Oil & Gas DiversificationOpportunities and Challenges

SubseaUK & Scottish Enterprise

2nd August 2016

Sam Gomersall

www.pale-blu.com

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

1

Carbon Capture & Storage

2

Oil & Gas Transition

3

Emerging Energy

Systems

We help organisations of all sizes to create opportunities and mitigate risks arising from major

changes in the energy markets.

Management consultants for the energy transition

Pale Blue Dot Energy

Project outline

To provide Scottish Enterprise with sector and market analysis to enable a detailed action plan regarding diversification opportunities for the Scottish oil and gas supply chain

Review 24 sectors

Map oil and gas capabilities to those sectors

Prioritise sector potential

Highlight other diversification aspects

© Pale Blue Dot Energy Ltd. 2016 Management Consultants for The Energy Transition

Sectors considered

Aerospace

Carbon Capture and Storage

Chemical & Life Sciences

Construction

Decommissioning

Defence

Downstream O&G

Energy storage

Food & Drink

Heat

Hydro

Hydrogen

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Knowledge

Marine

Midstream O&G

Mining

Nuclear

Offshore wind

Rail

Textiles

Thermal Generation

Water

Wave & Tidal

Unconventional gas

Findings: Priorities

‘Green’

Offshore wind

Nuclear

Decommissioning

Hydrogen

Heat

‘Amber’

Wave & Tidal

Chemical & Life Sciences

Unconventional gas

CCS

Energy storage

Knowledge

Water

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

‘Red’

Hydro

Aerospace

Defence

Construction

Marine

Midstream O&G

Downstream O&G

Textiles

Rail

Mining

Food & Drink

Thermal Generation

Findings

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Findings

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Findings

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Mapping summary

Sector with traffic lights Resvr Wells Facilities Subsea Support

1 Offshore wind

2 Wave and Tidal

3 Hydro

4 Nuclear

5 Aerospace

6 Defence

7 Chemical & Life Science

8 Unconventional Gas

9 Carbon Capture & Storage

10 Decommissioning

11 Construction

12 Marine

13 Downstream O&G

14 Midstream O&G

15 Textiles

16 Rail

17 Mining

18 Energy storage

19 Hydrogen

20 Knowledge

21 Food and drink

22 Water and wastewater

23 Heating and cooling

24 Thermal generation

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Sectors with subsea activity

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Scotland’s Opportunity

To use O&G ‘surplus capacity’ as an opportunity for growth

Consolidate position in Decommissioning and Offshore Wind

Develop sector leadership in emerging sectors such as: Hydrogen, Wave & Tidal, Heat, Energy Storage

Move from ‘solving a problem’ to ‘creating an opportunity’

Engage the O&G sector in the vision

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Market challenges

N Sea production in decline

Low oil price now, future price uncertainty

Growth in low carbon sectors

Transition from fossil fuels underway

Oil and Gas remains a huge sector

O&G supply chain unlikely to recover in size

Need to ensure awareness of the “broader script”

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Messaging challenges

Industry messages are a delicate balance;

“We need to be pulling together to secure the future for the N Sea, which still holds billions of barrels of oil & gas” DierdreMichie O&G UK

“Aberdeen is now beginning to face up to the challenges of its long term economic future after the complacency of a strong N Sea dominated era” Sir Ian Wood

Both messages are valid and complimentary

The diversification message needs to be stronger in Aberdeen

..without being seen as undermining the O&G message

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Cultural challenges

Insufficient drive for diversification

High oil price: no need

Low oil price: no capacity

Poor understanding of other sectors

Ability to market into other sectors

Perception of O&G from other sectors

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Diversification drivers & outcomes

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition

Improved value proposition

Distinctive offering

=>

Business synergies

Growth potential

Decline in current markets

Loss of revenue

=>

Diluted profitability

Loss of focus

Driv

er

Ou

tco

me

Strategy precedes delivery

© Pale Blue Dot Energy Ltd. 2016 Management Consultants for The Energy Transition

Summary

Early sector opportunities are in Offshore Wind and Decommissioning. Also Water and Nuclear.

Scottish leadership could be established in Wave & Tidal, Heat, Hydrogen, Energy Storage

O&G Sector not well engaged with Diversification

Precipitating O&G Sector engagement is the most important strategic action

O&G capacity is an opportunity for business and Scotland, but it will take time

Business can get started with preparatory action before engaging in strategic activity

© Pale Blue Dot Energy Ltd. 2016Management Consultants for The Energy Transition