The North Sea basin has a “two year transformation window” in which to ensure a strong, productive and profitable future for the oil and gas sector according to 37 senior executives and industry experts interviewed for PwC’s latest report A Sea Change.
The report found that 58% of senior oil and gas executives across UK, Norway and Netherlands feel positive about the future of the North Sea basin despite the present threats.
But the report said any inertia at this pivotal moment “could lead to decline at an exponential rate.”
The industry interviews reveal significant levels of optimism that with the right leadership, strategies, intervention and co-operation between operators, oil field service sectors and government “the North Sea can continue to provide a few more decades of production.”
“During our interviews we picked up a real sense of urgency to create one last cycle of success that will retain and generate jobs, stimulate growth and ensure security of energy supply,” said Alison Baker, PwC’s UK and EMEA oil and gas leader.
“But this was matched by a level of frustration at the fundamental issues that need tackling to avert the risk of rapid and premature decline …
“The majority of respondents also want government to take a lesson from Norway and Saudi Arabia and be bold in setting out their blueprint for the future.
“This must incorporate onshore activity as well as defining how the North Sea basin will evolve in the short to medium term and, crucially, how the end game — and subsequent transition to a low carbon landscape — will be managed.”
The report said that large operators have historically exported their best talent to frontier basins, leaving solid and stable leaders to man the helm across mature assets — “a move that has potentially stifled innovation.”
Respondents said a change of guard at the top is essential if the industry is to successfully disrupt its “we’ve always done it this way” mentality and become a force for innovation and re-invention while demonstrating entrepreneurial and forward-thinking leadership.
The report identifies a number of innovative solutions that could help create the “seismic shift” needed to break inertia and re-invigorate the basin.
- Creating a super joint venture vehicle, consolidating smaller and fragmented assets under one sole operator.
- Consortium financing with collective counterparty risk, “focussing on area based outcomes rather than asset based ones.”
- A Government-backed decommissioning fund or equity-backed guarantee scheme to help smaller companies cover their letter of credit requirements.
Kevin Reynard, PwC office senior partner in Aberdeen, said: “The North Sea still has a strong couple of decades ahead of it but the decisions to sustain it in that period need to be taken quickly.
“It’s vital that governments and industry come together and agree a blueprint for action.
“No one company standing alone can weather this but if all interested parties join forces to address the issues then there is hope for the North Sea.
“Government and industry have started to come together but this can be built on for the future.”
Read the full PwC report here: http://www.pwc.co.uk/seachange