Yet the commentary and public discussion about the industry has been sorely lacking any credibility or depth. Revenues generated by the North Sea’s oil and gas industry have fuelled the UK’s economy for those five decades whilst supporting 196,000 jobs, and it has delivered billions in taxes that fund education, health, and other public services.
But oil has become a dirty word and the industry an anathema to activists and those whose opinions are founded, not on facts and figures or even a basic understanding of what energy transition really means, but on misinformation.
It shouldn’t come as a surprise. We are living in the age of virtue-signalling with glib soundbites from glibber politicians seeking to address fundamental and complex issues with 280 characters on Twitter. This is neither good for the economy nor for livelihoods.
For the last few years, political pontificating has smothered the opportunity for rational debate and proper long-term planning for energy transition. The journey to net zero will be challenging and complicated, and responsible production of hydrocarbons, coupled with innovation from the oil and gas industry, to deliver and reduce the cost of clean energy production, must be part of that journey if we are to succeed.
Despite strong fundamentals and growing global demand for energy, the anti oil and gas rhetoric has made the industry a much less attractive investment prospect. Investors and lenders feeding off that sentiment have turned away from the industry. But depriving its access to capital only increases the challenge of delivering a just energy transition and leads to price inflation.
Supporting and continuing to invest in our hydrocarbon industry to meet our ever-increasing energy needs is the only way to control costs and to guarantee energy security for the next 30 or more years. It should be a complete embarrassment to politicians of all hues that it has taken the tragic events in Ukraine for them to recognise, or be able to admit, this.
Unfortunately, this awakening is almost too late. The decision to pause work on Cambo was a terrible one on many levels: virtue-signalling gone mad and a failure of leadership from both the Scottish government failing to recognise the importance of the industry here, and one of the largest operators in the world bowing to public pressure. At the time, it felt that this was tantamount to sounding the death knell on new production in the UK Continental Shelf – new production crucial to protecting jobs and domestic energy security.
The UK is already heavily reliant on other countries to supply us with energy, and we pay billions of pounds every year for the privilege. Increasing our reliance on imported energy creates a real threat as we increase the risk of power outages and huge spikes in costs with the economic and social consequences that these bring.
Industrial inflation, increased prices at the pump and on heating bills will push more and more people into fuel poverty – not to mention the ultimate irony: that by increasing our imports of hydrocarbon energy, we’ll be increasing our carbon footprint significantly.
No-one denies the need for an energy transition. The oil and gas industry recognises the need for change and at pace. It has been cleaning up its act and actively leading the decarbonisation agenda. The recent ScotWind process for seabed leases attracted many traditional oil and gas businesses.
Among the winners are BP, Shell, TotalEnergies and Equinor, demonstrating, in some cases, greater investment in wind power than fossil fuels and underlining that their offshore experience and expertise will drive and accelerate the shift to greener energy.
But as politicians crow for windfall taxes, they should recognise that it is the cash generated from their traditional oil and gas businesses that these majors are using to fund their investment in wind assets for remarkably low returns which, in turn, require them to increase their investment in technology to further reduce the cost and drive competitiveness of the renewable industry.
But still the conversation lacks the balance and maturity required to deliver a long-term energy strategy.
There is fault on both sides – whilst one apparently has no interest in understanding the issues at play, preferring short-term actions and political point-scoring, the industry (and especially its biggest players) has failed itself.
The oil majors have run scared of the PR consequences of engaging in discussion about the challenge of energy transition and instead tried to talk up their renewable aspirations whilst allowing the green lobby to accuse them of greenwashing and dominate the media agenda around their core business.
They are now feeling the consequences. There is, however, still time for that sort of grown-up discussion, but it is running out.
Look at Norway, one of the greenest countries in the world, which is poised for another oil and gas boom and has recently announced the award of 53 new licences for exploration in its latest licensing round, with its energy minister stating that “exploration activity and new discoveries are crucial”. This is in direct contrast to a Scottish Government that has backed itself into a corner by confirming its opposition to new oil and gas fields.
The Norwegians understand the implications of hydrocarbon production, but they also understand the value of controlling their own energy supply, not to mention the economic benefits to be gained by remaining an energy provider rather than relying on others and simply pushing the problem of hydrocarbon production elsewhere in the world.
The war in Ukraine has starkly underlined the need to reduce reliance on imported gas from Russia and awoken governments and other stakeholders to the need for a more balanced debate on energy.
With its new strategy imminent, the UK Government has an opportunity to reshape our approach to energy that works for the economy, the environment, the workforce and consumers. This is welcome but it must be much more than a collection of meaningless soundbites and unachievable targets.
Nick Dalgarno, managing director of Piper Sandler – corporate finance advisers to the energy industry