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Response to Attenborough's climate warnings will determine future of oil and gas

Attenborough: “Things are going to get worse”.

So said the broadcaster in one of his recent interviews about the impact of climate change on our natural world.

He added: “The question is how much worse, and how quickly is it going to get worse? The speed is accelerating. Whatever we do now, it’s going to get worse. And unless we act within the next 10 years we are in real trouble.”

Attenborough is, of course, completely correct and our response to his warnings will inevitably determine the future of the oil and gas industry both here in the UK and around the world.

In economic terms such a challenging debate has to be had in the context of what you could lose and what you might gain.

At the moment and despite the recent oil price crash, the UK oil and gas industry, if not
exactly booming, is sort of holding its own.

According to some observers, global demand is showing the potential for a modest gain over the next year and UK production is higher than was anticipated only five years ago when many who should have known better were attempting to convince us that the UK oil and gas industry was in rapid decline.

In fact we’ve seen a reasonable number of new fields come on stream, some of which, including BP’s Clair Ridge, are going to be producing for quite a few decades.

There have also been some useful what I might call “fill in” discoveries that are going to be relatively easy and cost-effective to produce.

In addition, we now have some technically intriguing fields at the close-to-start-up stage, including Hurricane’s Lancaster asset, a basement reservoir that everyone will be watching like hawks.

If successful it is thought there are other similar opportunities both west of Shetland and even, maybe, in the North Sea.

Exploration though is still problematic. Nothing like enough is being invested in that part of the industry for me to be convinced the UKCS has a genuinely long-term future and that, I fear, is in part due to most of the new players on the block having very shallow pockets.

Or, in other words, they don’t have the financial clout to even start considering major exploration programmes.

That said, there are no real signs at the moment of any reduction in overall effort to maximise what we recover from the UK Continental Shelf.

Frankly, it’s as if climate change just wasn’t a thing. Few oil and gas chief executives and certainly not UK Government ministers will be wringing their hands over David Attenborough’s dire warnings.

In Norway, though, attitudes are now beginning to change.

Within the last few weeks the Norwegian Labour Party, under particularly strong pressure from its younger membership groups, decided to withdraw support for drilling off the Lofoten islands.

Labour isn’t in power so nothing will actually happen but it is nonetheless a significant shift in policy from a party that has traditionally been supportive of the oil and gas industry. And if they do get back into power the writing is seemingly on the wall for new exploration and production in Norway.

But it seems the Norwegian Labour Party are not the only ones who have changed their tune on oil and gas.

US District Judge Rudolph Contreras has blocked oil and gas drilling on more than 500 square miles in Wyoming, saying the government needs to take into account climate change impacts before issuing exploration licences.

It seems this isn’t the first event of its kind. A number of similar rulings have been made in recent months, all criticising the US government for the same thing.

Even the Governor of the Bank of England has commented that there are “risks for financial firms as governments accept the need to tackle climate change because banks that have lent to companies reliant on burning fossil fuels
run the risk of steep financial losses.”

Coincidentally, but proving the governor’s point, the Norwegian sovereign wealth fund, built on the back of the oil and gas sector, has dropped its investments in firms that explore for oil and gas.

But it will continue to maintain holdings in larger operators that have renewable energy divisions including of course Equinor, which is rapidly increasing its renewables portfolio.

Meanwhile other big energy providers such as EDF are leading the way. It has created “Hynamics”, a new subsidiary that will enable it to become a key player in the hydrogen sector in France and globally.

David Attenborough is right. Things are going to get worse. However, it’s not just the planet that’s going to suffer but we should be in no doubt that without a dramatic change in their culture and way of thinking, the oil and gas industry and, therefore, the bulk of the economy of the north-east of Scotland is going to be a
dead duck.

Dick Winchester is a member of the Scottish Government’s Energy Advisory Board.

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