What Does Brexit Mean for Oil and Gas?
Here in the (not very) United Kingdom there is – and has been for some months – only one major topic of conversation: Brexit. Whether by the time this magazine is published Britain will have crashed out of the European Union, or be undergoing an orderly planned exit, or will have agreed to remain in the organization for a definite or indefinite time period, is still a great unknown. One of the few things that most people agree on, however, is that Brexit will bring about significant changes in the way the country does business with both Europe and the rest of the world – although whether these will be to the advantage or detriment of Britain many will dispute at great length.
Though global in nature, the oil and gas business will not be totally immune to these changes. A report by EY commissioned by Oil & Gas UK suggests that if the country reverted to World Trade Organization tariffs, it could add something in the region of £500 million a year to the cost of trading oil and gas, possibly doubling the annual trade bill with the EU. Just as the industry seems to be emerging from a two-year slump, such a scenario would be ‘unwelcome’, as the report says. The possibility of border procedures slowing imports of drilling and other equipment, at least in the immediate aftermath of a no-deal Brexit, could also have cost and efficiency implications, as could restriction of the employment of skilled foreign labor.
Worries have been expressed as to whether leaving the EU will result in major regulatory changes for the O&G industry. However, as the largest producer of offshore oil and gas in the EU, Britain took a leading role in shaping the existing regulations, all of which will convert into British law on Brexit, so there is little cause for concern on this issue – although future changes by the EU, especially looking towards a low carbon energy future, may adversely impact it. So: many questions, concerns and considerations, whatever the final outcome.
However, those of us who have been living through this turmoil can take some lessons from it that have nothing to do with oil and gas but are still very relevant for the industry. Firstly: detailed rigorous planning for every possible scenario is vital at all stages of a decision-making process.
And secondly: for all negotiations, whatever the topic, a willingness to compromise and collaborate is essential on all sides.