to be the largest North Sea natural gas discovery in more than a decade, while Equinor’s Rosebank, which has taken final investment decision (FID), and Ithaca Energy’s Cambo will need the UK supply chain.

FIDs were taken by Shell for Victory in the North Sea and Serica Energy for Belinda this year. Most of Victory’s recoverable gas is expected to be extracted by the end of the decade.

Serica plans to drill Belinda’s development well in the second half of 2025 with a budget of up to £25 million capex this year for the project.

Overseas, where the UK supply chain has been successful, work ahead lies in Angola on Kaminho and in Nigeria with Ubeta, both operated by TotalEnergies’, and potential for discoveries in Namibia in the next 12 to 18 months.

“Namibia in particular is a market that doesn’t have a well-developed supply chain and will present opportunities in companies that work in oil and gas in the UK and could work in Africa,” said Neil.