Business Outlook 2019

5.4 Realising New Opportunities for Supply Chain Companies

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Increasing the opportunity for the UK-based supply chain from export activity and diversification is a core aim of industry’s Vision 2035 — with the ambition to double the opportunity for supply chain companies.

EY’s Review of the UK Oilfield Services Industry shows that UK supply chain revenue originating from the export of goods and services fell from £12.1 billion in 2016 to £10.6 billion in 2017. This represented 39 per cent of total supply chain revenue generated in 2017, a level which has remained relatively consistent over the last five reported periods, demonstrating that reductions in export revenue have declined by a similar level to revenue from UKCS-based operations. The supply chain sector with the highest proportion of revenue from export activity was reservoirs, at 56 per cent. This is reflective of the nature of sub-surface work, which can often be carried out remotely for locations across the globe, and for which London and the surrounding regions form a global hub. Conversely, support and services accounted for the lowest export percentage, generating 71 per cent of revenues from UK-based activity. Along with export activity, diversification into new markets forms a key pillar of Vision 2035, ensuring that companies are able to apply their skills, expertise and resources to meet the needs of other energy industries. A survey of OGUK members indicates that more than half of supply chain companies provide goods and services to other energy industries, although the majority of revenue still relates to oil and gas-based activity – however companies are beginning to report that the margins on offer within alternative energy sectors are often greater than those in the oil and gas sector. While oil and gas will continue to be a crucial aspect of the future energy mix (see section 3.4) increased investment in alternative energy sources will be required to meet the aims of the Paris Agreement. Figure 29 outlines the change in global investment trends that will be required within the IEA Sustainable Development Scenario. Oil and gas-focused supply chain companies should view the changing dynamics as an opportunity to diversify further and realise new revenue streams.

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Figure 29: Investment in Fuel Sources Required to Meet IEA Sustainable Development Scenario

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Other Low-Carbon

2010-2017

2018-2040

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Transmission and Distribution

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Renewables

Energy Investment by Type

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Fossil Fuels

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200 400 600 800 1000 1200 1400

Investment ($ Billion)

Source: IEA

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