Wednesday Jun 29

As Britain is set on an uncertain course, what now for the UK's Oil and Gas Industry?

 

Last Friday, the United Kingdom woke up to the news that it would be leaving the European Union. The majority decision was won by only a slim margin of just four percent. The result has plundered the UK economy into a period of uncertainty. So where does this leave the UK’s Oil and Gas industry?

Thankfully, early indications envisage that Britain’s decision to leave the EU is unlikely to have an adverse effect on the oil and gas sector. Global oil prices did fall last Friday, but oil analysts and traders were in agreement that this fall in price was likely to remain for only the short-term. However the Oil and Gas industry still wants clarity from the government to curb the ambiguity on how it plans to move forward with agreements like the free travel arrangements between the UK and EU now being questioned.

In a recent poll by Airswift, which was taken before the referendum vote, one-third of energy sector workers would have voted to remain in the EU. The vote has created doubt amongst North Sea operators around the need to source talent for projects in and around the EU. Yet, leaving the EU could signal a more prosperous future for the UK North Sea. Norway operates outside the EU and is a major player in the energy industry, so the UK is now in a position to style a future for itself, in a similar guise.

There are some potential stumbling blocks that could have an impact on engineers finding employment in the UK. Some foreign or overseas oil companies may be reluctant in investing further into the North Sea, or into any other exploration projects either in other areas of the UK or in other energy sectors. Salaries could potentially be affected negatively due to that reluctance in investment which in itself is a response to the instability of next four years. It is apparent that there is not going to be a clear picture of the fallout from not being a part of the EU for some time.

The impact of Brexit may aggravate the already complex environment created by low oil prices. This, along with the potential of a Scottish referendum for independence creates an even bigger doubt for the industry. The emergency of a second “Indy Ref” could result in companies delaying or cancelling projects until any outcome is determined.

It may come as a relief to some that legal frameworks will not be changed immediately. Furthermore, in upstream oil and gas, Brexit would not change the all important things – taxation, licensing and regulations, as the UK already have control over this. What is clear however is the urgent need for a strong leadership to move forward swiftly and for the government to outline a process to minimise any period of ambiguity.

Energy company SSE said that the referendum result has presented no immediate issues to operations, but warned the UK government to be aware of the importance that relations between the UK energy market with European countries can have on efforts to deliver clean energy. They had the following to say on their website,

“SSE agrees with the UK Government that collaboration with other European countries on energy matters is important for UK consumers. It therefore hopes that the UK Government and the European institutions will provide clarity on future plans for the UK’s involvement in the IEM.”

Shortly after the result, Royal Dutch Shell released a statement confirming that it would work with the UK government and European institutions on any repercussions for it’s business from the UK’s decision to leave the EU. Shell did want the UK to remain, with it’s priority to continue supplying energy to customers in the UK and Europe.

Isabelle Kocher, CEO of global energy player Engie shared Shell’s reaction and clarified that Engine remained committed to investing in the UK, but added that she regretted Britain’s decision to leave. Kocher said the vote did not change the view Engie has of the UK, where at present it employs 17,000 people. BP has also come out and said that it’s headquarters would stay in the UK, despite the leave vote.

If new trade deals are negotiated swiftly and adequately, trade flows are unlikely to be affected. Responding to new regulations will not inherently disrupt present working practices. Oil and Gas companies are well built to withstand far more unstable political landscapes than a UK outside of the EU.  

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