OGUK Industry Conference: Deirdre Michie speech

June 4, 2019

Speaking to over 400 delegates at the OGUK Industry Conference in Aberdeen this morning, OGUK Chief Executive Deirdre Michie said:

Ladies & gentlemen, good morning and welcome, to OGUK's conference and exhibition for 2019: An Industry in Transition

I'm very pleased that so many of you have joined us here for what I hope will be an interesting and insightful 36 hours, where we consider the progress industry is making as it continues to emerge from one of the most challenging downturns, while positioning itself for a sustainable future that supports a lower carbon economy.

Four years ago, when I addressed this conference for the first time, before the possibility of Brexit or Trump had registered with anyone, none of us had any idea of the challenge and change that was to test us all at every level,

And that would take this industry to the point from which many thought it couldn't return.

But the sector's 'come back' is very much in progress,

Thanks to the resilience, courage and can-do attitude that has typified its success over the years and will be key to its sustainability going forward.

To help us consider all of this and more, I'm delighted to be joined in this opening session by Sam Laidlaw of Neptune Energy, Torgrim Reitan of Equinor and Jean-Luc Guiziou of Total,

Sam, Torgrim and Jean-Luc are three excellent leaders of companies epitomising this industry's transition whether it's because they are attracted to the competitiveness of the basin or are embracing and taking the lead in the energy transition,

Their thought-provoking views will lay the foundations for the focused and interactive programme that we have ahead of us with compelling and insightful industry leaders speaking and chairing our sessions throughout our time together.

I'd also like to thank Jean Luc and Total as our principal sponsor, for supporting us once again as well as of course all our other sponsors

Your backing for this key industry event is very much appreciated.

Ladies and gentlemen, ensuring we sustain our licence to operate while we transition to a lower carbon economy are key challenges for us.

I believe that there are three tests that we need to satisfy if we want to protect our licence to operate as well as simply do the right thing as responsible UK and global citizens.

One- Are we ensuring safe operations for our people and our organisations?

Two - Are our business models geared towards sustainability through thick and thin?

And three - do we proactively meet the expectations of the society we work in and for?

Indeed, as we look back over the last 4 years - the pace of change has been extraordinary and as we look ahead we need to stay focused on the things we can influence, deliver or change.

Because as Benjamin Disraeli said - when you are finished changing - you are finished -and this industry certainly is not.

So, when thinking about the society we live in and its expectations, another quote comes to mind,

('Until you start focusing on what needs to be done rather than what is politically possible, there is no hope. We can't solve a crisis without treating it as a crisis. We need to keep the fossil fuels in the ground, and we need to focus on equity. And if solutions within the system are so impossible to find, maybe we should change the system itself.')

These are the words of Greta Thunberg - an impressive young woman we can all take inspiration from.

A woman who wants to change the world.

I would like to reassure Greta- we are listening, because we want the world to be a better place too.

And while we believe that our industry's global contribution has improved the lives of billions of people, we are clear that climate change is a real and present danger that we must deal with together.

When Greta says, 'If solutions within the system are so impossible to find, maybe we should change the system itself.'

I would like to suggest that as the UK's offshore oil and gas industry has so many talented people, engineers, data scientists, remote vehicle operators, technologists and more

We can find and deliver the solutions needed while at the same time positioning ourselves to be at the heart of an energy system that also needs to change.

Whether it is by the sector working to reduce its operational emissions as well as supporting the advancement of low carbon and abatement technologies.

Indeed, along with our sector delivering from exploration through to decommissioning, it's already unlocking the energy transition with some operators extending their portfolios into other energies - Equinor -Total, Shell and BP.

And of course, the downstream and utilities sectors are doing a lot of work in this too.

This is why we welcomed the Climate Change committee report last month

Where it recommended that the UK set a net zero target for GHG by 2050 and by 2045 for Scotland.

This report provides a balanced and thoughtful blueprint towards a lower carbon future and I would commend it to those of you who haven't read it yet.

Its recommendations are rooted in practical and societal choices that we need to embrace as an industry and as individuals if we are truly to make a leading and constructive contribution to the future of our industry, our economy and our society generally.

The climate change committee also recognised that the indigenous offshore oil and gas industry needs to be a key part of a diverse energy mix going forward and is therefore not in competition with renewables.

Official figures show that production from our offshore industry will be needed to meet two thirds of the UK's oil and gas energy needs, while the gap between what we produce and what we need to heat our homes and fuel our cars is made up from imports, shipped from across the world often with a bigger carbon footprint,

It's why the Climate Change Committee report talked about 'energy sovereignty' and the need to make up that demand from domestic resources while we transition to a lower carbon future.

And our supply chain is already very much in action, using its transferable skills and expertise to service the needs of alternative energy companies from Global Energy to Wood to Aker Solutions.

So, while we continue to advocate with facts and evidence I appreciate that it can sound like corporate speak that doesn't have the emotion or the urgency that society and we, as part of society, are all feeling.

This is why Vision 2035, and Our Vision, Our Future campaign is set in the context of energy transition and not in isolation

It's about our industry supporting an accelerating energy transition through our people, expertise and infrastructure, while meeting as much of our country's oil and gas needs from home produced resources,

Where our world-class supply chain, anchored in the UK and with its international reach, adds value across the energy sector at home and abroad, developing technologies which help to decarbonise the economy

Delivering a diverse energy mix which can help us meet the UK's dual challenge of satisfying ongoing supply demands with a lower carbon footprint

Powering your iPhone- heating your shower - providing the screens for your computers or TVs or the glue to stick yourself to doors- unless you used a plant-based glue of course!

Indeed, anyone and everyone who wants to change the world for the better can work with us to help ensure a fair and just and managed transition and at a pace that will also be required.

And so today I can confirm that later this year we'll publish the road map which will set out how we can successfully deliver the vision and our industry's sustainable future, to ensure it continues to contribute to the country in terms of hundreds of thousands of jobs, security of energy supply, billions of pounds in taxes and investment levels, for decades to come.

So, if I have one ask of you today ladies and gentlemen, it is that you get behind our campaign - Our Vision Our Future and support our industry in delivering a sustainable lower carbon future.

So, if this is where we are heading, where are we now?

Well as we continue to emerge from the downturn our businesses are adapting to the new reality where an ongoing volatile commodity price,

Back down to between $60 and $70 with an outlook that remains in the $50 to $60 range means retaining a tight focus on budgets and looking for innovative ways of working that unlock opportunities across the basin.

It means sustaining and deepening the competitiveness that this industry has achieved through its own focus and endeavours as well as working well with both governments, regulators and the OGA to ensure a cohesive and comprehensive approach that is delivering results.

Production is up 20 percent over the last 5 years - costs are being contained at an average of $15 per barrel and production efficiency is up to 75% from the low 60s.

Our fiscal regime continues to be one of the most globally competitive and capital is being attracted back into the basin,

Over £3.2bn for 13 projects in 2018 with the same anticipated this year too.

The deals that are continuing to be done, Delek and Chryasor's being such recent examples of companies considering this to be a great place in which to do business

The momentum around exploration is building,

Although drilling continues to be at an all-time low.

Many E&P operators are cash flow positive for the first time in years - rebalancing their books and yes paying off debt and giving back to shareholders but also increasing their activity too.

Parts of the supply chain are starting to see the benefits but not all.

With margins remaining under pressure the sustainability of some areas of our supply chain is challenged and so some operators do have a choice.

And that is to ensure a better share and more balance in terms of the risk and return now or find yourselves and industry as a whole or paying for it sooner rather than later.

The supplier principles that we drew up earlier this year can be a key enabler to companies throughout the supply chain, addressing some of the issues that continue to challenge our industry in a constructive and mature way.

We will be encouraging our members to embrace them, and I urge everyone to get behind them and use them- what do you have to lose?

No one wants to see a return to boom and bust,

And this is where innovative projects and ways of working including the use of new technologies can unlock activity in a sustainable way and this industry has some great and increasing examples of this happening today.

And as we focus on our sustainability there will of course continue to be an important role for our politicians and regulators in ensuring a competitive and sustainable business environment,

Yes, indeed Brexit - no speech is complete these days without some sort of reference no matter how brief or colourful!

Our message to political parties of all persuasions remains the same - when it comes to Brexit, like every other industry, we need clarity and predictability, we need it sooner rather than later and we consider, that a deal outcome is in the best interests of this industry and the UK economy and society as a whole.

And so, ladies and gentlemen, those are two of our three tests - a sustainable industry, meeting the expectations of society, but what about safety?

When it comes to safe operations OGUK's most recent HS report shows a continuing improvement in people and process safety with record low numbers of reportable incidents 67% lower than 2001.

Concerted action to reduce hydrocarbon releases together with the HSE key programme initiatives has resulted in a continued decrease but the number of major releases while very small, appear to have plateaued.

Any release is one too many and the HSE rightly continue to challenge the industry and we are committed to working with them on this key area through process safety, audit and sustainable learning.

I'm pleased to announce today that we will host an HS and E conference in November and I hope you can join us

I'm sure you will agree that last year's successful Safety30 was also a very poignant reminder of why we must be constantly vigilant about the safety of our operations and our people.

Reflecting on the three tests I've outlined today,

Are we upholding safe operations for our people and our businesses? Yes, but we cannot and will not take this for granted.

Are our business models geared towards sustainability through thick and thin? Yes, indeed firmer foundations are in place - but there is always more to be done.

Are we proactively meeting the expectations of the society we live and work in?

No not really. We do need to step up and show leadership and this is why we need your active support for our vision our future campaign and the actual delivery of Vision 2035,

And so, ladies and gentlemen, we have much to be proud of and nothing to be complacent about given the journey we are on and our commitment to seeing it through

Wisdom is of course about knowing the right path to take, and Integrity is about following it.

And when it comes to safety, sustainability and our society we should be proud about what we can offer and humble in how we deliver it,

Thank you for listening to me - and now it gives me great pleasure to introduce our first speaker of the morning

Sam Laidlaw is a well kent face to this industry and his impressive bio is in the conference app that I would encourage you to download to get all information about the conference from the agenda to the delegate list to asking questions of your speakers and details of how to do this are in the programme.

Ends