Beyond 2016: Offshore industry trends highlighted in energy report
For example, in 2013, China and India’s combined electricity demand was 29% of total global demand. In 2050 McKinsey expects this demand to grow to 54%. This demand in growing markets, combined with growing populations and growing global economies, means a mix of energy sources including oil and gas has never been so important.
As well as forecasting higher demand and potential problems the offshore industry may face in the future, McKinsey has highlighted key trends that could help to sustain and grow the oil and gas industry in line with growing global demand. Here are just a few of the key trends as highlighted in McKinsey Energy Insight’s Global Energy Demand Outlook video report.
EFFICIENCY IMPROVEMENT REQUIRED
McKinsey forecasts that efficiency across all energy sectors will contribute to energy intensity falling by 50% by 2050. A combination of technological developments and new industry regulations will contribute to this happening.
Due to the recent downturn in the oil and gas industry with CAPEX and OPEX budgets being slashed, the sector is also already well on its way to embracing efficiency. With ever tightening margins, offshore operators are putting pressure on current procedures to boost efficiency, with one region leading the way – Norway.
A recent article on Energy Voice highlighted the work being done by Norwegian operators, Statoil ASA in particular. The state-controlled company, which operates 70% of Norwegian fields, has reduced investments across the board and sought to increase efficiency through production.
Speaking on the move, CEO of state-owned Petoro AS, Grethe Moen, said, “Improvement efforts and the focus on profitability have led to very high regularity. What’s important to us is that we have a diversity of companies that have the ability to implement projects. It’s important to have a sustainable supplier industry in Norway, which can both deliver efficient products and develop the new technology that allows us to take the next step forward.”
This forward planning by operators, in unfavourable market conditions, is leading the way for a better and more sustainable future for the offshore industry.
TECHNOLOGICAL BREAKTHROUGH ON THE HORIZON?
As we featured in our recent blog Why subsea technology is vital to the future of the UKCS, the role of new technological advancements is a key part of improving efficiency, but also creating sub-sectors for companies and regions to thrive in the future.
McKinsey has pointed out, in their Energy Demand Outlook video report, how they see technological developments affecting the sector over the next decades. The UK, however, is already stealing a march over other global hubs.
One such example of this is the development of the new Oil & Gas Technology Centre (OGTC) to be created in Aberdeen, Scotland. Fresh from appointing Colette Cohen as CEO (former Senior Vice President at Centrica), the technology centre aims to become a “go-to” global centre for developing offshore mature basin, subsea, and decommissioning technology solutions.
After announcing their confidence of winning £180 million of innovation funding to facilitate, stimulate, and accelerate new technological advancements in the UK, Chairman of OGTC Sir Ian Wood said, “With industry, government, academia and the public sector fully aligned on this project, our aim is to fundamentally change the oil and gas innovation landscape with a delivery mechanism that facilitates collaboration and accelerates the development and deployment of the technologies that addresses real industry challenges.”
Clearly, the UK is in a strong position to deliver the ‘disruptive’ technological developments as highlighted by McKinsey, both for exploration and late-life solutions in the industry.
EXPLORATION AND EXTRACTION ESSENTIAL
Not even a 1.7% increase in non-fossil energy over the next 34 years will be enough to satisfy the global energy demand required. While non-fossil energy demand in 2050 is expected to hit 187 million terajoules, the demand for coal is set to decline by 0.3% to 143 million terajoules.
This means that oil and gas will not only play a vital role in the world’s energy output, but demand requires both energy sources to grow over the next few decades. Here’s how McKinsey expects both energy sources to increase.
Oil – 0.4% increase by 2050
- 2013 – 179 million terajoules
- 2030 – 196 million terajoules
- 2050 – 208 million terajoules
Gas – 1.2% increase by 2050
- 2013 – 120 million terajoules
- 2030 – 158 million terajoules
- 2050 – 185 million terajoules
While these increases are minimal, it banishes fears that the oil and gas industry may go into decline over the next 20-30 years. Instead, operators can focus on extracting what they can from ageing assets and look at exploration projects too – something which Norway again is leading on in the current climate.
In our blog, Norwegian waters lead offshore field discoveries in 2016, we revealed the findings of Clarksons Research who recorded a 135% increase in awarded exploration blocks to North West Europe operators. This increase of awarded blocks has helped to fuel new discoveries in the Norwegian North Sea, such as Faroe Petroleum’s 21-metre gross oil-bearing Jurassic reservoir in the Brage oil field.
Following in the footsteps of Norway, the UK is now becoming more flexible with its exploration licenses, giving fellow North Sea operators the chance to source new reservoirs. Reuters reported in July 2016that the UK is set to “cut rental fees by up to 90%” too in its latest approach to attract companies to find new fields.
STAYING AHEAD OF THE GAME
Forecasts and reports should always be treated with caution, however, the future trends highlighted by McKinsey should not be a surprise to the offshore industry. As we’ve highlighted above, the oil and gas industry seems well on their way to embracing the efficiency, technological advancements, and exploration activity required to play a big part in the energy industry past 2050.
Despite McKinsey warning that oil may see a peak in demand in 2050, the offshore industry is defying the forecasts, for now, and investing in long-term strategies to gain precious profit yield once more.
Photo Credits: McKinsey Energy Insights
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