Debate on Oil and Gas Demand, Environmental Responsibilities, and Investment Decisions

Today we had the pleasure of hosting David Whitehouse, CEO of Offshore Energies UK (OEUK), for a comprehensive discussion on UK and North Sea energy. David joined OEUK in January of this year and previously held senior roles at CNR International UK and Shell, working on projects from deepwater frontier developments in the Gulf of Mexico to managing mature assets in the UK’s North Sea. As you will hear, David is pursuing a Master of Engineering in Renewable Engineering to complement his Ph.D. in Chemistry. OEUK is the leading trade association for the UK’s integrated offshore energy industry and their membership boasts over 400 organizations in offshore oil, gas, carbon capture and storage, wind, and hydrogen. We were thrilled to visit with David.
 
In our conversation, David first shares background on OEUK’s 50-year history, its member companies, and the types of support they offer. We discuss the dynamic energy landscape in the North Sea and Europe, the UK’s energy status including climate goals, energy security, the cost of energy, and the public’s increased awareness of the importance of producing energy domestically. David touches on the UK’s economic challenges, the UK’s energy production, challenges faced by the industry, including recent windfall taxes that have led to a pullback in investments by operators in the North Sea, the potential impact of expensive energy on the industrial base, and the crucial role of reliable and affordable energy in successful economies. We explore the growth of offshore wind production, plans for carbon capture and storage projects, and the importance of continued investment in oil and gas to support the transition. We also ask David for his views on societal acceptance of the oil and gas sector in the UK, Brexit’s impact on energy, government involvement and policies, infrastructure challenges, electricity demand, and the future workforce. The slides from today’s discussion are linked here. It was a thought-provoking and wide-ranging conversation and we greatly appreciate David for sharing his insights and time.
 
Mike Bradley kicked us off by discussing that the upcoming week’s equity market trading may be dominated by trading churn, lacking significant economic data and an end to Q3 earnings reporting. He flagged that commodity and energy equity traders are particularly focused on the November 30th OPEC meeting, especially after being delayed from last weekend. He noted that several issues will be topical at the OPEC meeting this week: first, OPEC members (Angola & Nigeria = 2.6mmbpd of combined production) have been considered the main reason for the pushback in the OPEC meeting as both members appear to be angling for higher individual production baselines in 2024. Second, it’s consensus that Russia & Saudi will extend 1.3mmbpd of production cuts though Q1’24. Finally, there doesn’t appear to be any real consensus that additional cuts will be forthcoming, much less production cuts of size, because it would only provide additional price cover for non-OPEC producers. He also highlighted that even though 2023 global demand growth was substantial, what was also substantial was 2023 global oil production growth of ~2.5mmbpd, which was much higher than expected due to the lack of Iranian sanction enforcement (~600-700kbpd), higher than expected U.S. production growth (1.2mmbpd vs early ’23 consensus of 0.7mmbpd) and continued growth from non-OPEC countries (Brazil & Guyana). He wrapped by noting that crude oil prices in 2024 could prove much more volatile, and that OPEC’s ability to effectively manage oil markets in 2024 could be much more challenged, given that global demand growth may be slowing, and non-OPEC production will still be growing. Arjun Murti added his thoughts on the IEA’s recent comments that t