Out-Law Analysis | 01 May 2018 | 4:38 pm | 2 min. read
As always, many of the 70,000 delegates, industry leaders, investors, buyers and entrepreneurs at this week's conference will be from Aberdeen, or have strong connections to the UK Continental Shelf (UKCS). The timing is apt, as next year the industry celebrates its own golden milestone: the discovery of the Arbroath Field, the North Sea's first commercial oil field.
UK companies visiting OTC will recognise the need to have access to a strong export market, and to be constantly looking for global opportunities. In this day and age, it is more clearly understood that a presence in international markets is not an option, but an imperative.
As part of a five-strong team from Pinsent Masons, the law firm behind Out-Law.com, who have been visiting OTC for more than 20 years, we are looking forward to playing our part in supporting a global client base of operating companies, supply chain service specialists, entrepreneurs and the new wave of technology start-ups, as they make the case for growing their businesses in the new energy landscape and maximise opportunities for exporting the skills and technologies for which the UK in particular is renowned.
This year, many delegates will be cognisant - and perhaps a little nervous - of the disrupted world in which we operate, in terms of the geopolitical complexities around the globe. Increased tensions in the Middle East, changing relationships with Russia, ongoing climate challenges and ensuring security of energy supply are just a few of the factors that oil and gas operators and the supply chain will be debating as OTC gets into full swing.
Those same issues, combined with OPEC intervention, have undoubtedly played a part in the oil price recovery. Following a six-day streak, the price of Brent crude oil climbed as high as $75 a barrel, the highest level in more than two years.
A continued upswing will bring relief to the supply chain in terms of improved margins, and it could also create a better environment for investing in new technologies. However, a steady and stable commodity price will bring far more benefits to the oil industry than a volatile one. While an oil price beginning with a seven appears to be good news, I can recall not too long ago that it began with a two - and that sort of volatility makes long-term strategic planning challenging.
A heightened oil price also impacts on merger and acquisition activity. It raises the possibility that assets will not change hands so readily because pricing will become an issue; with concerns from vendors that they are not achieving optimum value on the one hand, and downside risk fears from purchasers on the other.
OTC delegates are sure to be struck by the remarkable surge in activity in the US onshore oil industry, which has transformed international energy markets and now has a significant impact on the global economy. Long-term conference attendees, casting their minds back 10 years or so, would find it difficult to imagine that the US is now exporting record levels of hydrocarbons and is set to become a net exporter of oil and gas by 2022.
The US offshore sector, and the Gulf of Mexico in particular, continues to face challenging times, illustrated by the drastic reduction in offshore utilisation rig rates which sit at around 20% of the number of rigs in use before the oil price crash. The Trump administration has pledged to open up almost all US coastal waters to offshore drilling, but future developments remain to be seen in the face of overwhelming bipartisan opposition.
Bob Ruddiman is an energy law expert at Pinsent Masons, the law firm behind Out-Law.com.