The oil & gas industry is listening to climate concerns
The sector provides 75% of the UK’s energy needs, supports hundreds of thousands of jobs and contributes billions to the economy*, however these facts are often overlooked when the important and emotive issue of climate change is discussed. Jock Gardiner, Partner at Maven Capital Partners, argues that the oil & gas industry is alert to the issue of global warming and, to ensure it is able to effect real change, the sector should not be marginalised, but rather play an important role in the transition to a lower carbon economy.
One could be forgiven, in light of recent media commentary, for believing that the oil & gas industry acts with a wilful disregard for our planet and the global environment. The vocal campaigns used by activist groups to grab the headlines, in tandem with more sympathetic examples like Greta Thunberg’s address to the United Nations, mean that in this social media age the sector is experiencing greater pressure that ever.
Whilst this may be painting an unfair picture, there is no doubt that the industry needs to react quickly to combat this image problem. Energy transition could take decades and the industry should not be embarrassed about the important role it will continue to play in bridging that gap, but it needs to take a measured approach in communicating the right messages to demonstrate its capability in finding a path towards cleaner and responsible oil & gas development.
It’s probably fair to say that, regardless of the spectrum of views on the immediacy of climate change concerns, there is a general acceptance of the serious issues that the protestors are highlighting and the need to reduce our global carbon footprint, and that there is a need to improve the perception of oil & gas relative to other power sources. Carefully considered action is required to create sustainable change in energy production; the oil & gas industry needs to be at the heart of that movement, and not become the pariah on the outside.
Regarded in the industry as a reference point for technology and best operational practice, the North Sea will be the source of many new clean energy technologies, which will be exported around the world. Great advances have been made in wind and tidal energy, with the former now on the cusp of reaching a production cost that makes it viable as a standalone investment, without the requirement for governmental support.
There are notable examples of the industry’s willingness to change, such as the renaming of Statoil to Equinor, to reflect the company’s adoption of renewable energy businesses. Currently Equinor’s wind projects power 650,000 British homes, have already achieved a cost reduction of 40%-70% since 2012, and the business estimates that demand for renewable energy will grow at a rate of 10% per year.
Of course, the industry’s image problem is not restricted to climate change. It also needs to address real issues around diversity (gender, age and culture), technology adoption and short-termism, which have resulted in many people leaving the sector perhaps permanently. Failure to recognise and address the reputational damage caused by these perceptions is likely to create a skills shortage as environmentally conscious millennials, who often view oil & gas as a dirty, volatile and hazardous sector, that is the main culprit behind climate change concerns and therefore has a limited lifespan, will look elsewhere for work instead of bringing fresh thinking to the industry.
Regardless of the unrealistic claims of some campaigners, full energy transition cannot be achieved in a few weeks or even a few years. It needs to be safe and planned to ensure sustainability of change and avoid unintended consequences, and the oil & gas industry can play an important role for years to come.
Greta and the other protesters have done a very good job of raising social awareness, but we should not allow uninformed views to control the agenda and it would be folly not to harness the wealth of expertise within the sector in moving towards a more sustainable world.
*Source: OGUK, 2019