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Offshore Energies UK Annual Conference – Opening Speech by Deirdre Michie, CEO

24 May 2022

Aberdeen, May 24, 2022

Good morning, everyone, and welcome to our first in-person annual conference as Offshore Energies UK!

It’s wonderful to be here with you all, and I’m delighted that we have such a great line up of speakers to inform, inspire and, yes, test us too as we go through the day.

Indeed in this opening session, I am delighted to be joined by the Scottish Government Minister for Just Transition, Employment and Fair Work, Richard Lochhead,

 Linda Cook CEO for Harbour Energy and Andy Samuel, Chief Executive of the North Sea Transition Authority,  who will all bring their thoughtful perspectives about what we are dealing with today and can I remind you that their bios are all in your conference pack.

Let me start by reflecting on the global energy crisis, now made far worse by Putin’s invasion of Ukraine that began 3 months today- and at how the sector is responding to the changing thinking around energy policy.

We’ve followed the dreadful events in Ukraine with horror  and Offshore Energies UK condemns the invasion and fully supports the sanctions on Russia. This conflict and its tragic implications and consequences will be with us for years, whether personally or professionally.

Already, we can see an acceleration in the drive for energy independence – with most governments now wanting to minimise reliance on Russia and maximise low-carbon energy.

I am humbled that we have here with us today, Mavriky Kalugin, Chief Operating Officer at Naftogaz, Ukraine’s national energy company.

He’ll be sharing with us, in one of the afternoon sessions, the real time issues and horrors that he and his colleagues are having to deal with.

And I know you will join me in warmly welcoming him as we all seek to understand what more we can do to support Ukraine.

Mavriky you are most welcome.

Now, may I give some sincere “thank yous”– especially to Worley, our principal sponsor and Delaware as our supporting sponsor. 

I’d also like to thank our other session sponsors Hydrasun, Schlumberger and the Port of Aberdeen.

We really appreciate your backing and couldn’t have put on this key event without you.

“Our conference today comes on the back of so many challenges – post-COVID recovery, a cost-of-living crisis, energy security threats, a war in Europe and a climate emergency.

Our sector remains committed to helping mitigate all these challenges.   

Because we are a community of problem solvers, driven to succeed – for our people , our companies, our communities  and the UK’s economy.

Of course, an excellent example of this is the North Sea Transition Deal – the agreement we signed with the UK government last year, and the theme of this year’s conference.

And I am so pleased to be able to report, that just one year on, we are successfully implementing the deal, while maintaining our commitment to net zero and balancing the needs of security of supply.

At the various sessions today, you will hear all about the progress of this deal through our focus on transforming our supply chain and our plans to generate 40,000 new jobs.

You’ll also hear how we seeking to cut emissions by decarbonising oil and gas production. And how we are also supporting the development of new technologies like hydrogen production and carbon capture.

The deal offers the opportunity to unlock up to £16bn of investment across each of these areas as well as for electrification projects.

And with our commitment to 50% local content , it means that our energy transition and decommissioning activities, will be largely home-grown, creating many new opportunities for our supply chain and the communities our industry serves.

And we agreed to realise all of this by 2030!

It is, of course, our people and their skills that will be vital to successful delivery.

 So I am really pleased that today, OPITO the skills body for the energy industry, is publishing the People and Skills Strategy – a key commitment under the NSTD.

John McDonald, CEO of OPITO has been working with stakeholders from across all energies – to help people build cross-industry careers as we go through the transition.  

He is also focused on creating clarity around the standards and competencies that workers will need for these emerging energies.

Taken together this will help the industry retain and attract the skilled people needed to keep the lights on while driving forward the energy transition.

Congratulations to John and the team for getting us to this point, and its now incumbent on us all to keep working together to deliver the objectives of this important piece of work.

So, the ambition in the deal was high BEFORE the commodity price crisis and Putin invaded Ukraine.

But now, the focus on our domestic energy security has increased dramatically, with the publication of the British Energy Security Strategy which really raised the bar as it outlines the country’s aspirations to have its  energy largely made in the UK.

 An example of this is the new ambition for offshore wind with the delivery of 50 gigawatts capacity by 2030 – five times what we have now.

Just to give a sense of scale, for offshore wind this means installing a new wind turbine every day for the next nine years.

This is not just a practical and engineering challenge. It’s also a financial one.

Indeed, the Office for Budget Responsibility has costed the decarbonisation of the UK at £1.4 trillion by 2050, with £1 trillion coming from private investors.

You, our members, are among those investors.

Given the importance of all of this – its vital that we – our industry, the government, our regulators drive forward a long-term partnership, with the North Sea Transition Deal at its heart.

Now partnerships are, of course, two way and built on trust.

The prime minister has made it very clear that the government’s continued trust and support is dependent on us investing across all the energies, including in oil and gas.

And our industry is fully aligned on this, with particular support coming from our supply chain – who in an open letter yesterday to the PM and Chancellor,  made clear their backing for fiscal stability and predictability for the sector.

However, there is a challenge in terms of timescales.

Our industry, given the complexities we have to deal with, has to think and invest in terms of years and often decades.

Politicians, the media and campaign groups, however, operate on much shorter pressures and deadlines, whether they be impending elections, copy deadlines or fund raising.

As a result, it means we are now facing the threat of punitive taxes and regulations, just at a time when the UK needs to focus on long-term issues like energy security and working for net zero.

Much of this is really well-intended

Because the reality check for everyone, with millions of households in fuel poverty, is that there is an unprecedented cost-of-living crisis to pay for, at the same time as we have an environmental emergency to deal with.

But our belief is that stability in the way we are taxed and regulated is what allows us to promote investment, create jobs, and generate taxes that can be used to help with  the cost of living crisis, while at the same time,  getting the balance right in terms of ensuring  the nation’s energy security.  

Indeed, the OBR is already forecasting that, because of the current fiscal regime, our operators will pay over £7.8bn to the Exchequer this financial year. That’s a  20-fold increase on two years ago and equates to £279 per UK household.

At the same time, our sector’s combined investment potential,  to support energy security and underpin the transition could be worth up to £250bn between now and 2030.

This graphic is free to use but please source to OEUK

 Its an extraordinary combination that other counties can only dream of!

But the threat of new taxes could undermine this  – disrupting what could be a remarkable British success story.

 And for what?

Quick headlines, short term political gain, a minimal uptick in tax – the benefits of which would actually fade far faster than the damage such a tax could do with declining investment and production levels, that will almost certainly follow.

Because such unexpected policy swings, risk achieving the opposite of what politicians say they actually want and could result in undermining  energy security and ultimately the energy transition itself.

Social unrest can have the same effect.

Our conference today follows months of disruption, protests and legal actions involving groups like Extinction Rebellion, Just Stop Oil, Greenpeace and others.

Its no irony to say that we are aligned with their long-term vision, of a low-carbon UK.

But we do disagree with their approach as to how we get there

Because the actions they’ve been taking– headline grabbing but damaging – are another risk to investor confidence.

The UK’s current infrastructure, our 32 million petrol and diesel vehicles, the 24 million homes reliant on gas boilers, and the 35 power stations that use gas to make 40% of our power – does absolutely need to change.

But, and this is not an excuse, it is another reality check, that those changes will take time and so for some decades to come, much of our energy will inevitably come from oil and gas.

Of course, we do have a choice as to where that oil and gas comes from.

We could cut production and increase imports –intensifying our reliance on other countries. But as the Ukraine crisis shows, that’s not a great option.

Or we could, instead, choose to invest in the oil and gas resources in our own backyard.

The vision of the pressure groups, to block all oil and gas developments in UK waters, would do nothing to cut consumption or emissions.

Both are driven by how most of us live our lives.

Changing our infrastructure and the way we live, will take years of careful planning, hard work, and commitment to the longer term.

Disrupting our industry disrupts that process.

If the pressure groups were to get their way, the UK would become ever more dependent on other countries for its oil and gas – countries that could include Russia.

It would destroy tens of thousands of British jobs; it would cost our country and consumers billions of pounds in import bills.

And here is the irony, it would actually increase global emissions as we would have to import fuels with a higher carbon footprint rather than use what we have produced locally!

What’s more, it would undermine one of the few industry’s  capable of building the UK’s energy future. That’s our sector – which is already proudly in action, building the low-carbon and sustainable infrastructure needed to reach net zero.

So, our ask, to the politicians, policy makers, and pressure groups, is to put this in a broader context and not just in terms of the next election, publication, or protest.

But to work with us as we plan and build, not just for the weeks and months ahead but for the decades to come.

This country is better at this than many realise.

 Our NHS was built on a vision for the future. Our cross-party commitment to cutting greenhouse gas emissions shows how consensus can still win.

2050 – our net zero target – is 28 years away. That sounds a long time but in energy investment terms it’s not much time at all.

We still think carbon neutrality is achievable – but only if the regulation is right, the taxes are predictable and policymakers – from across the UK’s parties and governments – are working with us. Not against us.

Net Zero or Not Zero – the road to each is clear. The time to make that choice is now.

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