The supply chain for the oil and gas sector is at “breaking point” as the impact of the coronavirus hits an already challenged industry, according to a report.
Oil & Gas UK (OGUK) is calling for UK government support to protect the sector as it struggles in the face of pressures including volatile oil and gas prices and operational disruption due to Covid-19.
The organisation, which represents the UK offshore oil and gas industry, published a report The Business Outlook 2020: Security of Supply Report, which it said highlights the critical role the industry plays in providing secure, affordable energy.
Production from the UK Continental Shelf is enough to provide 63% of the UK’s oil and gas needs and 46% of the country’s total energy, it said. The sector is also set to play a key role in achieving a low carbon future for the UK including carbon capture, utilisation and storage, hydrogen and offshore renewables.
However, OGUK said it is now urgent to ensure the sector’s resilience to maintain a secure, affordable energy supply chain and is calling on the government to work with it to develop a sector resilience package.
Mike Tholen, sustainability director at OGUK, said: “It is crucial to support our industry in operating as effectively as possible in these challenging conditions and that the sector’s capabilities and skills are protected both now and in the future.
“The pressures of a volatile oil price, the lowest gas price we’ve seen in a decade and operational disruption due to Covid-19 means our supply chain is at breaking point.”
OGUK said the tumbling price of crude oil, due to an oversupply as lockdowns, travel and other restrictions affecting the economy are enforced around the world, were a “body blow” for an industry already creaking under Covid-19 pressure. It warned it could fundamentally undermine the ability of the industry to recover.
Global oil prices fell to a near 20-year low this week. OGUK chief executive Deirdre Michie said although the dynamics of the US market were different from those directly driving the UK, it would not escape the impact.
“Ours is not just a trading market; every penny lost spells more uncertainty over jobs, our contribution to public services and to the just transition we all want to see. OGUK will be pressing the case for a Covid-19 resilience package to governments in the coming days which will focus on protecting the supply chain, jobs and our ability to continue to reposition ourselves for the future.”