The oil and gas sector is one of the UK’s major employers, but it has had a challenging time over recent years, amid dwindling North Sea reserves and a difficult economic climate. Employment levels in the sector have dropped from a high of around 450,000 in 2014 to around 300,000 today. Here, we look at the latest trends that will shape the industry as we go into 2021.
There is often a perception that sustainability is all about renewable energy like wind and solar, and that it has nothing to do with the oil and gas sector. This is a gross misconception, and a dangerous one. Forward-thinking players in the industry have placed sustainability high on their priorities list, because it is what the public expects. This can be achieved through cleaner extraction methods, better management of environmental impact and support for ecological causes. BP’s rebranding to “Beyond Petroleum” was all about conveying a cleaner image. Expect other major oil and gas companies to pursue similar strategies.
Focus on LNG
“Fracking is over and the debate has moved on.” These were the words of Energy Minister Kwasi Kwarteng in June 2020, and they seemingly drew a line under the UK oil and gas industry’s pursuit of shale gas. This will force the sector’s hand into focusing on the world’s abundant liquefied natural gas reserves instead. LNG is a lower-carbon product than shale, and its extraction does not have the same environmental impact. This makes it a winner in the court of public opinion, too.
There are many tasks in the oil and gas sector that are repetitive and hazardous. In other sectors, these might well have been automated many years ago. The industry is no first-mover when it comes to tech, but once one major company goes down a certain road, the rest soon follow. 2021 is likely to be the year we see a major shift towards automation across the industry.
Increasing labour costs
As suggested above, the oil and gas sector is one of the most traditional. However, the workforce is ageing and graduates are not flocking to join the industry. The big players have resorted to offering inflated salaries and benefits to attract young talent, and inevitably, this means overall labour costs are climbing disproportionately. This is likely to remain an important factor, even with technological innovations reducing the overall manpower demands, as the new technology will, in itself, require personnel with specialized skills and high salary expectations.
Over the past decade, oil and gas companies have deprioritised investment in infrastructure. However, recent months have seen a shift in strategic thinking, and this area is now getting the attention it undoubtedly needs. Infrastructure investment is not just about building new rigs and the like. It also means critically assessing and upgrading existing networks to improve efficiency, reduce operating costs and enhance sustainability. The financial rewards and positive reputational impact will make this too compelling a strategy to ignore in 2021.