DEPARTMENTS • OIL & GAS MARKETS
Ukraine war will not derail
Europe’s energy transition,
DNV analysis shows
Although oil and gas demand in the UK will likely still outstrip supply in the coming
decades, Wood Mackenzie notes there is signifi cant uncertainty in the numbers,
and the North Sea could still increase production to improve energy security.

5 levers UK can pull to increase oil and gas production
High commodity prices and Russia’s
invasion of Ukraine have called into ques-
tion the UK’s reliance on energy imports.

In response, the UK government is set to
unveil a energy security strategy. In a new
report , Wood Mackenzie examined the
levers the North Sea can pull to increase
production and argues indigenous oil and
gas still has a major role to play.

While UK demand for oil and gas will
continue to outstrip supply, there are wide
ranges of uncertainty, the report stated. In
2030, production will be between 0.6 mil-
lion and 1.6 million bbl/day of oil equiva-
lent (BOED) ; the range for demand is even
wider. “By 2050, UK North Sea production will
have largely ceased. But even in a net-
zero scenario, demand will persist, with
emissions being offset by carbon capture
and storage and nature-based solutions,”
said Neivan Boroujerdi, Research Director,
North Sea Upstream for Wood Mackenzie.

“Current levels of production could be
maintained for the next decade, underpin-
ning energy security and safeguarding
jobs. But the UK is sorely lacking in gas
and will be heavily reliant on imports in
all scenarios.”
The report sets out five levers to boost
production: execution, new greenfield proj-
ects, increasing recovery from existing
assets, exploration and the development
of contingent resource. If all economically
viable resources were to be produced, this
could deliver 5 billion BOE of new volumes
and $60 billion of investment, according to
the report. Greenfield projects like Cambo
and Rosebank offer the most immedi-
ate upside, but some require finance or a
change in ownership.

Wood Mackenzie also asserts that UK
shale is not the answer. “In-place vol-
umes may appear big, but public oppo-
sition, population density, infrastructure,
land access, flow rates and low recovery
rates all limit its commercial impact,” Mr
Boroujerdi said.

Europe’s energy transition will be
accelerated – with less fossil fuels
in the energy mix and lower green-
house gas emissions – because of its
pivot away from Russian gas, accord-
ing to new analysis from DNV’s Energy
Transition Research.

Their findings show that 34% of the
energy mix in Europe will come from
non-fossil fuels in 2024, 2% more than
the pre-war forecast. Overall gas use
will drop by 9% in 2024 compared with
DNV’s pre-war model run. The biggest
percentage increase is in solar, which
is expected to be up 20% by 2026. The
delayed retirement of some of the con-
tinent’s nuclear power plants is also an
important component of filling the gap.

Although some coal is needed in the
very short term to meet Europe’s ener-
gy demand, by 2024 postponed retire-
ments and higher nuclear utilization
will be important to cover the shortfall
of natural gas. Emissions from energy
will be 2.3% lower in Europe from 2022-
2030, compared with a pathway with-
out the Ukraine war. This is due to the
increased prominence of low-carbon
energy (renewables and nuclear), more
energy efficiency and, in the short to
medium term, lower economic growth.

Russia’s pivot East will not fully
compensate for reduced gas exports to
Europe because of limited infrastruc-
ture. In contrast, DNV estimates that
Europe itself will produce 12% more
gas in 2030, reflecting industry’s reac-
tion to higher oil and gas prices in the
short term and response to the pledge
from EU to deliver more gas. The role of
imported LNG is limited by regasifica-
tion capacity, with extra infrastructure
expected to take years to build .

Global oil/gas contracts up by 9% from 2020 to 2021, while contract value rose by 51%
Annual oil and gas contracts activity
increased by 9% in 2021 in terms of the
number of contracts and by 51% in terms
of disclosed contract value, according
to GlobalData . The number of contracts
increased from 5,750 in 2020 to 6,263 in
2021 , and the disclosed contract value rose
12 from $115.42 billion in 2020 to $174.21 bil-
lion in 2021. The analysis cites improved
crude oil prices and COVID-19 subsiding as
key factors that boosted activity.

Notable contracts include those for an
LNG project by Qatar Petroleum for the
North Field East Project , as well as Saudi
Aramco’s 16 contracts, with a combined
worth of $10 billion, for the subsurface
and EPC works for the development of the
Jafurah shale gas field .

Operation and maintenance represented
44% of the total contracts , followed by con-
tracts with procurement scope with 20% .

M AY/J U N E 202 2 • D R I L L I N G C O N T R AC T O R



OIL & GAS MARKETS • DEPARTMENTS
Energy talent survey finds potential for skills exodus to renewables sector
A whopping 82% of oil and gas profes-
sionals would consider leaving for another
energy sector within three years, accord-
ing to findings from the sixth annual
Global Energy Talent Index (GETI) . The
report by Airswift and Energy Jobline also
found that 54% would choose renewables.

Moreover, the talent migration is
already under way, with 28% of those who
joined the renewables sector in the past
18 months transitioning from oil and gas.

This is partly driven by rising concerns
over climate change, with ESG factors now
the second-biggest driver behind cross-
sector career moves.

A total 85% of those in the sector say
ESG concerns are now a factor in whether
to join or leave a company. Those oil and
gas majors that are slowest to adopt clean
energy could, therefore, be most at risk
of mass resignations, with 28% of survey
respondents reporting that their organiza-
tion has not changed direction to adapt
to the energy transition. With investors
increasingly spurning fossil fuels , profes-
sionals now rank the transition to clean
energy second only to COVID-19 as the big-
gest challenge to oil and gas over the next
three years.

On the other hand, oil and gas workers
awarded their companies an average 3.53
out of 5 stars for performance on envi-
ronmental issues, and 18% of people who
joined from another sector in the last 18
Key fi ndings from the new Global Energy Talent Index show that the oil and gas industry
should not underestimate the competition for talent from other energy sectors like
renewables, as well as from the technology industry. Source: Airswift, Energy Jobline
months came from renewables. Further,
89% of all professionals would consider
moving within the sector, indicating that
companies with strong ESG credentials
could attract workers from both within
and outside the industry .

Renewables salaries are also increas-
ingly attractive . A total 40% of renewable
professionals received a pay rise last year,
compared with 31% in oil and gas. And
only 11% of those in renewables saw sala-
ries fall, compared with 21% in oil and gas.

“ The (oil and gas) sector should continue
to promote its role in global development
efforts and as a bridge to clean energy ,”
said Janette Marx, CEO at Airswift.

Airswift and Energy Jobline inter-
viewed sector experts and surveyed 10,000
energy professionals and hiring managers
in 161 countries across five industry sub-
sectors : oil and gas, renewables, power,
nuclear and petrochemicals.

Wood Mackenzie: Russian-Ukraine war may slow global economic growth in 2022-2023
Global economic growth could slow to
2.5% year-on-year in 2022 and 0.7% in 2023
due to the Russia-Ukraine war, according
to Wood Mackenzie .

The company has produced a downside
scenario for the global economy, assuming
large spill-over effects from the Russia-
Ukraine conflict through transmission
channels and markets, some interruption
of energy and commodity flows, an energy
price shock causing recessions in the EU
and US, and pro-cyclical policy missteps
exacerbating matters.

“Energy and commodity prices could
fall as the global economic downturn takes
hold and the EU and US recessions bottom
out after four to six quarters when con-
sumption hits its nadir,” said Peter Martin,
Research Director. “The lag in reaching
the bottom of the economic cycle sees the
global economy take a bigger hit, relative to
the base case, in 2023 compared to 2022.”
In the scenario, Russia partially defaults
on sovereign debt worth $480 billion, with
contagion effects for the European bank-
ing system. However, this pales in com-
parison to the Euro crisis in 2011-2012,
and banks are now better capitalized to
weather losses.

Conversely, a sharp rise in energy and
food prices hurts industry, destroys demand
and erodes consumer purchasing power.

Global business confidence deteriorates
and investment contracts. Wages are fro-
zen before unemployment eventually rises
and consumption falls further. Concerned
about inflation, major central banks persist
with monetary policy tightening into the
recession and fiscal support is inadequate.

“We think a 15% decline in Russia’s
GDP this year is possible,” Mr Martin said.

“Over the medium term, however, Russia’s
economy will be forced to rebalance and
restructure.” He added : “ More importantly, the global
economy could be looking at more perma-
nent changes. If the COVID-19 pandemic
highlighted a need to shorten supply chains,
the war in Ukraine underscores the impor-
tance to have reliable trading partners.

These forces could lead to a lasting realign-
ment of global trade. The global economy
becomes more regionalized — shorter sup-
ply chains with ‘reliable’ partners. ”
D R I L L I N G C O N T R AC T O R • M AY/J U N E 202 2
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