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New report on UK oil & gas supply chain opportunities in the energy transition published

18 April 2024

A new report published by independent research and business intelligence company Rystad Energy shows the oil and gas sector’s supply chain possesses between 60 to 80% of the capabilities required to develop the UK’s low carbon energies, but targeted investment is vital to capture the potential of an estimated £150 billion opportunity.

Image: Shutterstock
Image: Shutterstock

The research commissioned by OEUK is in a new report called ‘UK oil and gas supply chain and opportunities in the energy transition’. It aims to set out a clear path to inform key stakeholders of the breadth and depth of the UK oil and gas supply chain, its capability and capacity, plus its transferability and critical role in delivering Floating Offshore Wind (FOW), Carbon Capture Storage (CCS), and Hydrogen.

Fresh data reveals the urgent need for strategic action to help supply chain companies seize the potential of a projected 4% yearly increase in spend (real terms) across offshore and onshore activity. Forecasts indicate this major growth phase will occur across the UK’s floating wind farms, new hydrogen schemes and carbon capture and storage projects from 2023 to 2040. Rystad Energy’s analysis underlines the successful delivery of these emerging low carbon energies will hinge on the existing oil and gas supply chain delivering into them.

The report reveals urgent action is needed from government to tackle the decline in investment which has contributed to the scaling down of capital expenditure on UK capabilities in areas including engineering, fabrication, and construction.

Rystad Energy’s analysis presents a compelling case for policymakers to collaborate with the offshore energy sector to create support systems. These would focus on maintaining UK supply chain capabilities to ensure they are ready and available to meet the anticipated surge in demand for new low-carbon energies as they become established.

Published for this general election year, OEUK’s industry manifesto is calling for all parties to choose a homegrown energy transition built on stable long-term polices and fair returns for the UK’s offshore energy firms and their suppliers.

Despite the UK’s early mover position, and sizeable investments into Fixed-bottom Offshore Wind which has benefited from government incentives, supply chain companies haven’t gained a strong foothold in the domestic market, evidenced by a low share of the major work packages in Engineering, Procurement, and Construction (EPC) and installation. With limited overlap in capabilities, equipment and assets in the oil and gas supply chain at only 21%, it has been difficult for UK companies to leverage early mover advantages, allowing international original equipment manufacturers (OEMs) and vessel owners to dominate the market.

By comparison, in new energy segments like carbon capture and storage (CCS) and hydrogen, there is an opportunity to use the UK’s oil and gas expertise in handling high pressure volatile liquids and gases. Existing capabilities within the supply chain could support 84% of CCS spend and 80% of Hydrogen. With the industry’s heritage and experience of operating deepwater projects, it also has the capabilities to secure a potential 57% of the Floating Offshore Wind market.

Rystad Energy’s data indicates that with the right investment environment, the UK’s offshore energy supply chain could benefit from a significant global export market in these three segments. For hydrogen the accumulated forecast spend is around £590 billion and £470 billion for CCS between 2024 and 2040, representing much larger markets than those for Floating Offshore Wind market, which is valued at £100 billion. The supply chain also possesses significant design and engineering capabilities which, if invested in, could benefit from £125 billion of export opportunities over the same period.

The report is available from OEUK’s website here.

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