2. AGENDA
THE 3 BIG STRUCTURAL CHANGES IN GLOBAL ENERGY
MARKETS
THE IMPACTS ON THE NORTH SEA
THE IMPACTS ON THE COMPANIES
CONCLUSIONS

3. THE 3 BIG STRUCTURAL CHANGES
1: The (permanent) end of the energy super cycle
BP OUTLOOK
OIL PRICE (BRENT CRUDE, 2014$/BBL)
Source: BP and Thomson Reuters
0
10
20
30
40
50
60
70
80
90
100
110
120
130
1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
2014$/bbl
$50

4. Source: Thomson Reuters
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Oil Brent…
$50
THE 3 BIG STRUCTURAL CHANGES
1: The (permanent) end of the energy super cycle

5. MUCH MORE OIL TO COME
US Russia Saudi
Arabia
Iraq Iran
10million+ 10million+ 10million+
US
Saudi
Arabia
Russia
Iraq
10million?
Iran
10million?

6. THE 3 BIG STRUCTURAL CHANGES
2: Decarbonisation – so far little progress
330
340
350
360
370
380
390
400
410
20
22
24
26
28
30
32
34
36
38 1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
ppmGt CO2/yr
Emissions Atmospheric CO2 global mean
Notes: Emissions from fossil fuels and industry; Gt, gigatonne; ppm, parts per million; * 2015 represents forecast emissions.
Sources: CDIAC/GCP, 7 December 2015, http://www.globalcarbonproject.org/carbonbudget/15/presentation.htm; Ed Dlugokencky and Pieter Tans, NOAA/ESRL, 2016, www.esrl.noaa.gov/gmd/ccgg/trends/
Global CO2 emissions and atmospheric CO2 concentration

7. THE 3 BIG STRUCTURAL CHANGES
2: KYOTO, PARIS NOT THE MAIN GAME
KYOTO
• Production not consumption
• European not US, China & India
• No global impact
PARIS
• Voluntary not compulsory target
• ≠ 2°C
• Keeps UN in business with reviews
• 1.5°C target given 2°C can’t be met
• Trump & the future of the US participation

8. THE BIG STRUCTURAL CHANGES
3: Technology
• Shale oil and gas
• 8 years to transform global markets
• Electric generation & solar
• Electric storage and batteries
• Electric distributed grids and smart networks
• Electric households
ROBOTS
AI
3D PRINTING
DIGITLISATION OF EVERYTHING
ELECTRIFICATION OF EVERYTHING

9. IMPACTS ON THE NORTH SEA
1: FALLING PRICES
• $50 and falling – how much will be economic?
• What is the point of E & P?
• Does the Artic have a future?
• What will have to happen to costs?
• How much will tax go down?
• How will decommissioning be paid for?

10. IMPACTS ON THE NORTH SEA
2: Decarbonisation
• If decarbonisation works, the North Sea closes
• Pressure on developed countries to do more
• Renewable strategies
• CCS
• Switch to gas

11. IMPACTS ON THE NORTH SEA
3: Digitilisation
• Electric market is what matters
• Gas has a key role to play
• North Sea supplies are secure
• Electricity market is capacity, not wholesale
• Full implications of zero marginal costs

12. IMPACTS ON THE COMPANIES
• Harvest and exit long term strategies
• Oil and gas companies unlikely to be renewable leaders
• Cost structures will need to follow prices down
• Zero marginal costs change the structure of energy markets and
challenge the conventional IOC models

13. CONCLUSIONS
2014 IS A STRUCTURAL BREAK WITH THE PAST
DECARBONISATION IS UNSTOPPABLE
TECHNOLOGY, NOT PARIS WILL EVENTUALLY SOLVE THE
CARBON PROBLEM
ZERO MARGINAL COST IS TRANSFORMING ENERGY MARKETS
THE FUTURE IS DIGITAL, AND THEREFORE ELECTRIC
THE NORTH SEA WILL ADJUST TO ITS NEXT PHASE

16. FOR INFORMATION – DIETERHELM.CO.UK
• The CMA Energy Market investigation: Companies 5-0
CMA? Paper 17, Mar 16
• The new normal – oil prices after the crash, Paper 16, Feb
16
• Stranded Assets – a deceptively simple and flawed idea,
Paper 15, Oct 15
• Reforming the FiTs and capacity mechanisms, Paper 14,
Sep 15
• The first 100 days of Conservative energy policy, Paper 13,
Aug 15
Energy Futures Network
Paper 18.
After Hinkley – how to
contract for the rest of the
nuclear programme
Dieter Helm
Apr 16
Energy Futures Network
Paper 19.
Flawed in almost all its
parts – the final CMA
report on electricity
markets
Dieter Helm
Jul 16
Energy Futures Network
Paper 20.
Greg Clark’s energy
agenda
Dieter Helm
Sep 16
Energy Futures Network
Paper 21.
Energy and Climate
Policy after BREXIT
Dieter Helm
Oct 16
• Penalty tariffs, open ended regulation and embedding
overcharging. Paper 12, Jul 15
• British energy policy- what happens next? Paper 11, Jun 15
• Energy Policy and the Coalition, Paper 10, March 15
• What should oil companies do about climate change? Paper
9, Feb 15
• Competition in the British electricity sector: a set or practical
measures, Paper 8, Feb 15