COLUMN: UK's Abandonment of EU Could Have Dramatic Impact on Oil, Gas

COLUMN: UK's Abandonment of EU Could Have Dramatic Impact on Oil, Gas
The debate on whether the UK should leave the European Union reveals profound risk and potential reward for the oil and gas industry.

Writing this on the heels of President Barack Obama’s trip to England where he waxed philosophic on Brexit with his buddy, Prime Minister David Cameron, I’m pretty sure I know what you’re thinking: Great. Another arrogant American telling Great Britain what it should do.

On the contrary. My research into how Brexit (shorthand for Great Britain leaving the European Union) would impact the oil and gas industry around the world illustrates an impressive variety of scenarios. In short, whether you’re for Brexit or want to maintain the status quo, oil and gas has a lot at stake.

Several business leaders – perhaps most notably, Bob Dudley, CEO at BP – have spoken out, denouncing Brexit. In a BBC story, Dudley said that without the backing of the EU, Great Britain’s standing on the world stage may fade. And, he added, the EU needs Britain, and the opportunities afforded by the fifth largest economy in the world.

“There are lots of technical tax reasons, trade flows, regulations, that would make it better for our business and the energy business in general, the oil and gas business, [if Britain] were a part of Europe,” Dudley told the BBC.

Deon Daugherty
Deon Daugherty, Senior Editor, Rigzone
Senior Editor, Rigzone

The U.K. joined the European Union (when it was known as the European Economic Community) in 1973. Britons go to the polls on June 23 to elect whether they want to remain there. An April 21 poll by The Economist showed in its poll tracker that 51 percent of Britons want to stay in the EU; 40 percent support Brexit; and 9 percent don’t know.

I put the question to Cary Larry, director of oil and gas business development at Frost & Sullivan. He drew parallels between the U.K.’s dilemma and the confusion in Saudi Arabia.

“In the oil industry, you’re seeing a similar theme [to the Brexit debate]. You’re seeing a lot more countries [in Europe], whether they own oil production or not, become much more energy independent. Everybody is kind of going their own path,” he said. “With Britain leading the EU, it could be we’re seeing people trying to work out their best deals. As we’ve seen in OPEC, when a major company leaves a group or union, or in the case of OPEC, a cartel, it weakens the strength of the remaining countries.”

To Have and Have Not

In short, it creates a world of “haves” and “have nots.” Access to oil and gas being the chief ‘have’ in this scenario.

Larry said Brexit could strengthen Great Britain, solidifying its presence in the oil-rich North Sea. If the U.K. split from the EU, it would no longer be tied to the fluctuating market and troubled economies of some EU countries. It could address issues in the North Sea, including a lack of investment there.

“If [Great Britain] can have a (successful) economy, if they can show some kind of strength – it would help their investment opportunities in the North Sea,” he said. “We could see, from a production standpoint, something good come from it.”

From a demand standpoint, however, struggling countries would likely grow weaker. While Germany and France could hold their own, Larry said, other countries would suffer.

“If they suffer, it’s going to be harder to pick up their demand,” he said. “Others may not see a need to deal with EU as a whole for oil and gas. Deal with countries separately, and if those countries have the money and the credit to deal, they can [make deals]. If they don’t, it could be a very big detriment to them.”


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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Michael | Apr. 28, 2016
The UKCS is a mature, declining hydrocarbon zone, in which all new resources will be found in marginal, high operating cost areas, and will not replace the fields which are approaching end-of-life. This is equally true with the UK inside or outside of the EU. Likewise, its local resistance by British residents, which is unlikely to diminish, that restrains shale gas development in the UK, not EU membership. There may be hydrocarbon-related issues involved in the Brexit debate, but these are not such issues. The author should have seen that without someone needing to point it out.

Pat H | Apr. 26, 2016
The EU is destined to fail with just a few fiscally responsible countries constantly having to prop up economies of others that shouldnt have been admitted in the first place. Brexit will allow the UK to control their borders, unlike the remaining EU countries. The British pound has also consistently outperformed the euro, so whats the point of going backwards into the inevitable black hole with the others and having to later res-establish the Pound after the euro collapses?

john morris | Apr. 26, 2016
As its rural communities who are affected by shale drilling one has to ask how they will benefit. Rural communities in the UK use heating oil and are not connected to the gas grid. Such is our failure to advance beyond the Victorian era. To incentivise these communities we should oblige exploration companies to connect rural England to the gas grid. Forget about one off payments from the oil companies as has been proposed. Connect to the gas grid. While doing that get on with installing broadband at greater than 2mps. And what about the phone signals? Time for Britain to move into the first world.

john weaver | Apr. 26, 2016
The Brits have everything to lose and nothing to gain by staying in the EU

Jason | Apr. 26, 2016
I like the sentiment about Shale Gas boosting our production but in real terms the opposition actually comes from the people local to proposed sites as opposed to from Europe. I think if you were to run a Brexit campaign attached to producing more Shale related hydrocarbons youd probably alienate a lot of people.


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