Small is beautiful

Ian Marchant

Ian Marchant FEI Immediate Past President

The book Small is Beautiful by economist E F Schumacher was originally published at the time of the 1973 oil crisis. To quote Wikipedia “It is often used to champion small, appropriate technologies that are believed to empower people more, in contrast with phrases such as bigger is better”.
I think these words could usefully be applied to the challenges facing the energy industry today when we are facing different challenges that may, with the benefit of hindsight, look like an energy crisis.

The last hundred and fifty or so years have seen the energy industry fixated with bigger is better. It has been about the larger power stations, heavier and deeper offshore platforms and bigger companies. I think this is, however, yesterday’s trend. The future is smaller, more distributed and local. Here are four illustrations.

  1. More and more homes, schools and offices are fitting small solar systems and now this is frequently being combined with local storage. You can now install lithium ion batteries that are smaller than conventional gas boilers which means that all of your solar produced power can be consumed on-site. These are small, personal decisions which are democratising and disrupting the big centralised electricity system.
  2. The rise of unconventional oil and gas has transformed the economics of the fossil fuel industry. Regardless of the controversy around fracking, one thing is clear. These wells are quicker and faster to develop than the pieces of giant industrial architecture that dominated the industry until recently and this is changing the nature of the commodity cycle and the politics of the energy industry.
  3. Even the nuclear industry is being affected. If the 1600MW Hinkley Point C ever gets built, I suspect it will mark the final death throes of the bigger is better mentality. The focus is now on so-called small modular nuclear reactors which may be a fifth to a quarter of the size of Hinkley and stand a sporting chance of being connected with words not normally associated with nuclear power; ‘on time and on budget’.
  4. The market share of the big energy suppliers has been in steep decline recently and we have seen the emergence of a range of smaller competitors with different business models as well as the growth of collective and mutual owned energy suppliers. I suspect that this trend is going to be a consistent feature of the market.

The challenge for the energy industry will be how it copes with the disruption that is bound to occur as we move from a bigger is better world to one where small is beautiful and diversity of scale is a strength.

Facing the future head on

Louise Kingham OBE FEI Chief Executive

Louise Kingham OBE
Chief Executive

Gloom and doom casts a shadow across headlines about the oil and gas industry as economic slowdown and the continuing falls in commodity prices wipes millions off the value of stock markets around the globe. These circumstances are forcing companies to reshape their businesses with the inevitable pain of the impact this has on jobs, productivity, progress in the shorter term and the wider social impact which can be much longer lasting.

Industry cycles are expected – as are the’ ups and downs’ we experience when we’re in them. Clearly it’s important to ride the down times as well as you can but, at the same time, good leadership always has an eye on the future. Making time to think and understand how things will be different going forward and what that means for our organisations and so, being able to reposition to embrace change is essential.

At the same time, worldwide pledges have been made to reduce greenhouse gas emissions as part of the COP21 commitment. This takes engagement from the oil and gas sector and so, while managing the downturn, the industry is also examining  the challenges and opportunities these environmental responsibilities present.

With that in mind, listening to the impressive line-up of leaders gearing up to speak at International Petroleum Week in London in less than two weeks’ time to tell us how they are facing the future head on will be time well spent. Bob Dudley FEI from BP, Patrick Pouyanne from Total, Ayman Asfari FREng FEI from Petrofac and Igor Sechin from Rosneft are among the many taking part in presentations and panel debates between 9-11 February. I’d suggest you can’t afford to miss it.

Past, present and future

Ian Marchant

Ian Marchant FEI, President

All good things must come to an end and I am now handing over the Presidency of the Energy Institute (EI) having served two years. It has been a joy and a privilege to have the role and I hope I have been a good steward of our organisation. In reflecting on the two years, my thoughts are about the past, present and future.

We have just finished celebrating our one hundredth anniversary and that included a cake in the Palace of Westminster, a video from the Prince of Wales and numerous dinners and events up and down the country. It is good occasionally to look back and celebrate the achievements of the past, however that phase of EI’s life is over, probably for another 25 years. We have also launched the Energy Matrix, which makes available the accumulated knowledge of over 90,000 records and wisdom of our industry, in a modern digital form.

But enough of the past. We are all members of today’s energy industry and the EI continues to address today’s issues. During the last twelve months or so we have hosted the inaugural Energy Systems conference and our annual IP Week conference, which this year generated a lot of media interest, as well as another 90 events. A new addition to the EI calendar has been the autumn President’s event. In 2013, I hosted a debate and then in 2014 I gave a lecture which, as it was held in a function room at the Hard Rock Cafe, was full of song title puns. We have got involved in new initiatives such as POWERful Women and ESOS, and the first publication under the Energy Essentials banner has been issued. Our technical programme continues to go from strength to strength with the issue of 41 technical guidance documents, the publication of the first G9 offshore wind annual incident data report and further growth in the content of and access to The Journal of the Energy Institute. We have continued to drive up standards and build competencies for the future with the accreditation of 68 energy-related courses in 21 institutions throughout the world.

And talking of the future, as I hand over the reins to the very capable hands of Professor Jim Skea CBE FRSA FEI, I would highlight three foundation stones that have been laid recently. Firstly, we have started the refurbishment of our building to make it fit for the 21st century and to provide better member services. Secondly we have undertaken and launched our first Energy Barometer, which uses the knowledge and experience of our membership to gauge the state of the energy world and to inform policymakers and commentators. Thirdly, we introduced a new EI award category, the Young Energy Professional of the Year, to complement the work of our growing Young Professional Networks.

I believe that the group who met under the leadership of Sir Boverton Redwood a hundred years ago would be proud of what their creation continues to do and in its plans for the future.

The next best thing to knowing something is knowing where to find it ― Samuel Johnson

Louise Kingham OBE FEI EI Chief Executive

Louise Kingham OBE FEI
EI Chief Executive

Why is it that, in this information age we live in, the truth seems ever harder to get to? The facts often seem to either not exist or be buried ever deeper under layers of rhetoric and commentary . My views are probably a little tested after weeks of election campaigning in the UK, but nevertheless I think the point still stands.

So if we still think an evidence base is important – as I and other EI members do –  it’s essential that we step up and provide good quality, clear information that can be trusted. We also need to explain what the information was produced for and how we expect it might be used. This in turn reminds the recipients of the EI’s role as an independent professional society and source of trusted expertise – which is probably not called upon enough.

Two recent contributions from the EI have only just been published – the 2015  Retail Marketing Survey and the second G9 Incident Data Report for safety performance in the offshore wind industry.  Both reports contain a wealth of factual data as well as statistics;  both are designed to offer an evidence base for the state of play in two very different parts of the energy industry – one focusing on the health of a sector, the other on the health of the people within it.

So let me make a suggestion. If you are in need of trusted and useful information think about whether the EI could provide it for you.

The EI Knowledge Service provides a central resource for energy knowledge and information – find out more by visiting knowledge.energyinst.org

Energy Barometer – the role you can play

Prof. Jim Skea CBE FEI EI President Elect

Prof. Jim Skea CBE FEI
EI President Elect

This month sees the roll-out of the EI’s new Energy Barometer, which aims to ensure that the voice of the energy professional is heard by policy-makers and in the wider energy debate. The Barometer will be drawn from an annual survey among EI members.

Some of you will have already had an email from EI President, Ian Marchant FEI, inviting you to join the EI College which is at the heart of the Energy Barometer initiative. This means you had the good fortune to be randomly selected from among the professional and pre-professional membership to spearhead the Barometer project. If you have received an invitation, please accept at once. The EI Knowledge Team is waiting for your reply.

The team is currently preparing a questionnaire, which will be circulated to College members in early February. This involves researching questions, consulting industry experts and the EI’s Energy Advisory Panel, and fine-tuning the questions with the help of survey experts based at the University of Cardiff.  College members will be given two weeks to complete the questionnaire online, which should take no more than one hour. In March, the EI Knowledge Team will start to draw up a report developing a clear narrative from the conclusions and identify strong or surprising messages. The report will be reinforced with relevant industry statistics and will cross-reference energy policy proposals featuring in the party manifestos for the 2015 General Election. The report will then be published at a suitable time in the weeks following the election, and its findings will be communicated to EI members, government, and the public.

I can’t over-emphasise the importance of EI members’ participation in bringing credibility and prestige to the Barometer report. We are determined to ensure that the report picks up members’ views, 600 in all, right across the EI. In practice, this means that we’ve refined our random selection in two ways: first by making sure that we meet quotas for Fellow (FEI), Member (MEI) and Graduate (GradEI) members to ensure that the perspectives of both seasoned industry experts and future energy leaders are captured; second by ensuring that we get equal contributions from those who have elected to receive Energy World and those who have elected to receive Petroleum Review magazines.

If you have not received an invitation, you have not lost out. The College will have a two-year rolling membership with half the members replaced annually so that we combine an element of continuity with an opportunity for a wide range of EI members to contribute. This year’s invitations will be for a mixture of one-year and two-year memberships – in 2016 a further set of invitations will go out and you may well be on the list.

People who are not College members can also join activity on social media to discuss potential questions and important topics as well as debate the report findings – join in the conversation now @EnergyInstitute #EnergyBarometer to help form the questionnaire.

This is an exciting initiative in what will be a critical year for energy policy. Please join in and make your voice heard.

A 50-year adventure, but the North Sea exploration journey is far from complete

Louise Kingham OBE FEI EI Chief Executive

Louise Kingham OBE FEI
EI Chief Executive

September 2014 marked the anniversary of the award of Licence P.001 to BP, which saw the birth of the UK Continental Shelf (UKCS) only one year later when the West Sole gas field was discovered.

In 1970 the Forties discovery was made and, after construction of the pipeline by the same name, oil was brought to UK shores in 1975. A new era in UK energy production meant the adventure was just beginning.

On the 50th anniversary of that first discovery, in September 2015, the 8th Petroleum Geology Conference – known to many as the ‘Barbican conference’ – will take place in London at the QEII Conference Centre with a focus on North West Europe.  From the North Sea and surrounding onshore areas, to exploration frontiers in the North Atlantic and the Barents Sea, there is much to share from 50 years of learning.

The call for papers is currently open seeking abstracts and there will be an emphasis on knowledge transfer too because this event is about what the UKCS will mean for future generations.

The oil and gas industry is still the UK’s largest industrial investor with record cap ex of £14.4 billion in 2013. However, as capital and operating cost efficiencies reduce, there is never a better time to innovate – so it’s timely to share experience and learning and pass knowledge on.

Energy and the Scottish referendum – do we know the result yet?

Ian Marchant

Ian Marchant FEI, President

Energy has always played a key role in the Scottish economy. In the 18th and 19th centuries it was coal; in the 1950s and 60s it was hydroelectricity and power from the glens; from the 1970s onwards North Sea oil has loomed large and made Aberdeen one of the world’s premier energy cities. Finally, in this century, Scotland has played a leading role in the low carbon revolution both in renewables and in carbon capture and storage.

With this rich heritage, it is no surprise that energy became one of the key discussion topics leading up to the September referendum. The energy issues raised have, however, not been really settled by the vote and this would have been the case regardless of the outcome.

There are two issues worthy of comment. Firstly, there is the debate over the level of recoverable reserves in the North Sea. I have seen figures ranging from 15bn barrels to 24bn. I suspect that even the bottom end will require really significant investment and technological advances but we have to get the regulatory and fiscal regimes right and stable to even get close to this range. There was momentum behind implementing the recommendations of the Wood Report earlier this year and I hope that momentum is regained now the big constitutional issue is behind us.

Secondly, the low carbon revolution I mentioned earlier is stuttering. There are many causes behind this but political uncertainty is certainly one of the biggest. The referendum created a large shadow over investment and innovation in the renewable industry in Scotland and I sincerely hope that good progress can be made before the UK general election creates its own shadow. We need to see projects, both large and smaller community-owned ones, reach financial close and we need to see the climate of innovation and entrepreneurship return to both the corporate and education sectors.

The Scottish referendum has opened the Pandora’s box that is the UK constitution and, as the debate about things like devo max and home rule continue, I am sure energy issues will emerge that have to be sorted. These need to be addressed quickly, clearly and rationally if we are to avoid further delay and disruption or, to use a good Scottish word, a guddle*, in the two halves of the energy industry that are so important to the Scottish economy.

*guddle [verb. to catch fish by groping with the hands , as under stones or along a riverbank; noun. a muddled affair; mix-up; confusion.]