How Collaboration has Led to Sustainable Outcomes in Europe
In the United Kingdom and Norway, sector stakeholders are working together to secure a prosperous, low-carbon future.
The discovery of vast reserves of easily accessible oil in Norway’s territorial waters in the late 1960s was a game-changer for the Scandinavian nation, but abundance and proximity are not the only reasons the country’s energy sector has thrived in recent decades. Another key driver has been the establishment of formidable and diverse industry groups known as ‘clusters’.
“Early on in the development of the Norwegian offshore oil-and-gas industry, the government brought together various stakeholders including companies, service providers and universities into clusters to stimulate the development of specialised capability, products and services,” explains Bernadette Cullinane, Deloitte Partner, AOG. “In Norway’s supportive regulatory environment, these clusters were able to grow and become world-leading in, for example, one type of offshore technology, service or type of equipment.”
As these clusters grew and became successful, they were able to extend their reach and stimulate the development of new export markets, says Cullinane. “Companies within the clusters have become internationally successful and are now present in every major oil-and-gas hub around the world.”
Opportunities for Australia
Cullinane believes the Australian oil-and-gas sector has much to learn from Norway’s cluster technique. “It’s undeniably the best-practice benchmark for other countries to look to,” she says.
Western Australia’s Agent General to the UK and Europe, Mike Deeks, says the Norwegian Government has had an active role in establishing and maintaining clusters. “They’ve got some amazing research infrastructure which allows SMEs with good ideas to try out concepts in a government-provided facility,” he says.
Murray Bainbridge, Senior Trade Specialist for Energy at Scottish Development International, says the British have recently begun to replicate the Norwegian cluster model across their economy, creating sector-specific organisations known as ‘catapults’, which share expertise within themselves and trade information across sectors.
“The prime example of that in the UK just now is the Offshore Renewable Energy Catapult, which is specifically focused on offshore wind and is working very closely with the oil-and-gas supply chain [to] inform those companies what the sector needs, and to bring through new technology and new supply chain capability from the oil-and-gas sector,” he says.
Bainbridge says inter-sector collaboration in the UK has increased markedly since the oil-price crash of 2014. He cites the creation of the Oil and Gas Technology Centre in 2016 – co-funded by the Scottish and UK governments – as particularly significant.
“The OGTC is a world-first in terms of its cross-industry collaboration, including supply chain, academia and the operator community,” he says. “To date, they have co-invested with industry over £140 million to more than 220 technology projects and supported 20 new technology start-ups.”
Another example is Subsea UK, the trade body that represents the subsea supply chain across the UK. “Over the last few years they’ve been facilitating collaboration between oil and gas, offshore renewables and the defence sector where subsea challenges are similar, and one sector might solve a problem for another,” says Bainbridge.
Against this backdrop of increased collaboration, industry body Oil and Gas UK recently unveiled its Vision 2035 strategy for the UK Continental Shelf. It sets a number of bold goals, including increasing revenues by £920 billion, making the UKCS a net-zero oil and gas basin by 2050, adding £20 billion in value through investment in technology and innovation, and attracting 40,000 people to work in the basin.
The centrepiece of the plan, Cullinane explains, is an integrated energy system that combines traditional oil and gas with offshore wind and hydrogen generation. “The wind facilities can be co-located next to offshore oil-and-gas platforms, so the energy that’s created by the offshore wind can be used in the production of the oil and gas, and the extra can be exported,” she says. “The energy and gas can also be combined to manufacture hydrogen. Ideally, they’ll be producing hydrogen from the gas and then sequestering the carbon dioxide directly back into the reservoir.”
She adds: “It’s this very integrated vision, whereby a zero-emissions industry could be achieved through the incorporation of the renewable grid offshore, the creation of a new hydrogen export industry, and the ability to sequester carbon in that process back into the reservoir. This is a set of independent technologies working together in a new and integrated way – quite a revolution.” And, she argues, it’s been made possible by the collaborative mindset that the UK has imported from across the North Sea.
The value of collaboration
Cullinane says there is a growing awareness in Australia of the benefits of collaboration. “Some industry growth centres have been set up and the government has played a role in that,” she says. “There’s the National Energy Resources Australia, or NERA, for energy, and in the mining sector there’s METS Ignited, which is focused on mining equipment and technology services. But we’re still relatively immature in terms of our embrace of clusters.”
According to Cullinane, collaboration may be the best way for the Australian oil-and-gas industry to contend with the existential questions posed by the move towards ‘net zero’ that many advanced economies are making.
“Setting such targets in Australia is inevitable and pursuing those targets will demand collaboration,” says Cullinane. “What Vision 2035 in Europe shows is that everyone plays a part in putting together this tapestry of solutions that can support a net-zero industry.”
In the UK, setting a net-zero target has helped oil-and-gas sector companies chart a new course forward – towards hydrogen production and carbon sequestration. Bainbridge reckons Australia could also replicate the UK’s pivot.
“The big opportunity for Australia [is in] green hydrogen, so building offshore wind farms to produce the hydrogen which will power the economy of the future,” he says. “And, obviously, you’ve got one of the biggest markets on your doorstep for that: Japan has ambition to be a hydrogen economy by 2030, and they’re going to need to get their hydrogen from somewhere.”
He adds: “These activities may seem alien to many oil-and-gas supply chain companies, but we found in Scotland that the skills, technologies and experience that helped deliver 40 billion barrels of oil out of the UK North Sea are more transferable and applicable than you might think. Subsea engineering and asset integrity are just two common supply chain requirements amongst many.”
Following the UK and Europe towards net zero could help future-proof Australia’s oil-and-gas industry in another way, says Cullinane. “It will create jobs, and it attracts the right kind of talent,” she says. “We need to attract younger people to the sector, and young people want to work for companies that have a focus on emissions minimalisation.”
Cullinane argues that unless we keep step with the changes currently taking place in Europe and in the economies of our major Asian customers, Australia will fall behind. “We’ve got a small population, huge landmass, highly distributed assets, and our major consumers are far away from where the oil and gas is produced,” she notes. “These are all the reasons why it’s even more imperative for Australia to develop strategies that allow us to be globally competitive.”
Deeks has similar concerns. “The resource sector, whether it’s iron ore, gold, nickel, gas, whatever, has given us such abundant wealth that many of the companies during the boom days didn’t really try hard at being agile and flexible. I think now, in the modern environment in which we find ourselves, never has there been a greater need for that flexibility and that agility.”
AOG Energy 2021 will run 10-11 March at the Perth Convention and Exhibition Centre.
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