“I’m reading a book about anti-gravity. It’s impossible to put down.”
Which would you rather believe; a book about anti-gravity or ‘Roadmap 2035 (A Blueprint for Net Zero)’ from Oil and Gas UK? Both ask the reader to suspend disbelief.
The North Sea industry is in the grip of a deadly vice. It has driven down costs to what would have seemed unimaginable a few years ago and yet they are still the highest in the world. The oil price has recently collapsed, as it does every few years, but this time it looks different.
At around $42 per barrel the price of oil and gas is down in the doldrums but the more the price tries to return to a level of profitability, the less competitive North Sea oil and gas are.
Over a series of blogs we will examine a lot of products from the North Sea starting with electricity from gas-fired power stations.
Oil and gas producers have spent so long competing with each other (usually on cost) that they have missed the serious competition; renewable wind, solar and hydro-electric. Together with industrial battery systems, these technologies are making oil and gas increasingly expensive for power production.
Power can now be bought from a renewables market that has a twenty-year record of reducing costs. And this trend appears to show no signs of stopping. Being no longer economic, all coal-fired power stations in the UK will have shut down by the middle of this decade. Recent UK government annual statistics have highlighted the performance of renewables that provided a record 37.1% of the UK’s electricity in 2019, up from 33.1% in 2018, with wind power playing a major role.
Let’s be clear about this. The National Grid does not prefer renewable energy because it’s ‘green’; it prefers it because it’s the cheapest in the market.
Yes, the wind doesn’t always blow and the sun doesn’t always shine but industrial-strength batteries are already being deployed and are transforming the electricity sector. These batteries capture surplus electricity from the grid and hold it until demand exceeds supply. Then their speed of switching back online is within seconds, ensuring continuity of supply.
To add to the problems for the North Sea, the old reservoirs are depleting rapidly and any new ones being discovered tend to be uneconomically small, highly-fractured or otherwise awkward to exploit. And when a company eventually decides to shut down a reservoir and its platform, there is a large cost to decommissioning, typically in tens or even hundreds of millions of pounds.
No wonder that the oil and gas industry is disappointing the investment community. Over the past 10 years, returns for oil and gas stocks have been feeble in comparison to the overall stock market. Discerning investors are avoiding fossil fuel stocks not because it’s ethical but because it’s a smarter thing to do.
How can you take advantage of cheap renewable energy? Buy your electricity from a 100% renewable supplier, of course. Check out the ‘Energy’ section of this website to see the choices for your renewable electricity provider.
Finally, do you know where your pension and savings are invested? Do you read the literature from your financial provider? Are you exposed to fossil fuel stocks? If divestment from fossil fuels seems a little too radical for you, have you considered ESG investment? I know, that was too many questions. ESG investment is the management of funds according to Ethical, Social and Governance principles. A competent financial adviser would be able to offer you this choice (after thoroughly advising you on all aspects first).
Now, where’s that book I couldn’t put down?