Transition 22
Channoil Consulting has relaunched as Channoil Energy and created a new division, ‘Net-Zero Solution’, to work with clients specifically on energy transition.
For more than 20 years, Channoil has been at the forefront of advising the energy and transport industry, offering in-depth expertise in the continuously evolving energy market.
Net-Zero-Solution will consult and advise on both strategy and tactics, including preparing for the transition, measuring and managing carbon footprint, lower carbon fuels, renewable energy, power storage and customer solutions.
Our team of experts are already active in driving the lower carbon agenda with our clients.
Commenting on the creation of the new division, Dermot Campbell, CEO of Channoil Energy, says: “We’re excited to be launching this new division Net-Zero-Solution, which broadens our offer as a consulting business and will provide expertise and solutions to the energy sector during a time of significant change. We have built a team of renewable energy experts and look forward to working with existing and new clients.”
UKPIA welcomes the announcement of £171 million of funding towards major decarbonisation projects involving a number of UKPIA member companies.
The Department for Business Energy and Industrial Strategy has announced Industrial Decarbonisation Fund projects that it will be supporting in coming years. UKPIA member companies are active in almost all the successful projects, which each have a significant role to play in decarbonising industry as well as supporting high quality jobs right across the UK throughout the energy transition.
bp has announced that it is developing plans for the UK’s largest blue hydrogen production facility, targeting 1GW of hydrogen production by 2030. The project would capture and send for storage up to two million tonnes of carbon dioxide (CO₂) per year, equivalent to capturing the emissions from the heating of one million UK households¹.
The proposed development, H2Teesside, would be a significant step in developing bp’s hydrogen business and make a major contribution to the UK Government’s target of developing 5GW of hydrogen production by 2030.
With close proximity to North Sea storage sites, pipe corridors and existing operational hydrogen storage and distribution capabilities, the area is uniquely placed for H2Teesside to help lead a low carbon transformation, supporting jobs, regeneration and the revitalisation of the surrounding area. Industries in Teesside account for over 5% of the UK’s industrial emissions and the region is home to five of the country’s top 25 emitters.
Dev Sanyal, bp’s executive vice president of gas and low carbon energy said: “Clean hydrogen is an essential complement to electrification on the path to net zero. Blue hydrogen, integrated with carbon capture and storage, can provide the scale and reliability needed by industrial processes. It can also play an essential role in decarbonising hard-to-electrify industries and driving down the cost of the energy transition.
“H2Teesside, together with NZT (Net Zero Teesside) and NEP (Northern Endurance Partnership), has the potential to transform the area into one of the first carbon neutral clusters in the UK, supporting thousands of jobs and enabling the UK’s Ten Point Plan.”
UK energy minister, Anne-Marie Trevelyan, added: “Driving the growth of low carbon hydrogen is a key part of the Prime Minister’s Ten Point Plan and our Energy White Paper and can play an important part in helping us end our contribution to climate change by 2050.
“Clean hydrogen has huge potential to help us fully decarbonise across the UK and it is great to see bp exploring its full potential on Teesside.”
The project would be located in Teesside in north-east England and, with a final investment decision (FID) in early 2024, could begin production in 2027 or earlier. bp has begun a feasibility study into the project to explore technologies that could capture up to 98% of carbon emissions from the hydrogen production process.
With large-scale, low cost production of clean hydrogen, H2Teesside could support the conversion of surrounding industries to use hydrogen in place of natural gas, playing an important role in decarbonising a cluster of industries in Teesside.
Blue hydrogen is produced by converting natural gas into hydrogen and CO₂, which is then captured and permanently stored. H2Teesside would be integrated with the region’s already-planned NZT and NEP carbon capture use and storage (CCUS) projects, both of which are led by bp as operator.
The project’s hydrogen output could provide clean energy to industry and residential homes, be used as a fuel for heavy transport and support the creation of sustainable fuels, including bio and e-fuels.
Find the full update from bp here.
The downstream oil sector – the supplier of 96% of the UK’s transport fuels – is committed to decarbonisation of the transport system and can be an important ally in meeting net zero according to “The Future of Mobility in the UK” – the latest publication from UKPIA.
Building on its series of foresight reports, UKPIA’s “The Future of Mobility in the UK” considers the emerging trends, technologies and paradigm shifts that can combine to deliver a decarbonised transport sector in the UK.
The Future of Mobility makes three important findings:
Following a commitment of £72 million of funding, HyNet North West will transform the North West into the world’s first low carbon industrial cluster, playing a critical role in the UK’s transition to ‘net zero’ greenhouse gas emissions by 2050 and the global fight against climate change.
A multi-partner plan involving the Port of Cromarty Firth has been launched to establish a green hydrogen hub in the Highlands that will see Scotland lead the world in hydrogen technology.
The North of Scotland Hydrogen Programme aims to develop a state-of-the-art hub in the Cromarty Firth to produce, store and distribute hydrogen to the region, Scotland, other parts of the UK and Europe.
One of its projects will provide distilleries in the region with hydrogen. A feasibility study into this kick starter Distilleries Project will begin this month and is due to be completed in June. It is being privately funded by partners including ScottishPower, drinks giants Glenmorangie, Whyte and Mackay and Diageo and Pale Blue Dot Energy who are also leading the project.
Green hydrogen is created using electrolysers powered by electricity from renewable sources. Power would be supplied from current and future wind farms off the coast of the Cromarty Firth, as well as onshore schemes, and fed to the hub.
Bob Buskie, chief executive of the Port, said such a hub would provide a “massive boost to Scotland’s ambitions of decarbonising its economy and establishing itself as global leaders in green hydrogen technology, a sector still in its infancy.”
The delivery of green hydrogen to Glenmorangie, Whyte and Mackay and Diageo will give them the opportunity to decarbonise the heating of their distilleries and maltings, which are situated close to the Cromarty Firth. This would be achieved by using hydrogen as a substitute for fossil fuels to create the energy needed to make steam so the distilling process can be achieved.
Bob Buskie added: “In the short term, we have a number of local partners with vast experience in hydrogen, distilling and utility provision who want to decarbonise their operations. And in the long term, there is a huge opportunity to decarbonise Highland industry, transport and heat, as well as exporting green hydrogen to other parts of the UK and mainland Europe, which doesn’t have the same offshore wind capacity as Scotland.”
Sam Gomersall, hydrogen champion at Pale Blue Dot Energy, leaders of the feasibility study commented: “Scotland has the potential to be a global forerunner of green hydrogen production on a massive scale. It cannot be underestimated the hugely positive effect this would have on Scotland’s decarbonisation plans, as well as on jobs and the economy.”
Up to 15 new offshore wind sites are due to be developed in the coming years, with a significant number of the schemes on the ‘doorstep’ of the Cromarty Firth. That, along with the Port’s deep waters, established facilities and location at the end of the gas grid and in close proximity to large amounts of renewable energy, make the area perfect for a green hydrogen hub.
Scotland’s energy minister, Paul Wheelhouse, said: “It is clear that hydrogen will not only help us end our contribution to causing climate change, but could also create significant economic opportunities in Scotland and, in helping sustain new economic opportunities in a port that has a long track record as a supply chain hub for offshore energy developments. It will also support the Just Transition of the North Sea supply chain. The North of Scotland Hydrogen Programme is an exciting example of collaboration and regional hydrogen innovation required to realise the significant economic and environmental potential that hydrogen presents in Scotland.
“Our Hydrogen Policy Statement, published last year, highlights the importance of the development of regional hubs of hydrogen activity and innovation which will be central to ensuring we can make the most of Scotland’s massive potential in this new sector – a sector in which Scotland looks likely to have a significant competitive advantage.”
Maersk Training UK (MTUK) has launched the first half of its refurbished Aberdeen safety and survival centre which has undergone a £720k refurbishment to ensure it meets the needs of the industry as it looks to the future and the energy transition.
A new collaboration between the biggest commercial vessel operator on the Thames, GPS Marine and Green Biofuels, the UK’s leading provider of clean advanced fuel GreenD+, will help reduce London’s carbon emissions, improve local air quality, and boost the Thames’ drive to clean up and reduce pollution.
The organiser of the liquid fuels distribution industry annual event, UKIFDA, is delighted to announce that, for the first time in its 40-year history, EXPO will go virtual and will give centre stage to the industry’s Future Fuels initiative.
In addition to the new format and emphasis UKIFDA is also announcing that the headline sponsor will be industry titan Phillips 66 Limited.
The event will take place on 7th and 8th July 2021.
UKIFDA’s new chief executive Ken Cronin says:
“Having discussed this widely with our exhibitors and our members it was clear holding a physical event this year was shrouded with too much uncertainty. To expect commercial decisions to be made on such a basis would be grossly unfair. The safety of everyone has to be paramount.
“The EXPO has been running for more than 40 years and is the pivotal event for the liquid fuels distribution industry. In keeping with the spirit of EXPO we wanted to hold an event and do something bold which would be accessible to everyone and would bring people together to meet and discuss the important issues of the day bridging the gap between now and when we can meet safely.
“It is also fantastic to reveal Phillips 66 Limited as our headline sponsor. Phillips 66 has been a major part of UKIFDA EXPO for a large part of our history and we will be working closely with them to make this event a great success. I am also delighted at the strong response we have had from everyone in the premarketing of this event.
“Given everything we’re doing as an industry to contribute to the Government’s Net Zero target – with the investment we’re making in and the campaigning for the inclusion of renewable liquid fuels – this is an exceptionally important year for our industry and our customers and why we have decided to focus on Future Fuels.”
Renee Semiz, managing director, UK Marketing, Phillips 66 Limited: “We are thrilled that, despite the unprecedented challenges of the last 12 months, UKIFDA EXPO 2021 is going ahead and we are proud to be the headline sponsor. Operating excellence, environmental stewardship and social responsibility sit at the very heart of Phillips 66 and we look forward to the opportunity to be part of a key event in our industry’s calendar that is shining a light on the Future Fuels initiative.”
UKIFDA membership and events manager Dawn Shakespeare adds: “We have already secured the services of a leading event platform provider to ensure success and the best possible virtual experience for exhibitors and visitors alike.
“The social nature of the annual UKIFDA EXPO is key and will be a big part of the new virtual version, which will have a dedicated exhibitor area.
“This area will provide the ability for exhibitors to display pictures, videos and leaflets, as well as organise events, presentations and announcements, and to hold meetings with interested parties.
“There will be an entire separate conference section with the ability to hold presentations and to engage in interactive Q&A sessions.
“Day 2 of the event will be focused on what the future of the industry looks like and will be fully devoted to the Future Fuels Project. There will be opportunities for exhibitors, Members and delegates alike to discuss and showcase the transition to low carbon liquid fuels.”
“This year’s virtual UKIFDA EXPO will provide the industry with the connection it needs – and will bridge the way to when we hope to host a physical EXPO once more in April 2022 at the Exhibition Centre Liverpool.
“We hope as many exhibitors and visitors as we normally attract to our annual exhibition will support us this year and join us online for what promises to be a highly rewarding two days of exhibits, seminars, presentations, announcements, meetings, networking, Q&As, and more.
“We’re excited about our decision to go virtual this year and can’t wait to connect with everyone online on 7th and 8th July.”
For more information or to book your exhibition space or one of our remaining sponsorship packages, you can contact Dawn Shakespeare, UKIFDA membership and events manager, via email ds@ukifda.org or alternatively visit the show website www.ukifda.org/ukifda-expo/ to register to attend.
Green entrepreneur Jo Bamford said: “The PM has said the UK will be “putting a big bet on hydrogen” and the Budget’s green light for the Freeport East Hydrogen Hub is a major step towards delivering on these words. The Freeport East Hydrogen Hub will support the creation of thousands of green jobs and feature innovative uses in hydrogen for zero emissions buses, construction equipment, marine and agriculture. Crucially, these UK-made Net Zero technologies can be in use within 12 months and will place East Anglia at the forefront of the global hydrogen economy.”
George Kieffer, chairman, Freeport East Project Board, said: “We are delighted to have been chosen by the Chancellor as one of the first new Freeports in the UK for a number of years. Freeport East offers a unique opportunity to build a truly global trade hub at the same time as accelerating opportunities in green energy and helping level-up the economy. We look forward to working with Government to further develop our business plan and to realising the potential that this opportunity represents.”
Julia Pyke, financing director of Sizewell C, added: “This is a great step forward for the East of England. The Freeport East Hydrogen Hub will deliver on six parts of the PM’s Ten Point Plan for a Green Industrial Revolution. The Chancellor’s commitment to Freeport East will now turbo-charge private investment in Net Zero nuclear and hydrogen technology across East Anglia and support the development of one of the world’s most exciting and innovative decarbonisation projects.
“We will now develop our hydrogen offering in close cooperation with the port and with the Suffolk councils in order to get national competitive advantage by pursuing things at scale and speed.”
The March issue of Fuel Oil News looks in depth at the industry efforts to find future fuel solutions.
Responding to the 2021 Budget, OFTEC chief executive Paul Rose said: “The Chancellor didn’t hold back in outlining the financial toll the Covid-19 pandemic has taken on the UK economy, so it’s perhaps not surprising there were very few new green announcements, other than re-commitments to existing policies.
Derek Leith, EY’s global oil and gas tax leader comments on today’s Budget:
“It would be an unusual Budget if the Chancellor didn’t find some space for an oil and gas measure: oil and gas has only been absent from a UK Budget on two occasions in the past 25 years. Budget 2021 didn’t disappoint with a specific clarification on the detailed rules for oil and gas decommissioning relief. There are also some knock-on effects of the Chancellor’s announcements on the corporation tax rate, the super deduction for investment, and the extended loss carry-back.
“Papers accompanying today’s Budget included further changes to the corporation tax rules on the decommissioning of UK oil and gas assets. I’m sure clarification of the decommissioning tax rules will be welcomed by the sector as both industry and the Treasury are incentivised to see activities carried out efficiently and at the lowest cost.
“There will be an increase in the rate of corporation tax for businesses with taxable profits of over £250,000, from the current 19% rate to 25% from 1 April 2023. The rate of corporation tax for oil and gas companies active in the UK and UKCS remains at 30% with the supplementary charge an additional 10%. To the extent oil and gas companies have income that falls outside the upstream regime, such as interest arising from cash balances, they will be liable at the increased rate from 2023.
“The heavily trailed increase in corporation tax rate, quietly abandoning the current policy to have the lowest corporate tax rate in the G20 in favour of the lowest rate in the G7, is no surprise. Some of the sting is taken out by delaying the change for two years. The extended loss carry-back will be welcomed by smaller businesses where it will have a material impact. The super-deduction will also be welcome but unsurprisingly it is time-limited to the period up to 31 March 2023 so doesn’t apply when the tax rate increased from 19% to 25%.”
For the first time in Belgium, hydrogen will be used in a commercial scale cogeneration plant designed to generate electricity and heat from natural gas. The aim of the pilot project by INEOS and ENGIE is to replace natural gas with hydrogen used by the INEOS gas turbine. Initially 10% of the gas feed will be replaced by hydrogen. If this goes well the feed will be increased to 20%. The CHP plant at the INEOS Phenol site in Doel, one of the first to be built in Belgium, has the ideal profile to realise this test.
Hydrogen is expected to become an important link in the transition towards climate-neutral energy across society. One possible evolution in the coming decades is the gradual replacement of natural gas by hydrogen and in time ‘green hydrogen’ generated from renewable energy via electrolysis. This will gradually reduce the CO₂ emissions of current processes based on natural gas.
ENGIE is responsible for the design, installation and operation of the technology at the Antwerp site. INEOS Phenol has experience in handling hydrogen as a raw material for its production processes and also has the necessary permits for the hydrogen project. The commercial scale project plays a pioneering role in the energy transition of the chemical industry. This practical exploration by ENGIE and INEOS will provide both partners with valuable insights and data in the use of hydrogen in industrial facilities such as monitoring efficiency and measuring emissions during combustion, which is essential in the development of a next generation of burners.
ENGIE and INEOS are also joining forces on the Power-to-Methanol project in the Port of Antwerp. Both companies sit on the consortium with other partners to produce green methanol by reusing captured CO₂ in combination with sustainably generated hydrogen. INOVYN, an INEOS business, will operate this demonstration plant at the Lillo site.
The initiative is part of the roadmap that INEOS defined at the end of last year for its Antwerp sites to become climate neutral by 2050 and to reduce emissions by 55% by 2030 compared to 1990. The roadmap consists of a combination of measures such as the reuse of hydrogen and CO₂, further investments in electrification, the switch to recycled or bio-based raw materials where possible, and the use of ‘green heat’ and renewable energy. To this end, last year INEOS concluded two major contracts for the purchase of offshore wind energy, including the largest Belgian industrial contract ever with ENGIE.
Cedric Osterrieth, CEO ENGIE Generation Europe, said: “ENGIE believes in hydrogen as a key link to a carbon-neutral economy and wants to take a pioneering role with these industrial-scale tests, both in terms of research and practical implementation. We can again count on the expertise and support of INEOS, a key partner for ENGIE in the energy transition. This pilot project will give us better insights into the use of hydrogen to reduce carbon emissions, bringing us one step closer to a carbon-neutral future. It is a strong complement to our already ongoing projects across the country in which we are developing hydrogen solutions for industrial and mobility applications, starting from our expertise in renewable energy production, storage and infrastructure.”
Hans Casier, CEO INEOS Phenol: “This test is fully in line with INEOS’ strategy to avoid CO2 emissions at source. It marks a further step for INEOS Phenol in Doel, where 20% green steam is already being purchased via the connection to the Ecluse network. Today, INEOS already produces 300,000 tons of hydrogen on an annual basis as a ‘co-product’ of its chemical processes. This hydrogen is largely used as a low-carbon fuel and as a raw material in its own production processes so that fewer fossil raw materials have to be used. INEOS recently started a new business activity that focuses on the development of ‘clean hydrogen capacity’. For this, INEOS can rely on the expertise of INOVYN, which, as a chlorine and PVC producer within the group, specialises in electrolysis, an important technology for producing hydrogen.”
Exolum is the new brand name chosen by the CLH Group, strengthening the identification of the company with its future aims, focused on adapting its business to decarbonisation and the energy transition, the digitalisation of activities and the fight against climate change.
This rebranding is due to the need to adapt to the new environment and to transform the company itself, which, in addition to carrying out oil product storage and transport activities in Spain, has embarked on an international growth process and is now present in 7 other countries. The group has expanded its activity to the storage, management and transportation of liquid products, especially chemical products, operating in new sectors, such as eco-fuels, the circular economy and the development of new energy vectors.
In recent years, the CLH Group has experienced a series of notable changes, mainly focused on sustainable diversification, both of the geographical areas where it operates and the services offered to customers, over and above hydrocarbon logistics. Therefore, it became necessary to renew the brand and align it with this new era of the company.
“We want these initiatives for diversification and adaptation of the company to be aligned with the new challenges of the sector with a change in our corporate identity that reflects our growth and leadership,” explains Jorge Lanza, CEO of Exolum. “This brand reflects the transformation process that we are going through internally, to align with the company’s new business models and transmit our company values. These values are innovation and trust, reflecting the open and flexible way that we face the future, promoting new business opportunities committed to the development and sustainability of the planet.”
The new name, simple but modern, shows a spirit where innovation is the key. The brand is easily recognised in any language and the company will use this one name for all its business, both in Spain and six other countries where it currently operates (UK, Ireland, Germany, Netherlands, Panama and Ecuador – in Oman, it will continue to operate with the joint venture OQ Logistics), thus reinforcing the global identity of the group and creating a great brand that is sound, international and unifying.
With Exolum, the company sets itself a challenge to maintain the same level of recognition, extending it to the public at large, adapted to meet the aim of the company: “We create innovative solutions to improve our world”.
Today’s announcement that the UK Government will mandate the introduction of E10 fuel – petrol containing up to 10% of sustainable bioethanol, from September this year – has been welcomed by the industry with open arms.
Ken Cronin CEO of the UK and Ireland Fuel Distributors Association (UKIFDA) comments:
“Today’s announcement that E10 petrol is to be introduced from September 2021 is a major step towards the decarbonisation of existing cars in the UK, on the way to our 2050 net zero target.
UKPIA welcomes the UK Government announcement today that mandates higher ethanol content petrol – E10 – following consultation and will continue to seek close government-industry partnership on the rollout of the policy to enable a seamless transition for all consumers.
This transition to lower carbon petrol is fully supported by the downstream oil sector as a practical measure to further reduce transport carbon emissions – the equivalent of taking up to 350,000 cars off our roads – with minimal impact on drivers, filling station operators or the wider community.
E10 is petrol containing up to 10% ethanol – with the remainder made up of hydrocarbons. Currently, standard (or ‘premium’) petrol contains up to 5% ethanol.* Ethanol from renewable feedstocks is added to petrol to reduce the fuel’s carbon emissions.
The introduction of E10 is a practical step that increases renewable fuel use in the UK now and UKPIA looks forward to the UK Government’s consultation on updating the Renewable Transport Fuel Obligation to take further steps to deploy renewable fuels.
Today’s policy announcement is an important step in the UK’s broader energy transition journey. Updated renewable transport fuels policies are essential in reducing the emissions of the light road vehicle sector and, in time, such policies should help reduce emissions in more difficult to decarbonise transport sectors – such as aviation and HGVs – whereas part of a range of technologies, low carbon liquid fuels and hydrogen will have an important role to play.
UKPIA director-general, Stephen Marcos Jones, comments:
“The downstream oil sector is clear on the need for action on climate change and supports this step towards a higher uptake of low carbon fuels.
“UKPIA has been calling for a mandated introduction to E10 since 2018 and we are pleased government has made this announcement today.
“With E10 grade fuel to power cars in the UK from September 2021, carbon emissions should continue to reduce in the transport sector, an important means for meeting the Net-Zero commitment.
“As UKPIA has set out in its Transition, Transformation, and Innovation Report, with the right policies, the UK could become a trailblazer in the development of low carbon liquid fuels and electric vehicle technologies, as well as maintaining its leading role as a hub for sustainable aviation fuels. We look forward to working with government to progress these opportunities further.”
Southampton-based fuel supplier WP Group is fuelling change for a cleaner greener future by moving its own fleet over to the more sustainable Esso Diesel Efficient™ fuel, as it has shown to be not only more efficient than standard diesel fuel, but also more cost-effective and improves the carbon footprint of the vehicles that use it.
The WP Group’s Fuelling Change strategy demonstrates its commitment to more sustainable and efficient fuelling solutions that provide practical benefits, both commercially and environmentally.
The innovative company provides a range of fuel management solutions which improve operational efficiencies to UK customers in the fields of construction, traffic and fleet, airports, port and marine, agriculture, energy and power.
The Esso Diesel Efficient™ fuel delivers lower CO2 emissions, resulting in cleaner air quality. Compared to standard Esso™ diesel, the Esso Diesel Efficient™ fuel helps to reduce Nitrogen Oxide emissions by an average of 10 per cent and carbon dioxide emissions by an average of 2.8 per cent.
Independent tests on Esso Diesel Efficient™ fuel also showed a reduction in fuel use of 2.8%, amounting to 28 litres of fuel saved for every 1000 litres purchased and a saving on the business fuel bill.
Mark Clouter, business development sales manager at WP Group, said:
“We’ve seen the benefits that this additised fuel can deliver and have switched our own fleet to run on Esso Diesel Efficient™ fuel to support our company’s sustainability in the future.
“We recognise that our position as a supplier of diesel products, in today’s market, requires continual business evolution and this allows us to support the increasingly demanding requirements our customers are faced with when working to achieve their business objectives.
“We offer a comprehensive selection of fuelling solutions, from ISO standard diesel to HVO, a fossil-free, low carbon drop-in diesel replacement. And, importantly, we work with our customers to ensure, whichever fuel they use, it is used in the most efficient way possible.
“Our own switch to using Esso Diesel Efficient™ fuel in our fleet is a small step but a logical and significant one towards fuelling change.”
Tests at Millbrook Proving Ground, one of the most comprehensive test facilities in the world for conducting independent fuels testing, conducted with heavy-duty vehicles over a five-month period of normal daily on-road operations found that Esso Diesel Efficient™ fuel helped to reduce emissions; 10% NOx, 22% PM and 2.8% CO2, and improve fuel consumption by an average of 2.8% when compared to unadditised diesel.
Vehicle type, engine type, driving behaviour, and other factors also impact fuel and vehicle performance, emissions, and fuel economy. You can find out more about Esso Diesel Efficient™ fuel and the independent tests performed at Millbrook Proving Ground Ltd at www.thewp-group.co.uk/esso-diesel-efficient.
Commenting on Shell’s pledge made on 11th February, to accelerate the drive for net zero emissions, OGUK sustainability director Mike Tholen said:
“It is an exciting time for the country’s oil and gas industry as we see companies including Shell demonstrate how our sector is transforming to meet the clean energy challenge, putting their expertise to work, as other companies are also doing, to help achieve our climate goals here in the UK.
“Now is the time to develop a sustainable future. By reducing the carbon impact of oil and gas as we invest in low carbon technologies, we can unlock a homegrown move towards net zero which maintains consumer affordability, promotes our world class supply chain and protects jobs and the energy communities we support.
“Everyday we see more examples of how this industry is changing. As we continue to face the challenges brought about by the pandemic, the UK economy should build on its strengths. The North Sea Transition Deal proposed in the Energy White Paper will be essential to accelerating investment and creating employment opportunities in new technologies while reducing emissions from production.”
Oil services companies can no longer delay making a choice on their future direction according to the latest report from PwC Strategy&, called ‘Time to Choose’. The options are to stick with their hydrocarbon heritage; becoming ultra-efficient and digitally enabled or pivot towards low carbon growth opportunities such as offshore wind or carbon capture, using hydrocarbons as the cash generating engine to fund this transition.
‘Time to Choose’ states that a perfect storm of COVID-19, increasing public scrutiny and the growing momentum of Environmental, Social and Governance (ESG) factors influencing investor and buying decisions, has accelerated the pace and impact of energy transition in many regions.
According to the report’s respondents, many oil services companies already recognise the need to transform in order to better align with their customers, with some helping to set the pace of decarbonisation alongside major players.
Transformation influences
Low carbon credentials could become an area of significant competitive advantage. The report highlights how oil services companies can increasingly showcase their decarbonisation credentials as a means of securing tenders. Some respondents also mentioned increasing pressure being brought to bear by some majors who are keen for supply chain decarbonisation credentials to help support their own strategic direction and licence to operate.
Where firms operate can also influence the pace of transformation. As governments around the world respond to the pandemic, fiscal stimulus packages have been developed with many countries looking to use this pivotal moment in time to stimulate a green recovery to ‘build back better’. For those companies with a major footprint or head office in Europe, energy transition and ESG themes are likely to be much higher up the corporate agenda than other regions, such as the Middle East, which will see hydrocarbons retain their importance as a focal point.
Drew Stevenson, PwC’s Energy, Utilities and Resources leader, commented:
“We believe the oil services sector has a significant contribution to make in the UK’s energy transition journey.
“From engineering expertise and innovation to project management and global operational scale, these businesses have a golden opportunity to not only channel this capability into market leading credentials that will be in-demand globally, but to play a role in shifting the conversation about how this industry fuels and sustains energy and employment into the future.”
Decarbonisation driven by digital technology, deals and diversifying skills
In many ways COVID-19 has accelerated the need to adopt and deploy digital solutions. Given the physical impact of coronavirus on the workforce, companies in the oil and gas sector have been forced to increase automation and use of digital technologies, such as remote controlled vessels and robots to inspect underwater pipe networks and conduct maintenance scans of industrial complexes.
Needless to say, while digital offers great potential for efficiency gains in the oil services segment, in the short term at least, it will be balanced against tight cost control. As a strategic imperative, investment in digital solutions cannot be cut off.
M&A is another means by which energy transition could be accelerated, with complimentary skills, technologies and credentials likely to be highly sought after as entry points into new markets. Premium valuations are already evident for renewable-facing businesses. The availability of finance will probably also be a driver of this transition.
As for the transferability of skills between oil and gas and low carbon, this is not always easy or evident. All oil services companies have core capabilities in particular areas – some may have skills that are transferable while others may struggle.
Have you selected a strategic pathway that will allow you to flourish in an increasingly volatile trading environment? Let us know.
Otley-based company, Tate Oil, has partnered with Yorkshire Dales Millennium Trust (YDMT) to plant 3,000 trees over the next three years, in a bid to reduce its carbon footprint.
Launching on 1st January 2021, family-run Tate Oil will be planting a tree for every 4th order a qualifying customer places – helping the 1.5 million homeowners using heating oil to offset their carbon emissions. As a completely free service to the customer, Tate Oil’s scheme is one of the first of its kind in Yorkshire and focuses on giving back to the local community.
Working with local trust, the scheme will support the target of planting 100,000 trees within the county, including areas such as Nidderdale and the Yorkshire Dales. The charity will be working with landowners and farmers to facilitate the tree planting, with customers able to visit their tree.
Michael Devlin, deputy CEO at YDMT added:
“Through our ‘Together for Trees’ campaign we are working with many supporters and partners such as Tate Oil to plant 100,000 additional trees across the region. Trees are hugely valuable as a habitat for wildlife, supporting some of our most endangered woodland animals, like red squirrels, dormice and cuckoos.
“They are also important for our mental health and wellbeing and we believe that everyone should have access to them. The appeal aims to raise funds to create beautiful woodlands that everyone can enjoy for years to come.”
Tate Oil has ambitious goals for their new green initiative:
“This is a really exciting opportunity for us to help our customers offset their carbon emissions” says Andrew Tate, director of the company. “This is the next step in Tate Oil becoming a greener company, and we’re pleased to be working with a local charity doing great things for our county”.
The scheme will offset approximately 3,000 tonnes of CO² from the atmosphere, bringing Yorkshire a step closer to achieving the UK’s net-zero emissions target by 2050.
Enhancing collaborative culture within the offshore oil and gas industry is not only key to maximising the potential of its existing world class supply chain but could also unlock future activity in the UK Continental Shelf (UKCS) and be key to delivering a successful Net-Zero future.
Improving commercial models which support cost reduction whilst incentivising the supply chain could re-energise collaboration, according to the findings of the annual Deloitte and OGUK Collaboration Report, published on 28th January.
Deloitte and OGUK’s industry-wide Collaboration Index (CI), which measures the effectiveness of companies as partners in projects, is part of the annual UKCS upstream supply chain collaboration survey. The report showed a slight increase in the collaboration index to 7.1 in 2020 from 7.0 in 2019, highlighting the flexibility and support the supply chain showed during an exceptionally challenging year.
On top of this, collaboration success rates hit a record high in 2020 with more than 50 per cent of survey respondents saying over half of their efforts were successful. In what also marked a first in the survey’s six-year history, the overall proportion of ‘successful’ efforts was higher than ‘unsuccessful’ ones.
However, while COVID-19 saw many businesses work together to address the challenges, respondents said the pandemic and consequent economic downturn also led to disadvantageous commercial behaviours such as cancelled or modified contracts.
OGUK supply chain and operations director, Katy Heidenreich, said:
“OGUK has been encouraging industry to do business in a sustainable way to protect the supply chain. This includes finding innovative ways of working that deliver value for both sides, ensuring that industry has the skills and resources needed when activity rebounds, as well as using the Supply Chain Principles as a mechanism to improve behaviours.
“We redesigned the questions in our 2020 Collaboration survey to understand how well these Principles have been embraced since we launched them.
“Greater collaboration will be a key factor in unlocking future industry developments and to strengthening our basin, our versatility, and our resilience. The ability to work together well across companies, industry and the wider energy sector will be critical to delivering a successful energy transition which supports jobs and the communities we work in. Collaboration needs to be part of our DNA; while it is not a silver bullet, it is good for business.”
OGUK will issue a call to action to promote adherence to its Supply Chain Principles and to communicate the benefits after the survey received a broad mix of views.
Deloitte’s office senior partner (Aberdeen), Graham Hollis, said:
“In what is an extremely challenging environment, the industry must assess new opportunities and challenges as it addresses the year ahead. Organisations need to reimagine their businesses and models and focus on the right set of collaborative behaviours because as the report highlights, working closely with suppliers and customers to support one another will be vital.
“As part of this, Deloitte has produced a Framework for Action which details six building blocks that organisations should consider helping develop and continue building successful collaborative relationships – ones which deliver greater value for both operators and suppliers.”
Deloitte’s Framework for Action supports the OGUK Supply Chain Principles, and both will be key to stimulating collaborative behaviours. OGUK will also be issuing a call to action to promote adherence to its Supply Chain Principles and to communicate the benefits after the survey received a broad mix of views.
With the Supply Chain Principles, energy transition and internal collaboration being new themes explored in this year’s survey, almost two-thirds of operator respondents said they were making some progress to meet their energy transition objectives – in line with the OGUK’s Roadmap 2035: a blueprint for net zero – compared with 49 per cent of suppliers.
While some operators showed best practice in sharing the risks and rewards of working relationships appropriately, there are still opportunities to improve.
OGA’s head of supply, Bill Cattanach, said: “Successful project delivery is more predictable where there is a fair and equitable partnership between operator and supplier.
“There are encouraging signals, as shown in the report, that the industry is leaving old approaches behind and embracing the expertise which exists within the supply chain in a collaborative manner. However, there is still room for improvement, and collaboration should remain a key focus for industry going forward.”
Since his inauguration, the new American President, Joe Biden, has wasted no time in initiating the shift away from coal, oil and natural gas – once the bedrock of US prosperity.
John Kerry, previously Barack Obama’s secretary of state and key architect of the Paris climate change summit in 2015, has been tasked with drawing up the new President’s climate plans. He commented:
“It is one of his top priorities, without any questions whatsoever. He’ll make more progress on the issue than any previous President.”
Whilst many of Biden’s actions were expected, the speed of implementation was not, and the world watched as the US changed its stance on fossil fuels almost overnight.
In his first few days of Presidency, Biden stopped the giant Keystone XL oil pipeline dead in its track by pulling the permit, re-joined the Paris climate accord and ordered the Pentagon to make climate change an issue of national security.
Whole government approach
Kerry explained:
“He is mobilising every department, every agency of the United States government to focus on climate and he is determined to try and restore America’s credibility and reputation.”
The intense ‘whole government’ approach to the issue of climate change, with drastic actions and commitments already in play, raises the possibility of returning to the notion ‘where America leads, the rest of the world will follow’ in an arena where, until now, the US has been left far behind.
Veteran environmental campaigner Bill McKibben comments that the President wants to send ‘a decisive signal about the end of one epoch and the beginning of another’ – a signal aimed at investors: “Fossil fuel, Biden is making clear, is not a safe bet, or even a good bet, for making real money.”
An economic stimulus
With share prices plummeting and Goldman Sachs warning of a drop in US crude supplies, one oil services company CEO told Bloomberg: “The industry is aghast at these changes. They are more direct, more fierce and quicker than what folks expected.”
Biden has been careful in casting the agenda as an exercise in job creations and economic stimulus in the wake of the Covid-19 crisis. Kerry comments: “If we’re going to invest new money, let’s invest it in clean energy, invest it in clean jobs, invest it in those technologies and other things that will build the future, rather than simply being the prisoners of the past.”
Biden has reiterated his desire to end all fossil fuel subsidies, ordered a ban on new oil and gas leases on federal land and said a third of all federal land must be reserved for conservation.
Displaced workers put to use
The President plans to reinstate and strengthen Obama-era regulations on the three largest sources of greenhouse gas emissions: vehicles, power plants and methane leaks from oil and gas wells.
Many displaced fossil-fuel workers will be put to work sealing off the estimated one million leaking oil and gas wells whilst millions of ‘prevailing wage’ jobs will be created in line with the plan is to build 1.5 million energy-efficient homes and install half a million EV charging stations.
Not without opposition
Although some big oil companies have acknowledged some of the curbs on emissions lifted by President Trump need to be reinstated, backlash is expected from others in the fossil fuel industry.
The democratic senator for West Virginia, Joe Manchin, is likely to be one such voice. Elected as a defender of his states coal industry, Machin famously campaigned with a TV ad that featured him using a hunting rifle to shoot a copy of one of Obama’s climate change bills.
Working with the UK
Kerry and the rest of the administration is also set to work hard with the UK government to ensure that the UN Climate Change Conference (COP26), which is scheduled to take place in November 2021 in Glasgow, is a success.
With over 500,000 homes currently using heating oil in Northern Ireland, a new video has been released to communicate how straightforward it could be to dramatically cut CO2 emissions through the use of HVO as a near drop-in and, therefore, very cost-effective, replacement for kerosene.
David Blevings, NIOF, explains:
“Further to our November article, ‘NI Energy Strategy – an update’, we learn that OFTEC is promoting a video to local politicians ahead of the new NI Energy Strategy. The video shows how easy a transition to HVO will be for NI consumers and reinforces the immediate carbon reductions that are available for liquid fuel users.
“OFTEC has advised Government that the new strategy must be technology neutral and the inclusion of biofuels offers a seamless transition for existing liquid fuel users; a simple option for government to maximise carbon emission reductions in the off-grid sector at least cost for consumers with immediate effect.”
The video can be viewed here.
For further information contact David Blevings. (dblevings@oftec.org or david@nioil.com)