Countering unpredictability and uncertainty in the Energy sector

A full month into 2021 and we are past the point of making predictions for the year ahead.  Unpredictability will hopefully not be a theme that carries through from last year, however uncertainty will likely remain the case for some time yet in the Energy sector.

Live news feeds, rapid changes in sentiment, new policy statements and the power of social media all make the business of opinion forming and writing challenging.  These days, it is easy to get carried away in any direction in the Energy sector – however there are a few fundamentals to perhaps bear in mind.

A keen rate of change 

The rate of change that is driving energy transition is difficult to keep up with and sometimes hard to understand.  The foundations of this change movement can be attributed over the past few years to climate change activism and enhanced news coverage, how governments, investors and large corporations have reacted to this – and to Covid-19.  It has led to significant changes in UK government policy from banning petrol and diesel cars by 2030 to ceasing sponsorship of overseas oil & gas exploration.

Large corporations such as BP and Shell have changed dramatically – and have led others to react in a similar, proportional fashion.  In these current times of high levels of public emotion and rapid change, it could be questioned in years to come whether our response to current challenges and issues in the global Energy sector were rational, well thought through and measured.

Are we turning our backs on oil & gas? 

We’ve all heard how important the oil & gas industry is globally – from providing plentiful and relatively cheap sources of energy, to being a major resource in all industries including medicine, clothing, electronics, transport, construction and many more. Now and for some considerable time yet, we are dependent on oil & gas.  No one could argue with the facts however that we need to be much more responsible with oil & gas products and by-products such as single-use plastics and air pollution.

What else can the oil & gas sector do? 

Led by the E&P majors, we are starting to see smaller companies changing their names, identity and purpose.  Energy transition is becoming a key part of E&P and oilfield service companies who are able to adapt their strategies.  Some are showing interest in hydrogen energy, wind power services and re-purposing offshore installations to become renewable energy assets.  These developments are very positive and clearly help balance public opinion and investor sentiment.  Some may say however that the oil & gas sector has some way to go in justifying what is an essential existence.

• Do we really understand the impact of the sector in producing emissions – from large diesel generators, flaring and hydrocarbon leakage from plugged wells to transmission flow?
• Could the oil & gas sector do more in the effort to finding sustainable alternatives or green improvements to single-use plastics and combustion fuel?

In 2020 we started to see greater belief, sponsorship, funding and attention in new start technology and high tech companies leading this charge.  Addressing more of these types of questions may help the very survival of the sector.

Are renewables the solution? 

The benefits of clean energy from wind, solar and hydrogen are undeniably highly attractive and very enticing.  Not many people will argue that being able to find solutions that are cost effective, reliable and sustainable is the ultimate prize for the Energy sector.  Like oil & gas however, there is still a long way to go in fully and honestly justifying some of these alternative energy sources.  Does the lifecycle of a wind turbine or solar panel from manufacture to decommissioning justify its energy contribution whilst offsetting its environmental impact? Will demand meet supply or vice versa in the emerging hydrogen sector and will it be cost effective?  So many answers to these questions are unknown and add to unpredictability and uncertainty of the Energy sector.

The Energy sector is changing rapidly – it is exciting, high tech, challenging and increasingly so, more than ever – is becoming more widely recognised as a major industry not just in the North East of Scotland, but nationally and globally.  The attention that the Energy sector is getting can be put to very good use – and will hopefully help us all with a balanced, measured and collaborative approach to opportunities and benefits across all its various parts.

For further information, or if you have any questions, please contact Alasdair Green or your usual AAB contact.

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