Energy Focus Autumn 2023

Net-zero jeopardy

Political uncertainty, port infrastructure delays, grid flexibility problems, supply chain crunches and financial barriers are putting net-zero targets at risk. It is time for policymakers to face the truth!

VIEW

View from the top: Alex Grant

FROM THE EIC

5 Foreword

From the Chief Executive

6 View from the top Alex Grant, UK Country Manager for Equinor

10 News and events

Updates from EIC

12 Happy 80th Anniversary EIC!

Members and key stakeholders help celebrate eight decades of EIC

14 The big question How have leadership styles changed in the last 12 months?

18 Special report

Jonathan Dyble on the growing sense of apathy for net-zero

34 My business

Gustavo Brito, Global Digital Director, IHM Stefanini

30

Grid reform critical for net zero

ENERGY TRANSITION

22 The clock is ticking Professor Paul de Leeuw, Director of the Energy Transition Institute, Robert Gordon University

18

Net-zero jeopardy

RENEWABLES

24 Profits prove elusive in the clean energy transition

Sara Verbruggen

22 Powering up the workforce

OIL AND GAS

28 Is oil and gas recession-proof?

Sara Verbruggen

POWER

30 The power grid – bottleneck of the energy transition?

Tim Holt, Member of the Managing Board, Siemens Energy

NUCLEAR

Is nuclear in trouble?

Tim Yeo, Chairman, New Nuclear Watch Institute

Does boom mean recessionproof?

The Energy Industries Council 89 Albert Embankment, London SE1 7TP Tel +44 (0)20 7091 8600 Email info@the-eic.com

Chief executive: Stuart Broadley

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Editors Sairah Fawcitt +44(0)20 7880 6200 sairah.fawcitt@redactive.co.uk

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Account director Tiffany van der Sande

Production director Jane Easterman

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Picture editor Akin Falope

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Energy Focus is online at energyfocus.the-eic.com

ISSN 0957 4883

© 2023 The Energy Industries Council

Energy Focus is the official magazine of the Energy Industries Council (EIC). Views expressed by contributors or advertisers are not necessarily those of the EIC or the editorial team. The EIC will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.

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Stuart Broadley CEO

From the Chief Executive: In this edition, we ask the difficult questions around the net-zero transition: is apathy setting in? Have other pressures pushed it down the priority list? And what do the industry and other stakeholders need

It seems a long time ago that the seventh edition of EIC’s Survive & Thrive Insight Report was published, but it was only in July that we were among the first in the world to directly state that the world’s net-zero commitments around 2050 are now in jeopardy, with the evidence to back it up. Now, many are openly discussing this issue – most notably UK Prime Minister Rishi Sunak, who recently announced reversals to the country’s net-zero policies.

Still, no energy minister or head of state has gone as far as saying that they feel it’s time for a more serious, adult discussion about the realities of net zero – nor COP28, nor the International Energy Agency. No one is talking about how it is most likely that the agreed 2050 targets are not going to be met. Industry at large no longer believes these dates are achievable. Why? Lack of order books, lack of margins, lack of funding, lack of consistency of volume, and flip-flop environment and energy policies.

EIC’s members passionately believe that net zero is a necessity and the right thing to do. Increasingly, we are seeing that they are being realistic – they know that they cannot wait forever for policies to catch up with pledges, or for funding to catch up with posturing. Business leaders are starting to get on with the job themselves, no longer linking it to a 2050 date but instead taking the pragmatic and responsible actions that they can foresee and afford, which will eventually take the world towards net zero. This pragmatism is at the heart of the COP28 team’s language, too.

Inside this magazine, you’ll find these key topics discussed – as well as insights around such themes as the growing influence of oil and gas, the impact of a pending recession,

the return of boom and bust, the growth strategy of Equinor, one of the world’s biggest energy companies.

EIC will continue to push for the use of evidence in amplifying the voice of the world’s energy supply chain, so that we can balance energy transition with security and affordability but also investment and growth. They all go hand in hand. Our supply chain and our energy infrastructure are increasingly integrated with one another, not conveniently separated for policymakers to label ‘heroes’ and ‘villains’.

We continue to regard these times, this energy revolution, as the best of times in which to innovate and globalise; a once-in-ageneration market that business leaders are working hard to take advantage of. However, it is also a time for responsibility, for vision, for policy leadership and for industry clarity. The industry must do the right thing now, for the good of the planet and to satisfy the will of its stakeholders. This is especially true for its skilled staff, who are increasingly mobile, adaptable, selective and willing to take principled stances if they don’t believe in their leaders – both industry bosses and government ministers.

These times are some of the most challenging, but also the most exciting. What a time for the best engineers and thinkers to join the energy sector and help to steer us to a net-zero future.

Stuart Broadley Chief Executive Officer, Energy Industries Council

to do to get this crucial endeavour back on track?

View from the top

In 2022, we allocated 14% of our gross CAPEX to renewables and low-carbon solutions. Our plan is to increase that to 30% by 2025 and 50% by 2030

Alex Grant, UK Country Manager for Equinor

Alex Grant talks to Energy Focus about Equinor’s ambitious journey towards a sustainable and low-carbon energy future amid fears of recession

Equinor’s stated ambition is to continue supplying society with energy, with lower emissions over time, and to reach net zero by 2050. How is this ambition becoming a reality?

Recognising the global shift towards cleaner energy sources and the need to combat climate change, Equinor has integrated sustainability into its business strategy. We’ve set ambitious targets to reduce our carbon emissions and intensify our push into renewable energy.

Our activities in the UK show this ambition becoming reality. Our planned Rosebank development west of Shetland will have some of the lowest production emissions of any oil and gas field worldwide. We have three major UK windfarms, including Dogger Bank, the world’s largest floating offshore wind farm, and we are investing in a sustainable future by developing carbon capture and storage (CCS), hydrogen and battery storage. For every £1 we plan to invest in the UK in oil and gas, we aim to spend more than £3 in renewables, CCS and hydrogen.

Equinor plans to allocate more than 50% of the Group’s annual gross CAPEX to renewables and low-carbon solutions by 2030. Given the worsening delays in global green projects getting the go-ahead, is this ambition still achievable?

In short, yes – we believe our ambition is still achievable and we are on track to achieve it.

In 2022, we allocated 14% of our gross CAPEX to renewables and low-carbon solutions. Our plan is to increase that to 30% by 2025 and 50% by 2030. On the renewables side alone, we have Dogger Bank coming online in the UK, followed by Empire Wind and Beacon Wind in the US. We’ve made bolt-on acquisitions such as BeGreen in Denmark and Wento in Poland, and most

recently Rio Energy in Brazil. All of those will contribute to higher renewables CAPEX, along with accelerated activity in Poland, South Korea and elsewhere.

Less than 5% of the world's hydrogen and carbon capture projects have reached financial investment decision – how bullish are you about these technologies becoming a reality in the near future?

Equinor has been developing and using CCS technology for more than 25 years. We’re now pursuing new business models to make CCS commercially viable in the decarbonised energy systems of the future. For example, alongside Shell and TotalEnergies, we’re developing the Northern Lights CCS project on the Norwegian Continental Shelf (NCS), which will involve transporting CO2 from onshore industries to a receiving terminal by ship, and to permanent offshore subsea storage by pipeline.

Leveraging our R&D and innovation capabilities will be key in developing new energy solutions at an acceptable cost. We’re focusing on options to maintain oil and gas competitiveness in a low-carbon future, including in carbon capture, utilisation and storage, decarbonisation of natural gas through hydrogen value chains, and lowcarbon fuel transportation solutions. We’re also exploring synergies between renewables and oil and gas value chains.

Equinor is participating in several significant hydrogen projects, including ambitious plans in the UK. With developments in hydrogen technology, the potential for business and emissions reductions is promising. Continuing our decades of energy innovation, we’re participating in several projects to show how hydrogen can provide scalable and profitable growth opportunities in the future.

About Alex Grant

Alex Grant is Senior Vice President for Crude, Products and Liquids Trading and UK Country Manager at Equinor. He joined the company in 2017 as Senior Vice President for Global Business Development, overseeing mergers, acquisitions and divestments across the oil, gas and renewables portfolios. He moved to Equinor from investment banking at Jefferies, where he worked on mergers and acquisitions and financing transactions in the energy sector for 20 years. He holds a master’s degree in engineering from Oxford University.

Q&A Alex Grant: From the EIC

With the recent acquisition of equity in the US Bayou Bend CCS Project, does Equinor see the US market moving faster than other competing markets?

Bayou Bend is Equinor’s first announced low-carbon solutions project on the Gulf Coast and is positioned to be one of the largest CCS solutions in the US for industrial emitters, with gross potential storage resources of more than a billion metric tonnes.

Entering Bayou Bend strengthens our low-carbon solutions portfolio and supports our ambition to mature and develop 15 to 30 million tonnes of equity CO2 transport and storage capacity per year by 2035. Our experience from developing carbon storage projects can help to advance decarbonisation efforts in one of the US’s largest industrial corridors.

The US’s Inflation Reduction Act will encourage investment in the next generation of clean energy technology, creating industrial demand that will speed up much-needed innovation and lower costs to make US projects more globally competitive.

Equinor is showing great intent in delivering offshore wind capacity around the globe. What

needs to be done to scale up supply chain capabilities to deliver the projects in a cost-effective way, and can the industry really deliver subsidy-free offshore wind farms?

To scale up the offshore wind supply chain’s capabilities while protecting the focus on cost, particularly for mature markets such as the UK, we need to rethink how we enable and stimulate the supply chain. To date, the Contracts for Difference regime in the UK has been a tremendous success in contributing to offshore wind’s cost decline to price levels that are cheaper than most other sources of electricity generation. We’re building Dogger Bank under this regime. However, the industry has reached a level where suppliers are struggling to

deliver projects, particularly in the context of a globally constrained supply chain in raw materials, components and vessel availability. To achieve the offshore wind ambitions of the UK (50GW by 2030) and Europe (300GW by 2040), supply chain capability will need to increase. To deliver the capability, the industry will need to deliver on its targets while protecting the viability of projects – there can’t just be a race to the bottom on cost as the criterion for winning leases.

Equinor’s exploration strategy is to drill between 20 and 30 exploration wells each year, moving forward. Which countries are you most excited about for future production, and why?

Equinor has already built a strong position in some of the world’s most prolific oil and gas provinces, including the NCS, the US Gulf of Mexico and Brazil, which are our core areas for exploration. On the NCS we prioritise near-field exploration in addition to selected highgraded step-outs that could have material or play-opening potential. Our ambition is to create superior value every year, primarily in high-graded prolific basins, by identifying and accessing subsurface sweet spots and safely drilling a high-quality portfolio of cost-efficient wells.

Why would you say renewables are still valued so highly by the finance markets?

Valuation is not just a matter of looking at the cashflows forecast to be generated by an asset. It also has to factor in the discount rate, or the risk applied to those cashflows. The discount rate depends on a number of elements, including the interest rate (which disproportionately affects lower-risk assets) and the longevity of those cashflows as part of a business’s sustainability. Clearly, renewables and low-carbon fuels have a longer lifespan than oil and gas assets. Rising interest rates have meant that valuations of renewables companies have come down recently. Whether they have come down enough to reflect the different impact of rising interest rates on renewables versus oil and gas – that’s open to question.

We’re focusing on options to maintain oil and gas competitiveness in a low-carbon future

Equinor’s operations and maintenance base in the Port of Tyne will serve Dogger Bank Wind Farm – the world’s largest offshore wind farm

Would you describe the current oil and gas market as booming, and if so, what are your views on the likelihood of a bust?

The oil and gas market is cyclical by nature. For the rest of the year China will be key to crude oil demand while OPEC and Russia try to control the supply side. There are constraints to refinery capacity, and in most regions oil stocks are low as the market has been in backwardation. But China is sitting on record crude stockpiles, which provides flexibility.

The European gas market has stayed loose, despite supply concerns prompted by a potential strike of Australian liquefied natural gas workers. Demand has been fairly weak and the EU has already hit its storage filling target. Asian gas inventories are quite high, while in the US, strong production is keeping the market well supplied and inventory growth signals market looseness there as well. We expect some tightening in gas markets towards the winter as seasonal demand kicks in.

Are you expecting a global recession and, if so, how likely is it that this will significantly hamper Equinor’s performance?

There are several challenges facing the global economy, but I don’t expect a global recession in the near term. While momentum may be slowing, inflation is on a declining path in most economies.

Tight labour markets and low unemployment are supporting consumer spending and dampening some effects of higher household costs. Global growth increased from 2.4% year-on-year in Q1 2023 to 2.8% in Q2 2023, and we expect it to be moderate in the near term. Downside risks include the potential for the Chinese economy to underperform, failure to bring down inflation, the resurgence of financial market stress, increased debt distress given high borrowing costs, worsening geopolitical tensions and further geoeconomic fragmentation.

What do you hope COP28 will deliver in a meaningful way?

We hope COP28 will be an opportunity to accelerate the industry’s contribution in addressing the climate challenge: both as a platform for collective ambition-setting for carbon-intensive sectors such as oil and gas, and as a forum for public-private engagement on policy frameworks and tangible projects to accelerate decarbonisation and energy system transition.

There are several challenges facing the global economy, but I don’t expect a global recession in the near term

Dudgeon Offshore Wind Farm, located off the coast of Cromer in North Norfolk

news&events

Conferences from EIC coming up in 2023

ADIPEC 2023

Date: 2–5 October 2023

Location: Abu Dhabi, UAE

About the EIC

Established in 1943, the EIC is the leading trade association for companies working in the global energy industries.

Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require.

As a not-for-profit organisation with offices in key international locations, the EIC’s role is to help members maximise commercial opportunities worldwide.

Events

EIC LIVE events

EIC has a varied, packed and exciting agenda for the coming months. Members and industry peers from all energy sectors will be able to connect with us worldwide, whether at ADIPEC in the UAE, our trade delegation to Poland or the World Nuclear Exhibition in France.

See you there!

To discover other upcoming events, including webinars, and stay updated remember to check out our calendar at www.the-eic.com/events/calendar.

Why attend? EIC returns to ADIPEC once again to host the UK Pavilion. Having taken part in ADIPEC for more than 20 years, we have seen how the event has gone from strength to strength – emerging into one of the world’s most influential energy events. It remains a strategic and vital meeting place where professionals convene to engage and identify the opportunities that will unlock new value in an evolving energy landscape.

With 80% of attendees being decision makers, purchasers or influencers, ADIPEC is an exceptional opportunity for businesses to network with existing and new customers, and to review the services, products and solutions that will enhance performance, increase efficiencies and optimise costs.

If you’re attending ADIPEC this year, please do visit us! Contact internationaltrade@the-eic.com to find out more about our schedule during the event, and visit www.the-eic.com/ Events/Exhibitions/ADIPEC2023

Offshore wind trade delegation to Poland

Date: 10–12 October 2023

Location: Warsaw and Gdynia, Poland Why attend? With around 7.5GW set to come online by 2030, Poland has become a hub for supply chain opportunities as it continues to make strides towards becoming a well-developed market.

By joining EIC’s trade delegation to Poland, delegates will meet key

UPDATES FROM THE ENERGY INDUSTRIES COUNCIL

local players during organised group meetings in Warsaw, participate in briefing sessions presented by qualified speakers with in-market experience, and attend a networking reception. Additionally, the delegation will visit the BaltExpo in Gdansk.

If you would like to join this delegation or would like more information, email internationaltrade@the-eic.com, and visit www.the-eic.com/Events/ OverseasDelegations/OffshoreWind TradedelegationtoPoland

World Nuclear Exhibition 2023

Date: 28–30 November 2023

Location: Paris, France

Why attend? EIC will manage the UK Pavilion at this year’s World Nuclear Exhibition (WNE), the leading international event for all players in the civil nuclear industry, which brings together professionals from the entire global value chain.

Held in Paris every two years, WNE attracts more than 600 exhibiting companies, 40% of which are international, and which work in more than 70 activities that cover the industry’s entire value chain. A key event for the civil nuclear industry, WNE will feature the sector’s leading French and international companies, as well as many young, innovative companies in the nuclear energy startup space.

If you are interested in exhibiting with us, contact the team for more information by emailing internationaltrade@the-eic.com.

Reports

EIC Insight Report: Survive & Thrive VII

The seventh edition of the Survive & Thrive report provides warning signals of policy challenges and shows a fast-changing global energy landscape. Its unique research approach incorporates extensive interviews with the leaders and senior executives of 96 energy supply chain companies from around the world.

The report highlights that, despite growing demand and ambitious net-zero pledges, the energy supply chain is shifting into oil and gas, triggered by a lack of consistent and profitable work in green projects. This raises concerns that net-zero 2050 commitments will be delayed. Oil and gas markets are also experiencing a period of significant growth, which suggests that oil and projects are more likely to proceed with total funding than renewable and transition technologies.

This edition seeks clarity on the talk of a skills crisis, instead suggesting that businesses are largely still able to meet growth commitments with their resources, and worry more about a future growth spurt when the green revolution does happen.

EIC Country Report: Qatar

Qatar maintains a robust emphasis on its oil and gas activities, which are pivotal in supporting the energy transition. This is primarily attributed to its substantial reserves of natural gas, widely acknowledged as an acceptable fuel for transitioning to cleaner energy sources.

The country is currently putting a lot of effort into developing the North Field following the lifting of its moratorium on new gas export projects from the area. Additionally, it has engaged in several long-term agreements with other nations, establishing sale and purchase arrangements for the provision of liquefied natural gas.

Discover the latest developments in Qatar’s oil and gas, power and renewables sectors, including information on who each sector’s key players are and advice on doing business in the country.

EIC Insight Report: Europe OPEX

Policy and legislation are driving renewable capacity growth in Europe as countries prioritise green energy sources to reduce carbon emissions and move closer to net-zero emissions. Each country has its own carbon emission target, as well as targets for specific energy sources.

NEW REPORTS OUT NOW

Access the report for free to explore how our members are consistently thriving, innovating, growing, and sharing their expertise and valuable insights in a dynamically shifting market.

We have seen major growth in onshore wind, solar and hydroelectric capacity across Europe in the past 12 months. Together, these energy sources produce 92% of Europe’s renewable energy. This report provides an overview of European countries’ progress in transitioning to renewable energy, as well as where growth in the renewable market will take place in the next five years. It covers the EU’s 27 member states and 10 other countries in Europe.

Learn more about these and other publications and how to access them at www.the-eic.com/MediaCentre/ Publications/Reports.

Happy 80th Anniversary EIC!

This year marks the EIC’s 80th anniversary, and Energy Focus could not be more excited to celebrate all that EIC has accomplished in collaboration with members, partners, employees and friends. It is because of their continued support that EIC has been able to evolve continuously since its founding.

To celebrate this great achievement, we asked some of our key stakeholders around the world for their reflections on EIC’s 80th anniversary. To keep the celebrations going, we will share all their kind words and congratulatory messages in every edition of Energy Focus this year.

What an achievement for any members organisation to celebrate 80 years in existence, but especially one that has supported its members within the volatility of the energy sector.

During its 80 years, EIC has seen many changes and has been on its own transition. From supporting conventional energy production to informing members about the economic and geopolitical factors that influence and secure the way we source sustainable energy, the EIC team’s wealth of collective knowledge enables members to learn and identify future business opportunities.

As we move into a new era for energy production, I am sure that EIC will continue to advise and support us on some of the greatest challenges we are facing, helping us to adapt our thinking and identify new opportunities to support a sustainable future.

I view the EIC team as an extension of the BMT team, helping us to secure future work, ensuring we are aware of industry trends and always interacting with us in a positive and helpful way.

Congratulations, EIC, for 80 years of supporting your members!

Louise Ledgard, Global Business Development Director at BMT and Non-Executive Director at EIC

EIC is a bastion of British expertise and ingenuity, offering skills and networking opportunities that attract the best and brightest from across the global energy sector.

I have had the pleasure of working closely with EIC, which, in its 80-year history, has played a critical role in our energy security and in developing the jobs of the future – I expect that to continue for years to come.

Minister Graham Stuart, UK Minister of State for Energy Security and Net Zero

I would like to extend my warmest congratulations to EIC as it celebrates its 80th anniversary.

For 80 years, EIC has helped to bring together the energy industries across the globe and assist the supply chain through intelligence, events and networking. The growth story has been impressive, given the sheer numbers and variety of members covered today – for example through the SupplyMap database and the growing community of players that operate in ‘new energies’ and renewables.

Congratulations to EIC on its 80th anniversary. The energy industry has seen significant changes over that time – including the emergence of nuclear power, and a growing awareness of the climate impact of unchecked fossil fuel use – but EIC has consistently kept pace on behalf of its members.

It’s a pleasure to work with the EIC team to support companies through the energy transition. We have helped many manufacturers to expand their capabilities from oil and gas to win work in nuclear and other low-carbon markets, and we look forward to continuing collaboration on the road to net zero emissions.

Andrew Storer, CEO, Nuclear AMRC

As a trade association working across all energy sectors, EIC plays an important role in helping the UK supply chain to seek out and connect with global business opportunities. It has been a valued partner of the Government, particularly the Department for Business and Trade, for many years, and we have worked together closely on many important initiatives, including the Energy Exports Conference.

I am confident that EIC will continue to be a champion for the energy sector, and I wish you all the best for your continued success.

Rodney Berkeley CBE, Director for Sustainability and Infrastructure at the Department for Business and Trade

The market intelligence shared through the databases and regular briefing sessions is an excellent source of information to serve Petrofac and its peers as we navigate global markets and projects. We have found EIC to be flexible and approachable as it continually innovates and remains relevant with its offering. This agility is important as we enter an exciting era for the energy industry with its complex dynamics of net zero and energy security dominant in almost all international oil and gas-rich markets.

Martin Layfield, Engineering Consultancy and Global Growth Director at Petrofac and Executive Director at EIC

The BIG question

How has your leadership style changed in the last 12 months?

With COVID a distant memory, when it comes to leadership in a changing and booming energy market, the latest EIC Survive & Thrive Insight Report reveals that business leaders now have a much more straightforward mindset. As attention turns back to the job in hand, how have leadership styles changed in the last year? Energy Focus puts the big question to three members

Ann Johnson Business Development Director at Blaze Manufacturing Solutions

You would think that having a company that has successfully diversified across four markets, with key clients firmly established within each sector, is a success in its own right – but coupled with an order book that stretches into 2030 and an existing sales pipeline of more than £50m, it seems that there are challenges in every quarter.

The need for multiple disciplined staff is essential to success, along with tight planning and business controls, which have become the new priority. Financing multiple types of projects means forecasting cash flow is even more key. The markets outside oil and gas are more litigious, with complex terms and conditions and multiple external audits, making your health, safety, environment,

and quality manager’s head spin. Never has the need to share knowledge within the company been more key to success.

On the plus side, we can now be more selective over who we tender to, ensuring we successfully give all four sectors equal attention rather than chasing the golden fleece. Don’t get me wrong, we have kissed a lot of frogs, but we are on the other side and it’s all thanks to the improved contract controls we have in place. There is never time for complacency.

Blaze Manufacturing Solutions Ltd is a privately owned business providing technical safety and loss prevention solutions in the oil and gas, renewables, nuclear, mining, commercial and industrial sectors. The company provides everything from the front-end definition of concepts, detailed design, supply and installation, and the commissioning and maintaining of active fire extinguishing systems and fire alarm systems both in the UK and internationally.

Hugh Fraser

Managing Partner at Hugh Fraser International (HFI)

First, during the past 12 months, HFI’s management style has undergone significant transformation, driven by the rapidly evolving business environment.

Second, we have shifted from survival tactics to growth tactics – talent

We can now be more selective over who we tender to, ensuring we give all four sectors equal attention

acquisition, know-how development and embracing cutting-edge software technologies. The COVID-19 months, time rich for planning, have now moved into action days for implementation.

Third, an uncompromising emphasis on results, solutions and service levels for clients, and with a fresh look at differentiation and unique selling points. We cannot be complacent that past successes will be replicated in the future.

Fourth, a stepped diversification outwards from our petroleum technology roots towards energy transition technologies via an initial focus on oil and gas decarbonisation, rather than a headlong charge across turbulent unprofitable waters. Strategy is the hardest management task to get right but the key to success is when the strategic decisions are optimised.

HFI supports clients to establish, expand and divest their international businesses through strategic, value-added consulting and legal services, combining specialist know-how, connections, local partners and execution expertise. Its focus is on ventures which combine advanced energy technology and know-how with opportunities in the key territories of the Middle East region, including joint ventures, acquisitions and divestments. HFI’s clients are principally private equity-backed companies driving the energy transition.

Obehi Ojeaga

General Manager, Business Development and Corporate Affairs at Nigeria Machine Tools

The energy sector is a significant contributor to the Nigerian economy. It has undergone developments and challenges during the last 12 months that have shaped our business. As the largest oil producer in Africa, Nigeria’s production levels have been fluctuating due to various factors, including global oil price volatility and domestic security challenges, subsequently affecting industry performance.

With the energy markets evolving, we have embraced a more adaptable and agile approach. The sector requires well-informed and strategic decisions, which has led to a big shift towards a more data-driven approach, utilising market trends and insights to identify growth opportunities, re-evaluate current business strategies and allocate resources effectively. Consequently, the activities coming upstream in the sector, geopolitical events and policy reforms/ changes have led to an increase in stakeholder involvement and collaboration. We have focused on building strong relationships with key stakeholders, such as suppliers, customers and regulatory bodies, to ensure effective partnerships and navigate market challenges in a collaborative way.

In order for us to focus on the future, promote our core and strategic vision, drive change necessary for organisational success and ensure sustained growth and improvements, we have had to embrace a hybrid of innovative and collaborative ways. This involves fostering a learning culture within the organisation, encouraging continuous skill development, technology and upskilling employees to adjust to market changes, thus promoting

a flexible work environment to respond quickly to emerging opportunities.

Finally, our transformational strategies have enabled us to boost productivity, inspiring employees to achieve more by tapping into their potential. It has created a new level of motivation where competencies are identified, enabling us to mentor for better results where gaps exist. In the past 12 months, we have achieved remarkable creativity in our workforce, which has informed our business prospecting activities in the face of challenges and enhanced our processes and efficiencies – thereby elevating opportunities for growth.

Nigeria Machine Tools is an integrated industrial engineering, manufacturing and technical services company offering precision engineered products and services to meet operation and project needs across various industries, including the oil and gas, defence, maritime, construction, manufacturing and telecom industries. Originally set up predominantly to produce machine tools, the company has since metamorphosed into a dynamic organisation creating sustainable value by taking strategic advantage of its strengths and promoting a pedigree found on quality consistency, professionalism, expertise and trust.

We have shifted from survival tactics to growth tactics – talent acquisition, know-how development and embracing cuttingedge software

The sector requires well-informed and strategic decisions, which has led to a big shift towards a more data-driven approach, utilising market trends and insights

Every gamechanging project starts with an idea - Kent Consulting brings that idea to life

When problems are solved with technical ingenuity and risk-based solutions, profit flows faster. But every industry-defining move must be built on a strong foundation... consultancy which reaches beyond the obvious to deliver value across the entire asset lifecycle.

From idea to implementation

We assess, analyse, determine and develop solutions through a structured process – from a clean sheet of paper through to project execution. We define the minutiae of every investment idea and make it a reality – bringing together bespoke digital tools with unmatched engineering capability.

This is how we optimise the full engineering chain: not just through increased productivity, but a focus on cost, risk, productivity, and sustainability and decarbonisation.

We do this across each engineering stage, covering concept and feasibility, FEED and detailed engineering, and O&M and late-life management solutions.

Multi-discipline engineering & consulting services across the full asset lifecycle

We design with the end-in-mind ensuring a seamless and smooth transition through each phase of the project lifecycle from concept to execution and ongoing maintenance across both greenfield and brownfield.

From independent consultancy advice or integrated services, we are with you every step of the way.

Add the industry’s brightest minds to your team

When you find a partner you trust, you feel confident in every technical and execution choice you make. And when you actually enjoy working with them, that’s when you know you’ve got the right people on your side.

A partner who understands you Innovation first

A transformative idea is one thing. Turning it into a commercial success is another.

Bolstered by diverse expertise and a suite of industry-leading tools, we support you to deliver with certainty. We know how to bring carbon-friendly change to your assets and will always do right by you and the planet. And, of course, every recommendation we make is safe, actionable, and cost-effective.

There’s always a challenge to solve, a process to improve, or a new technology to bring to maturity. This need to innovate doesn’t just drive your performance – it builds resilience, and we are investing in automation and improved data insights to make this happen.

It’s also about the role you’ll play in shaping the future of energy. We can’t think of anything more important.

Less cost. More control. Expertise at every phase

Weak processes lead to overspend and lack of clarity. So we developed a structured approach to keep risk in check –and you firmly in control. This is transparency in action. Our clients expect nothing less.

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Time for policymakers to face the truth about net zero

Is the energy sector in danger of becoming alienated from net zero? Could a lack of urgency, a hesitance to take risks and unwillingness to be the first mover in the supply chain threaten the energy transition journey?

There is no doubt that momentum and enthusiasm for net zero has been tested by recent events. The financial shocks caused by the pandemic and Russia’s invasion of Ukraine have raised questions about what societies can afford to do, both economically and in terms of short and longterm energy security.

EIC data also suggests that a degree of apathy is starting to kick in. In 2021, 30% of member companies featured in the annual Survive & Thrive report were involved in energy transition stories. The latest two editions (2022 and 2023) have seen this figure drop to 22%.

Why is there net-zero apathy?

Alongside Survive & Thrive, EIC has conducted dozens of panel discussions and interviews involving hundreds of industry stakeholders –and based on these conversations, it is clear that vanishingly few in the supply chain believe that the UK will hit net zero by 2050.

Furthermore, EIC members report that they are not seeing energy transition and renewable sector work come through onto their orderbooks.

This is fed by a range of challenges, from port infrastructure delays and supply chain crunches to financial barriers caused by higher interest rates and inflation, which is causing projects previously bid to become loss-making with low margins. Meanwhile, finance is generally more difficult to come by, with investors looking for lower-risk, bankable developments.

Investment data backs this up. Only 8% of the world’s offshore wind projects that have been announced and are currently open have so far been funded. In addition, just 3% of the world’s hydrogen projects, 2% of the world’s carbon capture projects and 1% of the world’s floating offshore wind projects are funded.

With such little investment activity happening, many are naturally asking: is net zero is unaffordable?

Sverre Alvik, Programme Director of DNV’s Energy Transition Outlook, says that while cost might be perceived as a barrier to reaching net zero, from a societal point of view this is not the case.

“The transition is affordable in the sense that it represents a lower share of global GDP than the present energy system,” he explains. “The challenge, however, is that overall costs to reach net zero are higher than those associated with the business-asusual trajectory. Those higher costs may be used as an excuse for inaction.”

John Gummer, Lord Deben, who served as the chair of the UK’s statutory Climate Change Committee, believes that the key to overcoming hesitancy and restoring momentum lies in investing in the grid.

“The grid must be changed from one that puts out electricity from large central stations to one that is able to pick up electricity from a very dispersed group of generators, from people’s PV cells on their roofs right the way through to nuclear power stations, he explains.

“It’s a revolutionary change which has got to take place, and it’s going very much too slowly.”

Indeed, the pace of action, as has been underlined by investment data and EIC survey findings, is underpinning doubts about the likelihood of reaching climate targets.

“This is no longer just a personal view – doubts about net zero by 2050 are increasingly based on data and evidence,” says EIC CEO Stuart Broadley. “It is absolutely time for policymakers to bring all of the key stakeholders together again, to put their hands up and say, ‘these are the legally binding targets that we set and we passionately, desperately want to hit’.”

The gap between policy and reality

Lord Deben says that the grid issue, and the importance of grid infrastructure, has been acknowledged. However, he

Based on data and sentiment obtained by the EIC from surveys, discussions and conversations from across the energy supply chain, there is a growing sense of apathy and doubt about the viability of reaching net zero by 2050, writes Jonathan Dyble

The policy that we have does not move fast enough, nor is it complete enough, for us to see the detailed way in which we reach 2050. What we need is urgent delivery. The government must realise just how serious this is, and how important its actions are

Lord Deben, former chair of the Climate Change Committee

Is net zero being left behind?

The struggles of transforming ambition into reality

Financial investment decision (FID) rates are key indicators of whether projects are moving beyond policy ambition into industrial reality. EIC data starkly highlights that transitional technologies have much lower FID rates than oil and gas, as developers struggle to secure the necessary finance and offtake agreements for clean energy projects.

also states that the UK is not aligned across the spectrum of government, with departments lacking concrete strategies on how to decarbonise key sectors such as steel and agriculture.

So, while headline targets exist, the detailed policy frameworks and ideas needed to hit them are lagging behind. Many in the private sector believe that the current political community is failing to acknowledge this reality.

“Creating a cohesive global policy is the most obvious hurdle that has proven insurmountable,” says Alvik.

“As well as being more ambitious, policymakers must be more pragmatic. The passing of every day without a global net-zero plan diminishes the likelihood of reaching the Paris Agreement. In our pathway to net zero we lay out how this is possible, but it requires a massive and immediate policy response.”

This policy hesitancy is fuelling a dynamic that EIC refers to as ‘net-zero jeopardy’.

“How broad is the gap between policy and reality?” Broadley muses. “We think it is getting wider by the day. And every day that policymakers do not put their hand up and say we have problems is another day where the gap gets bigger.

“What surprises me in the political energy space right now is that I don’t know of a single energy minister around the world who has currently accepted in a public arena that their own net-zero country commitments are at risk. It feels like it’s too much of a political hot potato for any one country to be the first to say they are in trouble.”

Broadley further outlines that the situation is reaching the point where industry leaders no longer believe policymakers or even listen to them. This is extremely concerning, not least because it could result in a disconnect between investment and policy.

Source: EICDataStream – % of projects funded 2023–28

Getting back on track

To reach net zero, all stakeholders need to be aligned with the same concept of reality. Together, politicians, enterprises, investors and other energy sector protagonists need to foster an enabling framework that supports partnerships, R&D and sustainable practices. A logical place to start is to develop a reliable and robust way of measuring net zero progress. Worryingly, the path to 2050 is not being properly tracked, meaning stakeholders up and down the value chain have very little to hang their hats on and base strategies around.

That the journey towards net zero has to happen is widely acknowledged as essential. Solving the climate crisis, energy security in a volatile world, economic prosperity – these critical issues all hinge on a successful energy transition. If net-zero apathy is to be overcome, now is the time for policymakers to get on track, listen to industry operators and properly align themselves.

“I am absolutely clear that net zero is achievable by 2050,” says Lord Deben. “It was laid down on the basis that it was achievable, it could be done – and it still can be done.

“The gap between policy and reality is fundamentally a gap of time. The policy that we have does not move fast enough, nor is it complete enough, for us to see the detailed way in which we reach 2050. What we need is urgent delivery. The government must realise just how serious this is, and how important its actions are.”

Alvik agrees, adding: “If we are to achieve net zero by 2050, then the world needs get onto a war footing. Massive, early action to curb record emissions is critical. No new oil and gas will be needed after 2024 in high-income countries, and after 2028 in middle and low-income countries. It has to happen now.”

Without implementing more robust and legally enforceable net-zero policies, it is probable that climate targets will not be met. In a new study, Imperial College London reveals that only 12 out of 35 net-zero policies are legally binding. Increasing this number will enhance the chances of these policies enduring over the long term and spur concrete actions

According to the UN’s World Meteorological Organization, July 2023 was the hottest month on record, affecting millions of people around the world. The changing weather patterns and associated heatwaves, wildfires, floods and droughts are the harsh reality of climate change and will now be a common feature for the future for our planet.

Against this backdrop, governments and society are facing increasingly stark choices on how to prevent, mitigate and prepare for the worst impacts of the climate emergency.

Net-zero targets at risk

In 2022, the UK government published the British Energy Security Strategy. This wide-ranging strategy document outlined the country’s ambitions in terms of offshore wind, hydrogen and carbon capture and storage by 2030 and 2050 to

meet the legal obligation of being net-zero by 2050 (2045 in Scotland). Successful delivery assumes the development of 50GW of installed offshore wind, 10GW of hydrogen production capacity and 30m tonnes of carbon capture and storage capacity per year by 2030. The Scottish Government has also published its draft energy strategy, which is currently under consultation.

Although the UK has been a climate leader among its international peers, the rate of progress towards delivering the nation’s 2030 greenhouse reduction targets (68% reduction versus 1990 baseline) and 2035 (78% reduction) is now seriously at risk.

It is estimated that close to £200bn will need to be invested in the offshore energy industry alone over the remainder of this decade to help underpin the 2030 targets. However, Offshore Energies UK – one of the industry trade bodies – projects that half of this spend, £100bn, is currently at risk due to political uncertainties.

Powering up the workforce

The latest report by Robert Gordon University’s Energy Transition Institute, Powering up the Workforce, highlights that delivering the ambitions outlined in the British Energy Security strategy will see the UK’s offshore energy workforce numbers rise from around 150,000 today to close to 225,000 by 2030. However, it also notes that if these ambitions are missed, the number of industry jobs could fall to as low as 130,000. A combination of reduced investment in oil and gas, a slow-down of investment and activity levels in renewables, and less ambitious UK local content targets for new activities could put up to 95,000 offshore energy jobs at risk by 2030.

Oil and gas skills key to net zero

The report also highlights that retaining the offshore oil and gas supply chain, its workforce and associated skills over the next five

The clock is ticking

To deliver on net-zero ambitions, we need to build a net-zero energy workforce. Investment, collaboration and harnessing the power of the offshore oil and gas industry is crucial. But time is running out, says Professor Paul de Leeuw, Director of the Energy Transition Institute at Robert Gordon University in Aberdeen

years will be crucial to delivering on the net-zero ambitions while ensuring security of energy supply. This is because there continues to be limited capacity for the UK offshore renewables sector to host and accommodate the quantity of skilled oil and gas workers impacted by the predicted decline in the hydrocarbon sector until later this decade.

With the offshore energy industry currently representing close to one in every 200 jobs in the UK and around one in every 30 jobs in Scotland, the sector has a critical role to play in leading the transition to a lower carbon future. However, with the high concentration of oil and gas workers in the North-East of Scotland, this workforce could be disproportionately impacted if Scotland is not successful in fully capturing the full range of offshore energy activities and UK local content opportunities.

A numbers game

The right interventions at the right time

Even though the UK represents less than 1% of the world’s population and around 1.2% of the planet’s greenhouse gas emissions, the nation should build on its proud energy heritage and continue to show global leadership and be an exemplar in the net-zero space.

The UK possesses all the attributes and resources to realise the ambitions set out in government strategies and forwardlooking industry programmes. Although the clock is ticking, with cross-party political and industry collaboration, the UK and Scotland can achieve its strategic goals to deliver net zero, provide the energy security the country needs and significantly enhance the supply chain and workforce numbers in the UK’s offshore energy sector at the same time.

By Professor Paul de Leeuw, Director of the Energy Transition Institute at Robert Gordon University, Aberdeen

225,000

Delivering the ambitions outlined in the British Energy Security strategy will see the UK’s offshore energy workforce numbers rise from around 150,000 today to close to 225,000 by 2030.

130,000

However, if the ambitions are missed, the number of industry jobs could fall to as low as 130,000.

Retaining the offshore oil and gas supply chain, its workforce and associated skills over the next five years will be crucial to delivering on the net-zero ambitions while ensuring security of energy supply

The net-zero workforce: Energy Transition

Profits prove elusive in the clean energy transition

Policies aiming to decarbonise energy supplies and deliver net zero have facilitated increased investment in renewable energy, such as wind and solar. In 2023, for every US$1 invested in fossil fuels, US$1.70 is going to clean energy, according to the International Energy Agency. Five years ago, that figure was US$1 for US$1. However, despite growth in clean energy generation, the energy crisis has exposed economies’ reliance on fossil fuels. The private equity sector is making the most of this transitory period: renewable infrastructure assets offer long-term stable returns and meet environmental, social and governance requirements while commodity price rises fuel oil and gas (O&G) deals.

Offshore wind margins under pressure from rising energy costs commodity prices

Renewable and clean energy comprises a multitude of subsegments and

technologies, from hydropower, solar, onshore wind and offshore wind to less mature sectors such as battery storage, renewable hydrogen/ power-to-x (PtX) and carbon, capture and storage (CCS). In the case of offshore wind, where competitive auctions have catalysed progressive reductions in the levelised cost of energy, exposure to high energy costs and commodity prices has squeezed margins to below the level required to justify the multi-billion-dollar CAPEX required.

In its January–June 2023 interim report, Swedish energy producer and offshore wind developer Vattenfall cited cost increases of up to 40% as its reason for halting development of its 1.4GW offshore wind project Norfolk Boreas, off the east coast of the UK.

Inflationary pressure caused by the rising costs of fuel and key commodities such as steel resulted in zero offshore wind bids in the fifth allocation round (AR5) of the UK Contracts for Difference auction for new renewables capacity. In the US, developers of several offshore wind projects are also seeking price rises for their offtake agreements, taking inflation into account.

The impact is being felt in the offshore wind supply chain, which includes companies that have diversified to capture opportunities from renewables as well as core activity in offshore O&G and marine.

Straddling O&G and renewables

“Renewables margins appear smaller at this time but we are hopeful this will change in the not-too-distant future,” says Balmoral sales director Gary Yeoman. Around 60% of new enquiries relate to renewables projects, while 62% of new sales relate to O&G and 38% to renewables. “Over the next decade, we expect it to be 60% renewables and 40% O&G,” he adds.

Offshore wind accounts for most of ABL Group’s renewable work, and it has

It has been a challenging year for renewables. Inflation is hitting industries such as offshore wind hard, yet some providers are hoping perseverance will pay off, says Sara Verbruggen

recently secured work for PtX concepts from the O&G industry.

“ABL’s profitability in renewables is lower than in O&G. However, if you were to split out upstream and downstream O&G, downstream profitability is not dissimilar to renewables. In upstream and exploration and production, profits are higher and that is where most of ABL’s business is,” says Dr RV Ahilan, chief energy transition officer.

Demand for Servomex’s gas analysis tools, systems and related services for carbon capture and electrolytic hydrogen production is less than for O&G. It is positioning itself for growth from these new markets, often in response to O&G clients.

“We work with the majors as they transition away from traditional activities towards cleaner energy – for example where Exxon is intending to develop carbon capture projects in the Gulf of Mexico,” says Stephen Firth, Servomex’s Product Manager – Special Projects/STEM Manager.

“We definitely see that clean energyfocused businesses carry a premium,” he adds. “Part of that is driven by the growth rate of clean energy. O&G is seeing growth rates of 4–5%, while carbon capture and hydrogen’s growth rate is double. It is a faster rate, but starting from a much smaller base – there are still fewer of these projects around. EICDataStream shows 383 live CCS projects globally, which is much greater than the previous few years.”

What goes up must come down

Dr Ahilan says that while acquisition targets in the renewables industry were inflated in 2021–22, this is changing. “ABL has an internal understanding of the premium it should offer companies in its acquisition sights. In one case, the valuation of a target was well in excess of the bid ABL submitted. Now these valuations have come down, as we’re seeing companies that previously rejected offers return to the table,” he says.

One concern voiced during research for EIC’s seventh Survive & Thrive Insight Report was for businesses in the renewables sector that have been valued more highly, reflected in a higher EBITDA multiple, some of which are actually making losses. Valuations could end up being reduced because they are not turning a profit.

The critical importance of responsive policy

The headwinds facing certain renewable and clean energy segments mean policymakers need to be flexible and adaptive. In September 2023, the European Commission released its European Wind Power Package, aiming to improve auction systems in member states and focus on skills, access to finance and stable supply chains. In her annual State of the EU speech, Commission President Ursula von der Leyen said pricebased auctions have “led to a race to the bottom” and need to change.

TheCityUK, an industry-led body representing UK financial and related professional services, acknowledges that while the UK government has set out a high level of ambition, such as its target for 50GW offshore wind by 2030 and Net Zero Strategy, it should go further, developing and communicating detailed timelines for reducing fossil fuel reliance and helping firms to understand the

attractiveness of projects and allocate capital.

Rob Jewkes, Venterra’s Chief Executive Officer, says: “O&G producers have the benefit of transparent market pricing to evaluate and achieve their project returns. The pricing framework for participants in the energy transition is very much driven by government policy –so although offshore wind is the cheapest form of new energy available to our communities at scale, offshore wind developers and their supply chains are reliant on pricing fixed at a level that does not allow for a viable industry.

“The recent failed UK round AR5 is demonstration of this and calls for government to work with industry to set more realistic investment frameworks to allow developers and the supply chain to deliver on their role in the energy transition.”

Dr Ahilan adds: “O&G is more profitable and it is also a beneficiary of subsidy, explicit and less obvious, whereas renewable energy markets are becoming less subsidised. Only increasing the price of greenhouse gas emissions will encourage more investment by O&G players in renewables and offshore wind. It is happening but not fast enough.”

Preparing now for future growth

According to management consultancy Bain, the energy transition is unique among the global paradigm shifts that have driven private equity dealmaking in the past 30 years, being “fraught with politics, regionalism, regulatory uncertainty, and deep complexity”. It warns that sitting on the sidelines is a clear risk for investors. As the transition broadens, private equity firms need to establish experience, capabilities and networks that will allow them to “turn change to their advantage”. Suppliers and would-be suppliers to the renewables industry know this.

Yeoman says: “The market is moving at a pace that supply chain companies need to establish themselves because it will become very buoyant at some point; it is all about timing. As a company, Balmoral is already well established in offshore renewables, particularly fixed and floating wind.

Firth adds: “The supply chain is positioning itself for when these smaller, high growth markets gain real traction. You have to be ready for when they take off.”

70% of the world’s announced 13,500 energy projects are for green developments, but this is only worth about 30% of the US$13.5 tn market. Conversely, oil and gas claims about 30% of project quantity for nearly 70% of the value.

Source: EICDataStream

KOSO KENT INTROL (KKI) HAS RECENTLY COMPLETED A COMPREHENSIVE DEVELOPMENT AND QUALIFICATION PROGRAM OF A FULL RANGE OF SUBSEA CONTROL VALVES. THE DEVELOPMENT PROJECT WAS SPONSORED BY TECHNIPFMC, A MARKET LEADER IN SUBSEA PROCESSING TECHNOLOGY.

Currently the only solution for subsea processing is to use a subsea choke who’s crude ‘stepping’ actuation mechanism provide a less than desirable level of control for subsea processing and CCUS applications. The lack of available, qualified control valves for subsea applications has meant that compromises in overall process design and performance. As the focus on moving more to subsea processing increases the need for a high performance subsea control valve is imperative for systems such as subsea compression and separation, not to mention the fast developing challenges that CCUS and hydrogen production and storage will bring.

Our client, TechnipFMC, were looking to enhance their subsea processing systems and value they bring to the end-user. A range of highly accurate, low operating torque subsea process control valves to work in conjunction with the TechnipFMC subsea Electric Actuator was identified – Introducing The Series 1275!

KKI used its extensive experience from the numerous topside specialised process control valve applications and marinized the specific design features of each application into one complete subsea process control valve solution.

KKI sought significant input from the world’s leading international Oil & Gas companies, which lead to us completing one of the most extensive endurance testing programs ever experienced on a subsea control valve.

A very conservative approach was taken regarding the testing requirements, which meant that the whole project was going to take several years to fully complete. The general testing covered hydrostatic pressure testing, seat leakage and API 6A PSL 3G gas testing.

The overview of the range qualified was:

SIZE: 1” to 9”

RATING: Up to and including API 6A 10K

Main qualification testing covered:

– API 6A/ISO 10423 PR2.

– Hyperbaric API 17D/ISO 13628.

– Nitrogen leak testing.

– Flow testing.

– Endurance testing defined by TechnipFMC and KKI.

KKI made the decision to make a significant financial investment in its own in-house test facilities. This upgrade meant that the testing of the new subsea control valve range could proceed without affecting the execution of their ongoing production orders.

From this in depth development project KKI achieved:

– A new fully qualified range of subsea control valves.

– A highly accurate subsea low friction mechanical. operator c/w Inverted Planetary Roller Screw (IPRS).

- Enhanced accurate positioning mechanism.

- operating torques less than 25% of what a typical subsea operator would require.

– A new specially developed stem hard coating to provide an enhanced wear and corrosion resistance stem seal surface.

– A new gland seal packing system to accommodate the extensive movement that the valve stem would experience during normal operation.

MATERIAL CLASS: API 6A ‘HH’ (corrosion resistant alloys)

TEMPERATURE RATING: API 6A -46 Deg C to + 140 Deg C (-50 to +284 Deg F)

uring normal operation to +284

WATER DEPTH: Qualified to 3,048 meters (10,000 feet)

OPERATOR: Bespoke low friction MOIPRS – ROV/Electrically operated

INTRODUCING OUR NEW RANGE OF SUBSEA CONTROL VALVES

The Series 1275 Subsea Control Valves are a new and fully qualified range, designed, engineered and tested at our Brighouse facility in the UK.

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MANUFACTURING SUBSEA VALVES SINCE 1984

KOSO Kent Introl has over 35 years’ experience in the subsea industry manufacturing a range of Control and Choke Valves for the world’s largest energy companies.

Oil

Hydrocarbons are insulating energy businesses from a recession

Oil and gas (O&G) supply chain companies are reporting record order books. Nice work if you can get it, especially in straitened times – but it was not that way a few years ago. The backlogs from a hydrocarbon resurgence are expected to continue for the foreseeable future, even with all signs pointing to a global recession as economies wrestle with inflation by inducing slowdowns.

Feeling recession-proof

Nearly 70% of respondents to EIC’s latest Survive & Thrive survey said that they felt recession-proof, with just 5% saying they believed they would be immediately impacted by a recession.

Despite challenging financial conditions, geopolitical tensions and an energy transition that remains highly dependent on net-zero and decarbonisation policies, many companies surveyed by EIC observe an O&G market that is booming for the first time in a decade.

Simplistically, demand is outstripping supply – but this obscures the unique global events that have led to our current situation. The industry was already leaner due to under-investment following 2014’s oil crash, then slashed demand and capacity as

economies ground to a halt during the pandemic. This was followed by gas prices that rose as the world reopened for business, then went stratospheric when gas markets scrambled to cut ties with Russia following its invasion of Ukraine. At the time of going to press, oil is approaching US$100 a barrel. According to market analyst Rystad Energy, the rise from US$70 to US$95 a barrel in three months is due to “very strong” demand, sharpened by Saudi Arabia’s extension to cuts in output.

Two-thirds of the World Economic Forum’s chief economists expect a global recession this year – so why is O&G so resilient? While major economies are implementing policies to steer us to a net-zero future, such as the US’s Inflation Reduction Act and the EU’s RepowerEU package, and while investment in renewable energy exceeds investment in hydrocarbons, the net-zero transition will still take decades. One in seven cars bought globally in 2022 may be electric, according to the International Energy Agency but that means six out of seven are still running on petrol or diesel.

Energy security concerns

Perhaps the biggest reason behind this resilience is that whether we like it or not,

the energy discourse is much more nuanced and complex than a couple of years ago, as governments contend with energy security and inflation on top of net-zero imperatives. Hydrocarbons are critical to any approach that tries to reconcile all three.

James Phipps, Managing Director of Cokebusters, says: “As well as satisfying the national and international movement towards alternative energy sources, responsible and competent governments should be ensuring sufficiency in energy security for their citizens and other infrastructure.”

He adds that growth in both population and consumerism requires not just more energy, but also energy security. “Energy can derive from a multitude of sources, which need to be instantly available and/or portable. The energy transformation process, of course, varies depending on the source, and there are losses incurred during that transformation.

“Investments should also be focused on technologies that continue to enhance fuel efficiencies and minimise the by-products of combustion.”

Alderley Chief Executive Colin Elcoate thinks countries with well-established energy strategies and strong policymaking capabilities around O&G production and

and gas demand looks set to continue even as a global downturn looks increasingly inevitable, providing suppliers with a pipeline of work for the foreseeable future, says Sara Verbruggen

supply are more likely to stave off recession and bounce back quickly. On a bullish note, he adds that there are several key factors making recession in the sector far from inevitable –chiefly that hydrocarbon demand is strong and has no sign of weakening, “particularly given present energy security concerns”.

He also points out that the US, EU and EMEA countries are investing heavily in new low-carbon technologies, creating new jobs, skills and opportunities for the whole sector. This diversification – where governments support and enable investment and development in hydrocarbons as well as renewables and other forms of clean energy, will reduce reliance on foreign energy imports, reducing the risk of recession.

As EIC’s latest Survive & Thrive report attests, for many providers of solutions and services

within the global energy industry, O&G work provides consistency – and is responsible for many of their profits. For the next few years, they do not see that changing.

Elcoate says: “Even though peak oil is edging nearer, O&G will continue to play an important role in the energy system to 2050 and beyond – every future energy scenario shows renewables, nuclear and O&G as part of the 2050 energy mix. This requires new O&G developments and investment today to meet this demand and contribution to tomorrow’s energy mix.”

Many of the skills required to deliver the energy transition are already found within O&G, he adds, so hydrocarbons require investment to retain those skills. Otherwise, they cannot be used to deliver the lowcarbon technologies and energies needed to meet our net-zero ambitions.

Invest in your business and diversify Downturns follow periods of high demand. Bust follows boom. To weather the impacts of such cyclicality, players must act strategically by investing in their businesses – diversifying into new, emerging markets or technologies that have strong future

prospects. Regardless of any trend, says Phipps, this is “simply good business practice” for spreading risk and capitalising on opportunities with available technologies.

Cargostore Chief Executive Andrew Hart says: “In the context of our business –leasing offshore DNV certified shipping containers – we see the robustness of the O&G market as an opportunity for strategic growth.

“The main approach to capitalising on the next stages of the O&G market expansion is to actively establish operations in emerging markets, combined with a continued investment in the existing and latest models of containers required, to ensure we have enough of the right types of units strategically placed globally to support next phase of rapid market growth.”

Elcoate says: “For Alderley, we must look ahead to future trends such as developing technology that can respond to the needs of providing energy security and reaching net zero. This will enable us, as well as other supply chain companies, to remain market focused and respond to clients’ everchanging demands.”

Investments should also be focused on technologies that continue to enhance fuel efficiencies and minimise the by-products of combustion

James Phipps, MD, Cokebusters

While the case for the energy transition is evident, the challenges are extensive. We must tackle climate change – it is the challenge of our generation – but in recent years, price fluctuations, supply bottlenecks and geopolitical concerns have made it difficult to access affordable, secure and clean energy.

Today’s grid is not fit for tomorrow’s purpose

The need for greater investment is increasing. Growing energy demand means that the world’s power grids – the backbone of our energy supply – must be steadily expanded. Industry must be able

to ramp up capacity on a sustainable basis. The challenges involved can only be overcome if politicians, industry and society pull together.

The electricity grid is one of the world’s largest machines. It needs to be extended, upgraded and improved while continuing to operate. Imagine fixing an aeroplane mid-flight and you can appreciate the challenge ahead.

According to a recent BloombergNEF study, a 152 million-km supersized grid will be needed to power a net-zero world by 2050 – more than double the length of the grid today. High-voltage direct current (HVDC) projects will play an important role, as this is a key technology for bringing renewable energy from often-remote generation site

to the consumer, and allowing for the exchange of energy between countries by interconnecting them.

Innovative grid technologies are on the rise

The EU wants to add 128GW of new interconnector capacity by 2040. The technology has already been deployed in several large-scale projects around the world. The NeuConnect project will connect two of Europe’s largest energy markets, Germany and the UK, enabling enough power for 1.5 million households to be transferred between them.

Raw materials in high demand

But will the future availability of raw materials be able to keep pace with the

The power grid –bottleneck of the energy transition?

Tim Holt at Siemens Energy looks at what it will take to successfully expand power grids for the energy transition in the long term

rapid growth in demand? This is a central question that all technology manufacturers are asking themselves in the service of the energy transition –especially given that raw materials must come from responsible sources.

Due to rising demand and high prices, the market for the most important minerals needed for the energy transition has doubled in the last five years; in 2022, it had reached a volume of US$320bn. Cobalt, lithium, copper, nickel and rare earths are primarily needed for the numerous technologies that will be central to the energy transition, such as wind turbines, solar plants, e-cars and electricity grids.

If we look at the German expansion requirements for HVDC transmission solutions on land and at sea, for example, we are talking about around 80GW that must be transported over long distances through Germany by 2035. An estimated one million tonnes of copper will have to be used in the main technological components. This corresponds to the material requirements of around 19 million electric cars – and that’s just to meet the needs of a single country.

Addressing the skills gap

A successful energy transition will require not only the right quantities of raw materials, but also people to process these raw materials, build the plants, and plan, design and implement the projects. Recruiting experts is a challenge because the entire industry is

suffering from a shortage of skilled workers and is competing worldwide for the best talent on the market. For a successful energy transition, we need to call on policymakers. In addition to a sustainable strategy for addressing the skills gap, stable framework conditions must be created if the industry is to create the conditions for economic success – and therefore for secure and well-paid jobs. In the case of grid expansion, for example, this should include further simplification and acceleration of approval procedures so that skilled workers are not tied up in projects for longer than is necessary.

Standardisation is key to grid success

Standardisation will be another important lever for the successful expansion of grids. Today, each European transmission system operator has special design requests. This exponentially increases the number of design variations that engineering teams, manufacturing sites

and suppliers must manage – all capacities that could be put to good use in other projects.

A positive example is the major contract award for HVDC grid access solutions by the German-Dutch transmission system operator TenneT in April 2023. Three of the projects were awarded to Siemens Energy. The converter platforms will all follow the same 2GW standard and will enable all project participants to drive the expansion of offshore wind energy more quickly and efficiently.

No net zero without serious grid reform

We have a mammoth task ahead of us. Mastering it will require long-term, reliable network planning, because the industry needs long-term predictability that will enable it not just to secure business on a project-by-project basis, but also ramp up the supply chain on a long-term sustainable basis. And we need to act now, because one thing is clear: without a reliable power grid, the energy transition cannot and will not succeed. We can only create a secure and more sustainable energy future if we tackle the challenges together across sectors, industries and countries. This requires innovations, strong partnerships and ongoing dialogue between policymakers, industry and society.

By Tim Holt, Member of the Managing Board at Siemens Energy

A 152 million-km supersized grid is needed to power a net-zero world by 2050 – more than double the length of the grid today

Transmission: Power

Is nuclear in trouble?

At first glance, the outlook for the UK nuclear energy industry is the best it has been during this century. The government has set ambitious targets for investment in new reactors. There is now wide acceptance of nuclear’s role as an essential part of the global response to the threat of irreversible climate change. Despite the growth of renewables, it is clear that the clean energy transition cannot be completed by 2050 without expanding nuclear capacity.

World rekindles love for nuclear

This optimism extends beyond the UK. In the last 18 months, concerns about energy security have spread across Europe and further afield. Countries that until recently were content to depend heavily on imported gas and oil are reappraising the role that nuclear could play in their energy mix as a secure zero-carbon electricity generation technology. Its comparative price stability is an additional attraction.

Even the European Commission, whose attitude towards nuclear energy has historically veered between scepticism and outright hostility, now agrees – albeit grudgingly – that it poses no threat to human health or the environment.

Ambition alone is not enough

Against this favourable background, what can go wrong? The answer, in the UK at least, is several things. First, the economic outlook has deteriorated significantly since the target of 24GW of new nuclear capacity by 2050 was first set. Higher inflation, rising interest rates, increased government debt and slower growth all spell trouble for an economy already weakened by Brexit.

Second, the list of capital projects demanding money from the taxpayer includes HS2, an upgraded electricity grid, a cleanedup water industry, battery charging infrastructure for electric vehicles, and the repair or replacement of crumbling hospitals and schools.

The turn back to nuclear energy is encouraging, but with fears about the health of the global economy, realising these ambitious goals requires bold, brave leaders and collaboration, says Tim Yeo, Chairman of the New Nuclear Watch Institute

Sizewell C is yet another cash-hungry project, the only difference being that it needs more cash than most of the others. With a general election due next year, there’s a high risk that difficult spending choices will be kicked into the long grass. Even a short delay in confirming the availability and method for funding the rollout of new nuclear reactors will be damaging for the industry’s future.

A plan is only as good as its implementation

Last July, the House of Commons Science, Innovation and Technology Select Committee’s report ‘Delivering nuclear power’ called for the government to “publish a clear delivery plan, a Nuclear Strategic Plan, for its nuclear project pipeline, backed up by detailed figures of projected energy production from nuclear for the years leading up to 2050.”

This plan should “be developed in collaboration with and engaging the confidence of the whole sector” and “include interim targets for nuclear energy production in 2035, 2040 and 2045”. Publishing a plan does not by itself guarantee that the new-build programme will be delivered on time, but it would provide much-needed reassurance about the government’s intentions.

The creation of a UK-wide supply chain that can support a revived nuclear industry, along with a workforce with the skills to construct and maintain a dozen or more new reactors in the next quarter century, would contribute hugely to economic growth and strengthen the UK’s competitive position. However, it will only happen if industry is convinced that the plan will actually be implemented.

Long-term vision and collaboration are critical

Trade union recognition of the employment benefits of nuclear energy has helped to preserve broad bipartisan political support. Now is,

Nuclear under construction worldwide 2023 The top 10 countries by CAPEX

The majority of nuclear projects are in Asia, with China topping the list, followed by India.

therefore, the perfect time for Claire Coutinho, newly promoted Energy and Net Zero Secretary of State, to invite Shadow Energy Secretary Ed Miliband to join her in preparing the Nuclear Strategic Plan.

This unusual move is needed because the consequences of investment decisions in the nuclear industry are felt for more than half a century after they are made. Eliminating the danger of sudden policy reversals, and creating certainty that the commitment to investment in additional nuclear energy capacity will outlast a change of government, would boost confidence.

Big challenges for small reactors

Another area of doubt and possible delay flagged by the Select Committee is the government’s support for small and advanced modular reactors (SMRs). So far, the Rolls-Royce-led consortium has received more than £200m of public money for research and development, plus £280m of private investment.

The government has subsequently announced a competition in which other vendors’ technology would be assessed. This could lead to the benefit of the public investment already made being squandered. Uncertainty about the government’s intentions will result in a policy risk premium being added to

future costs. This is especially true when all spending commitments are under scrutiny.

This would be very frustrating because the global market for SMRs is big enough for more than one company to succeed, and Rolls-Royce is a credible competitor in the race to deliver a fully functioning SMR. Success would restore pride in the UK nuclear industry and make it easier to attract talented young recruits.

Will new nuclear happen?

Fears about whether the UK’s nuclear ambitions will ever be realised would be allayed if details of exactly how the Regulated Asset Base funding method will work are published. The aim of bringing private investors in to fund large new nuclear plants is laudable, but the achievement of this goal will not have been accelerated by the unexpected and sudden change of the Energy Secretary.

It is also regrettable that direct public funding of nuclear infrastructure appears to have been ruled out. Government can always borrow more cheaply than private businesses, and any loans could be made repayable once new reactors come on-stream and revenue starts to flow.

It will be a tragedy for the nuclear industry if current economic and political challenges scare ministers into deferring difficult decisions until after the election. Prime Minister Sunak has nothing to lose by showing bold leadership on this issue. There is unlikely to be a better opportunity to do so for many years to come.

By Tim Yeo, Chairman of the New Nuclear Watch Institute

Fears about whether the UK’s nuclear ambitions will ever be realised would be allayed if details of exactly how the Regulated Asset Base funding method will work are published

Gustavo Brito IHM Stefanini

What does IHM Stefanini do?

Agility, design thinking and service design are the basis of our methodology. We understand that before applying engineering and technology in industry-based business models, it’s necessary to authenticate the needs of the business, define the key performance indicators that will be targeted and lay out a customised digital roadmap for each client. That’s how our digital consultants work – they are always up to date with the latest trends and designing innovative solutions, even in restrictive environments.

Global Digital Director

Gustavo Brito takes Energy Focus behind the scenes at IHM Stefanini

Can you tell us a little about IHM Stefanini?

IHM Stefanini is the manufacturing segment of the Stefanini group, Latin America’s largest services company, which operates in more than 40 countries. From shop floor to cloud, we support industrial clients in their digital journey, making lasting and significant enhancements in operational performance, overcoming their initial indicators and speeding up their environmental, social and governance agendas. We believe in technology’s disruptive potential and, above all, in the talent and creativity of our team.

What’s a typical day like in your role?

As a partner and director, I’m responsible for defining and adapting IHM’s strategy and positioning within the industrial community. Aligned with our business strategy, I lead our marketing actions, sales,  offers, products and delivery so we are increasingly recognised as the leading strategic partner in our clients’ digital journeys.

What are your daily challenges?

I face many challenges daily, but communication is at the top. With a flexible office work model and people spread across the world, communicating and ensuring that our strategy reachers everyone, regardless of their location or work hours, is always a challenge. Another challenge is enabling all our team members to capture and share insights, allowing us to adapt our organisational

structure for greater responsiveness.

What’s your favourite part about working at IHM Stefanini?

Our people, definitely! We have an impressive ability to attract people who are aligned with our values and culture. Trust is at the heart of our flexible working arrangements, and it makes our routine much easier.

What has been your greatest achievement as an IHM Stefanini employee?

Making IHM globally recognised as an excellent strategic industrial engineering and technology partner. We currently have clients in Brazil, Latin America and the US, and together, we’re building a new industry through their digital journeys.

What has changed since your first day at IHM Stefanini?

Many things. From a small company with five founders and a focus on engineering and industrial automation, we’ve become a leading global consultancy, engineering and industrial technology player. Our 1,000 people across the world make us proud for keeping our creative and collaborative culture strong and for facing our clients’ complex challenges as if they were our own.

Trust is at the heart of our flexible working arrangements, and it makes our routine much easier

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EIC

THURSDAY 19 OCTOBER 2023

#NAD2023

Hosted by Dame Joanna Lumley

Energy Industries Council wins The King’s Award for Enterprise: International Trade

“There is no more important a role for me now, as chief executive, than to ensure that the EIC continues to prosper for the next 80 years and beyond.”

Stuart Broadley, CEO, EIC