Energy Transition: what does “Transition” mean? 

Calum Crighton Flat

Everyone in the industry is talking about “Energy Transition”.  What does it actually mean though?  In simple terms, it seems to be clear enough. I.e. as a society, our source of energy (for fuel, light, heat) will between now and 2050 (or 2045 for Scotland) be transitioned away from fossil fuels and be replaced by a cleaner source.

That could be from:

  • fully renewable sources like wind, biomass, wave, utilizing new and existing technologies;
  • use of carbon capture, usage and storage (CCUS) to “clean-up” otherwise less clean sources like oil and gas; or
  • emerging technologies, such as production of hydrogen (of varying “colours”).

What does all of this mean for the offshore oil & gas industry?

For existing companies in the sector, including exploration & production (E&P) companies and services companies there lies a huge diversification opportunity. Is the diversification really all that significant?  In some ways yes, but in other ways, not so much.

E&P Companies

We have seen many traditional E&P companies commit to Net Zero. From high profile name changes, such as TotalEnergies, and even higher profile court cases, such as the ruling against Shell (which is to be appealed by Shell).

I have also heard anecdotally that companies are having their hand forced into cleaner energies to ensure they can attract and maintain private equity investment as investors look to clean-up their portfolios.

In practice though, I feel existing E&P companies, and in particular the “old guard” will adapt to the new greener energy industry well. We take oil production for granted in the 21st century, but let’s not forget the enormous technical challenges overcome to get the black stuff out of the ground. These companies have time and again risen to the challenges of the day, and I am confident they will do so again to continue to produce energy for many years to come.

Supply Chain

It is too simplistic to say that it is “business as usual” for the services companies as we move into a new type of energy industry. A drilling company or a subsea tree manufacturing company isn’t going to be able to flick a switch and apply its processes, engineers and equipment directly to an offshore wind farm (for example).

However, there are many supply chain companies who have already made successful transitions from offshore oil & gas to offshore wind – First Subsea, with their cable protection system is one example that springs to mind.

There will be many cross-overs and overlaps for existing supply chain companies.

What about the “new” guys?

Whilst wave power doesn’t feature in the Government’s 10 point plan, a great example of an emerging company into the wider energy industry is Orbital Marine who have made headlines with the O2 – the most powerful tidal turbine in the world. It has the capacity to meet annual electricity capacity of around 2,000 UK homes. One example in amongst many more of new technologies and new companies we hear about every week in the energy industry.

Conclusion

The UK is very well positioned from a geographic standpoint and has the engineering and technical expertise to transition successfully over the coming decades. The existing energy and supply chain companies will play a huge role, supplemented in no small way by emerging companies – all with a close eye on innovative technologies which have underpinned the oil & gas industry for the past 50+ years.

If you would like further information on the topic discussed in this blog, please contact Calum Crighton by email: ccrighton@gilsongray.co.uk or by phone: 07841 920101. You can also view Calum’s profile by clicking here.

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