What is the role of the UK supply chain in a changing oil and gas industry?

An article by Colin Elcoate, CEO of the Alderley Group

18 January 2022

Lord Browne’s recent interview with Time magazine calling for oil and gas companies to be bolder in separating their low- and zero-carbon activity from their fossil-fuels business gets to the heart of the challenges posed by the energy transition.

As Lord Browne stated in his article, the business of hydrocarbons is capital intensive and ‘unloved by the market’ whereas low-carbon activity is valued ‘at a premium’ by investors.  Importantly, he told a few homes truths recognising that hydrocarbons will be around for a long time to come.

That’s because energy demand is growing rapidly globally.  There is no sign that this trend will discontinue.  Therefore, providing reliable, sustainable energy solutions to satisfy the need for lower carbon emissions is a long-term game.

As CEO of an international supply chain business, I have seen the energy transition close up.  We are now in a period of transition where because of the nature of the energy industry – production and consumption – change will take place over many decades and will be far-reaching.

Energy systems of the future will always be a mix of different energy sources, all with their own peculiar set of challenges – economic, geographic, political, and environmental. 

IRENA’s recent report on how one new technology, hydrogen, cuts across the whole energy system underlines this.  We are all left trying to navigate a global multi-dimensional puzzle. 

The energy transition has forced supply chain companies like Alderley and its group companies, SMS, and Kelton, to wrestle with fundamental questions such as.

Where does the global energy supply chain fit into this?  And how should it respond?

Obvious areas of focus relate to recruitment and people.  This must be the number one priority. 

By offering our people the opportunity to work on projects of international significance with the best global energy companies in the most dynamic growth markets we’ve been able to attract great new talent including graduates as well as retain our top people. 

Another lesson for the supply chain is on creating bespoke solutions that address the demand from clients for lower carbon and more efficient products and solutions.  The energy transition is about rewiring our own mindsets not just producing new things.  We’ve responded to this by encouraging our teams to develop a culture of ‘innovation-first’ that has resulted in new approaches in areas such as hydrogen or CCUS.

In this way, clients know that we are supporting them on their journey, no matter how exploratory or uncertain the end destination may be.

Third, the supply chain needs to place skills high on the agenda for a successful energy transition.  As an industry we must recognise that skills across the supply chain are transferable.  Our experience in the oil and gas industry indicates that the skills needed for a lower carbon future already exist.  The job is to encourage people to focus this expertise in the areas most needed including lower carbon technology and innovation that improve energy efficiency.

The supply chain in the UK must ask itself other searching questions such as: where do you localise? And how do you globalise?

Underneath this disruption and uncertainty lies great opportunity for solution providers that can take a global perspective, reach new markets, and develop world-class talent in-country with a culture of innovation and problem-solving.

While the supply chain will never find itself under the same scrutiny as a major energy company like BP or Shell, it has a golden opportunity to redefine itself while staying true to its core values based on progressive engineering and embedding the next generation of talent. 

For this reason, we should all be positive about the future and open to the views of energy leaders such as Lord Browne.

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Colin Elcoate is CEO of the Alderley Group and has worked in the energy industry for 30 years.

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