Sharing fewer spoils
There is a more sobering reason why the energy transition begets collaboration: because there is less money to be made in decarbonisation, and over a longer payback period, than in oil and gas. Shifting to a lower-returns model requires a change of mindset.
In a boom-and-bust industry rife with competition, rivalry rules. The cyclicality of oil fostered a short-term approach that led to a reactive or aggressive approach to contracting and commercial relationships. Big projects with high barriers to entry would rain down bumper returns, tiding companies over the fallow years.
This approach might work for big oil companies with balance sheets that can roll with the commodity markets; but it is incompatible with the energy transition because there won’t be the same upside in clean energy. Wind, solar, geothermal, hydrogen, carbon capture, power-to-X and other transition technologies are all fundamentally long-term, low-margin plays.
We have to approach decommissioning in a more measured, long-term, collaborative way.
Mike Adams, CEO of Elemental Energies
Slow returns, resilience and a common purpose might all seem a bit boring for seasoned oil and gas professionals. But that is what success will look like in the energy transition space, and achieving it requires a different mentality.
Decommissioning the past
Nowhere is this more apparent than in North Sea decommissioning. The sheer volume of wells that must be safely plugged or repurposed demands operators, supply chain companies and the regulator work collaboratively, and at scale. This won’t happen unless all parties come to the table with the right attitude – one that embraces flexibility, transparency and long-term relationship-building throughout the supply chain.
“Oil and gas is fundamentally a cyclical business; everyone is trying to make hay while the sun shines. If we do that in decommissioning, we are never going to get through all the wells. We have to approach this in a more measured, long-term, collaborative way.”
That’s according to Mike Adams, CEO of Elemental Energies, an independent well engineering firm headquartered outside Aberdeen. “It doesn’t work if you are collegiate and collaborative with one part of the supply chain but not with another,” he told E-FWD.
A collaborative disposition is essential from the outset, but efforts will fail if this is not sustained – or if the scale of the project does not justify the time it takes to negotiate highly complex contracts underpinning multi-field decommissioning campaigns.
Scale is needed for collaboration to work
Mike Adams, Elemental Energies
“A lot of time and money goes into planning big campaigns and for operators to decide how to piece together assets to decommission. That scale is needed for the collaboration to work. The operator needs to come to the table as an equally collaborative party giving us that certainty they are as committed to these projects as we are. When it’s a large project and there’s long-term certainty then we can take on more risk, lower costs or do other things to meet in the middle,” Adams tells E-FWD.
The role of the regulator
So, collaboration is a state of mind. But it is also an environment – one that must be fostered from above by the fair and firm hand of regulation. “If you’re an asset manager in charge of four trees, it is hard to see what’s good for the whole forest,” a North Sea operator source tells E-FWD. “The regulator needs to be in a position of not just encouraging people to come together, but seeing through the problems they are facing.”
Fostering collaboration is baked into the North Sea Transition Authority’s mission and values, and is enshrined in two of NSTA’s 12 oil and gas Stewardship Expectations. Building a culture of collaboration (SE9) is a “‘required action and behaviour” in the Maximising Economic Recovery Strategy for the UK. Operators are also expected to “collaborate and cooperate with their supply chain” by “acting reasonably and fairly in all aspects of supply chain engagement” (SE12).
Performance against these expectations is measured under the NSTA’s Collaborative Behaviour Quantification Tool (CBQT), which gauges the extent to which operators collaborate with the regulator, within joint ventures, with the supply chain and on development of Area Plans.
If you keep pushing campaigns back, will there even be a supply chain here to deliver it?
Alastair Bisset, NSTA head of decommissioning
The NSTA operates a measured escalation process that moves operators into proactive facilitation if they are not meeting agreed commitments. Usually this triggers improvements, but if not, the case can be referred to the dispute and sanctions team, which will decide whether to investigate or even pursue further escalation through legal routes.
“There are instances when we have seen things we wouldn’t like to and that’s led to escalation, but in the main industry realises what we are trying to deliver,” says Alastair Bisset, NSTA head of decommissioning. “It’s about making sure we don’t slide on that.”
Bisset echoed the concerns of some supply chain companies that see decommissioning campaigns being deferred by operators, who cite an economic case for delaying plug and abandonment (P&A) activity. This puts the NSTA in a tricky spot: should it adhere to its mission to drive down costs, or push to maintain momentum?
“There are times when you are going to have to look at the longer term. But the supply chain are rightly saying that if you keep pushing things back, will there even be a supply chain here to deliver it?” Bisset told E-FWD. “If you are trying to cut costs down the line, the reality is that we might not have the capability here and we will have to bring it back to the UK” which implies higher costs.
Collaboration is happening
Yet things are moving in the right direction. “The number of wells now overdue or soon to be overdue doesn’t take away from the good work being done by operators,” Bisset said. He cited an uptick in planned P&A activity in 2025 heralding what has been described as the coming ‘decade of decommissioning’.
Bisset also cited innovative new approaches to contracting heavy lift vessels to work simultaneously on both new well drilling campaigns and P&A, or even combining decommissioning with offshore wind installation.
“It’s not the norm by any means and it is [not simple to arrange] but we are well aware of conversations happening around that,” he added. Such collaborative approaches allow operators to share costs and pull vessels, infrastructure and capability into the North Sea that otherwise might go elsewhere.
Stronger together
Collaboration is also rife in the research and development (R&D) space. Joint Industry Projects (JIPs) offer a formalised structure that brings together unique knowledge within a partnership. JIPs are often too complex or too costly to be handled by one party and they require specific knowledge or equipment which is not at hand in one company.
JIPs are usually organised by a testing laboratory or standards body such as DNV, where all the participants share the results and findings. “Each participation is carefully analysed considering the potential benefits as well as the risks of non-participation,” an executive at an industrial manufacturer tells E-FWD.
In February, for example, DNV launched the second phase of H2Pipe – a JIP aiming to develop a new code for the design, re-qualification, construction and operation of offshore pipelines to transport hydrogen – either pure or blended with natural gas.
Tenaris, the New York-listed global pipeline manufacturer, is involved in a JIP exploring materials used in certain CCS well injection applications. And in offshore wind, the Carbon Trust this year launched the Sustainability JIP with 11 big-name developers to measure and address offshore wind’s lifetime emissions.
Political (un)certainty
All of these initiatives require, to a greater or lesser degree, clear strategic leadership at the highest levels and an unwavering commitment to the energy transition. Sadly, the UK is moving in the wrong direction on this front. Political turmoil is rife and policy U-turns are commonplace. Electoral cycles have always defined decision-making, but the lack of cross-party consensus on even the simplest aspects of energy transition goal-setting make the problem much worse.
“If you were to rank the UK in terms of political risk, it would sit somewhere alongside Mexico, just below Venezuela and Russia and certainly not above Norway or the Netherlands,” the North Sea operator source said. “People keep looking at their spend in the UK and ask, ‘what’s my return on investment? Why would I put another dollar in the UK?’”
Against this backdrop, it is perhaps unsurprising that there is room for much greater collaboration in the North Sea energy space. Without a stable and predictable policy environment, industry participants cannot confidently invest in shared goals. When political landscapes shift unpredictably or policies undergo abrupt reversals, the very foundation of collaboration is shaken.
People keep looking at the UK and ask, ‘what’s my return on investment? Why would I put another dollar in the UK?’
Energy projects, often with long lead times and substantial capital investments, become vulnerable to the winds of political change, impeding the momentum needed for collaborative initiatives to flourish. With an election looming, crafting enduring policies that balance economic, environmental, and social considerations is not an immediate priority.
In navigating the energy transition, fostering a resilient collaborative ecosystem requires a commitment from policymakers to provide the certainty and continuity essential for industry players to unite their efforts seamlessly. Only then can the collaborative spirit prevail.
