From the Chief Executive: April 2021

As we passed the anniversary of the UK’s first national lockdown on 23 March, it gave many of us a reason to pause and reflect on the past 12 months. The impact of 2020 on our personal and business lives still resonates, and what was initially thought (and hoped) to be a brief period has now established itself as a new way of living, changing many fundamental aspects of our lives. Reduced office space and flexible home-working policies are here to stay for the long-haul, and travel restrictions and social distancing have led to a boom in seamless, global virtual teamworking. One thing I am acutely aware of is the resilience and diversification that has been displayed, both here at the EIC and in the wider energy industry. We have had to learn how to react much faster and more radically to uncertainty, giving a real sense of entrepreneurialism on a macro and micro scale.

Looking back also gave us the opportunity to look forward. This year very much feels like more of the same, but there are signs of real hope. We are no longer in the dress-rehearsal of 2020. Now it’s time for the performance – and we all know how to do this. In the energy sector, oil price stability in the US$60 range is hugely beneficial to companies in all sectors. It gives supply chain companies – hit hard by the financial shock of 2020 – hope to rebuild their tender pipelines, invest in new technologies and consider new export markets. There is also a real excitement and hope around the ambition and opportunities in energy decarbonisation for 2021, and particularly in the run-up to COP26 this November. The gradual return of physical events, the prospect of holidays and the improving weather (particularly for us locked-down Brits!) give a real sense of optimism for the months ahead.

While it’s right that we should feel optimistic about 2021, key challenges for the energy market loom large on the horizon. While the UK government’s decision to remove fossil fuel trade subsidies represents a positive step towards decarbonisation, this may trigger the same globally. With the lion’s share of global CAPEX investment over the next five years still dominated by upstream, midstream and downstream oil and gas, could this decision prove to be premature for a supply chain already under pressure? A return to normality also hinges on a world-wide vaccine roll-out, and while many countries are making great strides in this area, others, such as Brazil, are struggling – which may hold us all back.

There are fears that countries are not moving fast enough to meet COP21 targets, particularly with new COVID-19 debt burdens, and concerns that COP26 may not get the global traction the world needs to fulfil ambitious net-zero commitments. A key topic and outcome of COP26 will be the requirement for increased scale and investment in energy transition technologies such as hydrogen, CCUS, floating offshore wind and energy storage. EICDataStream, the EIC’s global project-tracking database, shows that these sectors account for just 2% of the global project opportunities during the next five years. Without a major increase in the pace and scale of these projects, companies risk over-investing too soon, or may be distracted from their core business while these sectors are still in their infancy.

If the past 12 months have proven anything, it’s that energy industry leaders have got what it takes to meet these challenges. The most diverse and sustainable businesses will be the most profitable businesses. The businesses that have a high percentage of exports across multiple energy sectors will be in the best possible position. Having now interviewed more than 60 EIC members for the 2021 EIC Survive & Thrive Insight Report, which studies the strategies that companies deploy to succeed in a crisis, there are common factors to those that have achieved success in these times. Have a vision, be persistent, but also be agile and open to change at all times – now more than ever. And above all, be kind to all the people who matter to you.

Stuart Broadley Chief Executive Officer, Energy Industries Council stuart.broadley@the-eic.com