With apologies to Pete Townshend …. “I’ve got a feeling twenty one is going to be a good year ….”.
I am sure that is a sentiment echoed by all, albeit with even the most optimistic still crossing their fingers behind their back …
Looking back at my 2019 New Year wishes, I said I thought that 2019 had lit the after-burners on ESG and GHG issues. Of course I did not see the truck that was even then hurtling down upon us …. although perhaps I was more prescient than I realized when I said “I believe the 2020s will be a decade of dominated by massive change for upstream oil and gas companies …”. While I think I had the space correctly identified, most certainly I had not contemplated it was going to arrive in quite the manner it has.
I was asked around mid-year whether I thought the fall-out from Covid-19 had slowed or accelerated moves to an energy transition. You can see a longer answer in this video chat. In responding, I highlighted a couple of things that I thought were standing out:
Whatever your views on climate change, the energy transition, or ESG/GHG reporting, if you have not already bothered to research and understand what is going on in the background (and less and less is actually background now), do that now ! And then decide on your strategy, because whatever you think, change is coming. If you don’t understand how that might evolve you are going to find it tough when you do have to modify things; and
A new mid-Atlantic divide with European companies in particular had already started happening.
I would not say that the past year or so has made me an evangelist for all things transition and ESG, but it certainly has caused me to dig deeper into the subject and convinced me that there has been an inflection point this year. It is now not “if”, but in what manner(s) change will evolve. Of course, that is not the same as saying that oil and gas is going away any time soon (it will not, it cannot), or that every initiative being promulgated has been clearly thought out.
All that said, I have to disclose my track record ! Brexit, Trump nomination, Trump election all crashed and burned ! But, in the end, I more or less called the politics correctly this year.
Which seems a good segue back to how climate change and the energy transition will play out on this (the western) side of the mid-Atlantic divide.
Although there are many, one of the big differences between the U.S. (in particular) and other international independent E&P sectors is the sheer scale and opportunity presented at home, particularly since the advent of the shale boom that reinvigorated the onshore. Differences are not limited to the independent sector either; despite their international and reputational exposure, the Majors are also addressing things in a different way.
So, how does this all play into 2021 (and beyond) ? A year or more where two ropes are going to be pulling; one linked to (at least) some more regulation, and the other the pull to try and “get back to normal”. Probably the regulatory debate in the U.S. will take the early lead, given that even if all goes well it is likely to be the middle of the year before any semblance of normality – new, or old – starts to shape how everyone is thinking about future plans and investments.
The past four years …. or, perhaps, better to say three-and a-quarter of them … has cemented what may be described as an island culture. Already under pressure from lackluster financial performance, the challenge going forward for many is going to be how to change in order to navigate the pressures not just from financial institutions imposing their climate and social license filters, but from a new administration that is going to bring in some form of a Green Deal, even if that deal is not entirely “New”. Ultimately, how things pan out will reflect whether these ropes are diametrically opposed in tug-of-war fashion or, while still at something of an angle to each other, combine to move the industry in a direction where both can claim to have achieved their objective.
For the industry in general, and the U.S. industry in particular, the key must be to engage in the debate and shape the future. Fighting to try and kill change will surely just end with the imposition of new and much less palatable rules. So, with all these issues in play, I am looking forward to 2021, and not just to forget 2020.
From a Ulysses business perspective it has not been anything like as challenging as the year has been for most, with the disruption that has come falling in to what can properly be described as “first world problems”. Put another way, mostly that has consisted of delays in arbitration hearings …. with the inevitable consequence that rearranged timelines start to pile right on top of one another !
We also saved a lot of money on travel (from the number of rearranged flights, just as well the airlines killed change fees), and learned more about Zoom / Webex / Teams than any of us really wanted to know. Which raises the question on the “new normal”; where will be the balancing point between the need for human interaction (work and social), and the time and cost saving of not needing or having to meet or be present in person ? While video can work very well for some events and particularly when you know the other people on a call, it isn’t quite the same for networking and business development, or saying “cheers” at the end of the day ! And for those that commute, is it really necessary routinely to be in five (or six, seven or more) days a week, traveling only during rush hour. I do not think the office will go away, but surely the average square footage needed per person is headed downwards.
What else do I expect 2021 to bring ? Well, hopefully a return of something called “vacation” !
For me, my escape comes mid-year though with a trip to South Africa for three weeks to follow the Lions play the Springboks. Apologies to those who do not follow the sport … rugby, and a particular set of fixtures that takes place but once every twelve years.
Too good to miss and, I hope, a perfect antidote to this year.
Which seems a good point to wish everyone the very best for their own escape route from this year, that a vaccination comes your way sooner rather than later and that, in the interim, you are able to take some enjoyment out of the season.
Best regards … I’ve a feeling twenty-one is going to be a good year ….