Minister on a mission

Lord Stephen Green of Hurstpierpoint is passionate about British innovation in the global oil and gas supply chain. He is enthusiastic about the dynamic nature of the world's upstream business and the UK's unyielding efforts to ensure it continues to earn the right to sit at the energy industry's top table.

Britain's need to maintain its influential role as an international center of energy expertise and a recognized source of technological innovation and knowledge for the oil and gas sector is vital for the country's economy. Equally important is the battle to keep the UK North Sea and the still-emerging Atlantic Margin frontier West of Shetland as competitive as possible when it comes to attracting fresh multibillion dollar investments. This is at a time when the competition for new investment dollars has never been fiercer as younger hydrocarbon provinces around the world put forward their own compelling cases.

It is at times like these that the need to leverage existing ties with established partners is paramount, and Green wasted no time in reaffirming as many contacts and relationships with his counterparts in the US as possible during the world's biggest offshore event of the year, the Offshore Technology Conference in Houston, April 30-May 3.

The UK has an extremely long and well-established trade relationship with Houston and the US as a whole, with many billions of dollars having been invested in the North Sea over the past four decades or so. But the money flows both ways – few realize that the UK is Texas' No.1 foreign investor, and that ongoing relationship is expected to continue to flourish as the state follows its predicted growth pattern.

"British innovation is a core strategy of our economy," the minister said. "This is my first visit to OTC, and having gone 'round the stands and met with so many British and other companies, it beggars belief how wide the contribution has been to our economy and many others.

"The British have a very strong delegation here, with at least 124 companies in attendance, and they clearly have some leading-edge technologies. The sheer variety of different kinds of companies here is astonishing.

"With exploration and production activities being carried out all around the world, the knowledge that has been working so well on the UK Continental Shelf can and is being applied elsewhere," Green continued. "The expertise that has been built up in our E&P sector has a clear resonance everywhere else. This expertise is a key part of the oil and gas supply chain and plays a significant part in the export of our goods and services internationally, which is worth an estimated US $10 billion to the UK economy.

"It's clear to me that the domestic market is important in Britain, but the international market is so very important to the country as a whole. Many British firms are world leaders, and it's vital for the US and the UK to continue to collaborate closely."

The minister is certainly a man who knows the economic value of the energy industry – and the risks. "This is an industry of very volatile prices. That's just a fact of life," he said.

As a former leading banker in the UK with responsibility for investment banking and capital markets as well as a stint as chairman of the British Bankers' Association, Green has had to use all his financial acumen and experience to help restore faith both at home and abroad in the country's fiscal energy policies and stability after controversial budget changes and a windfall tax raid by the UK's coalition government in 2011 left many questioning whether it was still a viable province for new offshore investments.

This year saw the government reveal a budget that has gone a long way toward placating the concerns of North Sea players after a year of heavy criticism from the oil sector. New tax breaks were proposed to boost the development of frontier fields in the West of Shetland, including a $4.7 billion new field allowance for large and deepwater fields. This was particularly sweet music to the ears of large companies such as BP and Total, which are set to benefit most from any eventual reduction in tax as they are under way with substantial new field developments in the region such as BP's Quad 204 project and Total's Laggan development.

The government also promised to end uncertainty over who pays for the dismantling of old North Sea platforms by entering into a contractual approach for decommissioning tax relief. It also left open the possibility of the introduction of further reliefs targeting specific opportunities such as brownfields and HP/HT fields, which will be the subject of further consultation.

Green said the UK government had to provide "a fair and stable environment" for innovative industries such as the oil and gas sector. "The country needs a vibrant offshore industry, and Britain is as open and welcome to investment as any other," he said.

He also stressed the need for the upstream industry to transfer its knowledge and expertise into other applicable areas such as the offshore wind market. "Offshore wind is a key part of the energy mix going forward. It's currently around 6% to 7% of the energy market in the UK, and the target is 20% by 2020. The transfer of knowledge there is very applicable – the very large size of some wind turbines is similar to some of the oil industry's very large platforms." According to Green, the UK is going to be one of the largest wind markets in the future, and a good deal of that will require foreign investment, "so we should ensure we have one of the best offshore wind industries around," he said.

Commenting further on the UK's energy mix, Green pointed out that nuclear power is contributing around 30% of total supply, while coal is around 20%. "But for all the role that nuclear and renewables will play going forward," he said, "the oil and gas contribution is going to be critical as far ahead as we are able to see."