I’m dissatisfied with the term Energy Transition. Everyone’s doing it, but they’re all doing something different. So, I’ve been working on a framework for describing what’s going on.
Much of my network is concerned with Oil and Gas and there is this term “Energy Transition” banded about. Which it seems they define as –
“What we are doing now won’t work in the future. Let’s find ways to apply our skills to ANYTHING new and hey-presto, that must be energy transition”
As a definition it is not helpful. So I am looking for a different way of classifying things. This is what I have so far.
Meta Industries
Firstly, I took the word Energy and examined it. That led me to realise that it is really one of a few “meta-industries” that provide the fundamental requirements for our world. Energy being one. Others include things such as Shelter, Food and, Transport. Each of these meta-industries have alternative outputs which can be used to provide their utility. For instance, Energy, output can be fulfilled by Oil, Gas, Coal, Electricity, etc. You get the picture. It’s the same for the others meta-industries.
Meta Industries in transition
Each Meta industry has alternative outputs which are, somewhat, interchangeable and can achieve the primary goal of supply.
Each of these alternatives outputs have a supply chain of interconnected industries that will be impacted by a switch between alternatives. Such a switch will also require modification of consumption activities. i.e. switching more of the Meta Industry “Energy” output from Oil to Electricity requires electric vehicles, which require batteries etc.
I think talking about working in “Energy Transition” is almost meaningless. Energy Transition is an outcome created by other activities. These activities are things you can work on. Energy Transition is not a thing in itself but a description of what happened. It would be the equivalent of saying you work in “Energy Profitability”.
Working Up, Working Down
This thinking has led me to a framework around each alternative supply chain (working down) and from each “traditional” industry (working up).
To explain, the Oil Industry is a component of the “Energy” supply chain, but is also a component of the “Fertiliser” supply chain which is part a “Food” Meta Industry output alternative.
It is difficult to analyse the “oil industry” in isolation as it gets caught up in all it’s supply chains from energy to chemicals to road construction to transportation. I propose that we can simplify the analysis by looking down from a fundamental Energy Meta Industry.
There are 4 Industry groups impacted in a transition between alternative outputs of a Meta Industry. E.g. the switch from Oil to Electricity.
A: Industries that will cease to be needed
B: Industries that mitigate the impact of (A) industries until they do
C: Industries that will replace them
D: Industries that do not need to change at all
Industries that die and ones that help them pass peacfully
The (A) industries are unwelcome but necessary for a while. The goal should be to make them obsolete as soon as possible.
This removal creates economic opportunity:
To reduce the environmental impact until they do (for instance by reducing unnecessary emissions)
As facilities are removed from service, activities for dismantling the infrastructure will flourish
Professional services for financing, operating, and advising in this space.
The reducing capacity of (A) industries will lead to reduced scale economies and higher cost of capital.
Temporary mitigating industries emerge
The (B) industries are temporary, they will somehow clean up the unavoidable impact that (A) industries have until they are closed down. Carbon scrubbers that sort of thing.
The doom-spiral for doomed industries
Even if they are doomed, (A) industry projects will still be required to be around for a time. But they will also need to execute unpopular projects with loads of political risk. They will have higher cost of capital. They will carry increased costs from compliance, regulatory charges, and penalties. They will need to pay for a new input cost – (B) industries. They will have higher operational costs. They will find it hard to recruit and retain staff so labour costs will increase. These increased costs will lead to increased output prices. This will cause further reduction in demand for their product. Scale economies will kick in for competitive substitutes. It will become a downward spiral for the old, and an upward whirlwind for the new.
New industries emerge as innovation accelerates
The (C) industries are the up and coming replacements. They will likely be easier to finance, enjoy tax breaks and subsidies. They will also benefit from scale-up, learning economies and rapid innovation. They are likely to employ modern technology such as autonomous vehicles, AI, 3D printing and big data from the start. They will be the foundation of the 4th industrial revolution.
Some things stay the same
The (D) industries are the ones with very little impact on the environment that don’t need to change in this Meta Supply chain. But may be impacted by due to interference from other Meta Industry transitions.
Meta Industries need to be analysed seperately
This lens applies to all the Meta Industries, and can help disentangle the analysis.
Of course there are interconnected implications, because if the Oil Industry is a type (A) industry for energy, it may be type (D) for, say, fertiliser manufacturing. So even if it is eliminated from the Energy Meta Industry, it may not be from the Food one. But the implications of the changing cost of production may have interesting implications for fertiliser pricing and availability.
Two brand new Meta Industries
On top of this there are two more new Meta Industries. These meta industries don’t seem to function well with our current rules, regulations, incentives and rewards. To get them to function we’ll need some changes to the economic rules of the game.
Meta Industry 1: Coping with Climate Change. As sea levels rise and storms increase there will be activities required to deal with this. From insurance, to design, to retro-fit conversions, to disaster recovery. Meta Industry Output is “resilience”.
Meta Industry 2: Cleaning the biosphere. There are technologies being worked on that can remove harmful gasses from the air, can rehabilitate rain forests, rewild habitats etc. Meta Industry Output is “Biosphere Maintenance”
The problem with these two Meta industries is that it’s not clear who would pay. In an individualist capitalist society it is in no one person’s interest to pay for this, but we will all benefit from it if it occurs. We have moved away from socialist policies for the common good for a long time, but maybe these industries will require us to return to them – and on a global scale.
This is the third post in the series considering the left-field consequences of the 4th Industrial revolution (4IR). Not only are there several technology trends leading to breakthroughs in productivity but also there are drivers pushing changes in approaches to energy. This is a long post, so apologies in advance, but there’s quite a lot to say on the topic.
If you were in Surrey and was asked “does the world need any more cars or need a better standard of living”, you might be tempted to answer no. If, however, you were in the poor parts of south east Asia or Africa you might instead agree that raising living standards is good idea. To do that output per person must go up and that will require technology, know-how, organisation, and energy. As living standards rise demand for domestic energy rises too.
Development has implications for energy demand, supply, and emissions. For capitalism to continue to provide improvements to people’s lives different economic drivers will be required if we are to address environmental constraints. Some will come from technological advances, some by regulation and some by changing desires of consumers. In short, we need a transition in our approach to energy.
I’m going to address energy transition in four ways: energy substitution, energy efficiency, decarbonisation, and decommissioning.
Many members of the Bestem Network are involved in the oil and gas industry. Please don’t read this post as a prediction for oil prices, it’s not. It’s also not about the short-term outlook for the oil industry. It doesn’t deal with the decades of piped gas and LNG and the abundant shale gas available. Instead it explores inescapable (if inconvenient) long-term trends. Guided by the insights from members of the Bestem Network, I am concerned to know if I am investigating along the right track more than demonstrating “being right”.
For oil veterans “Energy Transition” is firmly on the agenda in 2021. Many people I talk to are experiencing declines in their current business. Some are starting to believe the value of resources and capabilities that drove business success in the past should now be reconsidered. For them, it’s tempting to term any new line of business as energy transition – because it is a transition away from the energy business they knew. This phrasing doesn’t aid analysis. That’s why I decided to consider this topic in four dimensions.
There’s a lot of resistance and denial about change in the Oil and Gas industry. People can’t comprehend that skills, resources and assets that seemed so valuable three years ago, may no longer be so. Oil companies are writing off reserves, there is talk of stranded assets. Of course, there are people whose interests are served by changing the public discourse and some of the “illogical” conclusions of proponents of the new order may be “wrong”. Perhaps all parties have the same priorities, but in a different order? If enough people subscribe to a new paradigm, they can sway the outcome. Watch out, history only calls this way once.
What’s the data say?
If you haven’t read the BP statistical report on energy and oil – you’ve missed out. LINK
For my oil and gas colleagues, please note the graph above is for energy usage and therefore does not include consumption of oil and gas for other purposes such as chemical feedstock. These other uses account for about 15-20% of consumption. LINK
Perhaps petrochemicals will become a relatively more important use for oil. There are important developments including the configuration of the new Yanbu refinery that hint at this. Perhaps this market will be dominated by the middle east. LINK.
By far the most important sources of energy are Oil, Gas and Coal. Our modern world is built on their consumption which has increased 10x since 1900. In many ways the history of the 20th century is the history of oil. I am currently reading Daniel Yergin’s book the New Map, it’s a great reminder of how mega-politics is tied up with energy. LINK
Figures from the USA indicate that approx. 40% of energy is consumed in the home (heating, lighting, powering equipment, etc.), 30% is used for transport (private cars, lorries, boats, planes etc.), and 30% is used in industrial settings (steel, cement, manufacturing, mining, oil production, etc.). LINK
As other parts of the world catch up with the lifestyles of the Europeans and North Americans sheer weight of numbers could mean another 100x increase in energy consumption is on the horizon unless something changes.
Unfortunately, this poses two problems: Firstly, consumable resources are finite causing scarcity and price rises which slow global development, and secondly it appears that the emitted gasses are inconveniently killing us all (albeit quite slowly). LINK
Apparently we must emit no more than 100GigaTonnes of CO2 before the end of the century. LINK. In 2018 we emitted 40MegaTonnes. LINK. Carbon concentration in the atmosphere stands at 400 parts per million (up 50% from where we stood in 1850). At the current rate, excluding growth, we hit our upper limit in about 25 years, leaving us 55 Years where we must emit nothing at all. So, we must grow and use more energy but emit less carbon.
On top of this, advances in power semi-conductors, computerisation and battery technologies are making electricity more interesting. The use of oil, coal, and gas to create electrical energy that will then be transformed into stored potential and then to kinetic energy is less efficient than directly generating electricity in the first place. This is especially true when the price of new generating equipment is benefitting from economies of learning and scale. Since 2010, utility-scale solar PV power cost has declined 82% LINK and LINK
The upshot of all of this is that:
The human population of the world cannot safely advance until its growing energy requirements are met by means other than oil, gas and coal
Not only must we not increase the rate of CO2 production, we must reduce it
Combine this with some trends:
There is a growing desire to use electrical power
Measurement, algorithms, and power-switching leads to reduces losses in electrical power systems
Cost of generating electricity from the sun and wind is reducing
It’s possible to capture CO2 as it is produced so it is not released
It’s possible to remove CO2 already present in our atmosphere
There are other fuels that don’t produce CO2 when they burn
All this points to: growth in renewable generation; a stop in demand for oil, gas, and coal for electricity generation; reduction in the tasks that need doing; ways to use less energy to perform tasks; moves to reduce the production and release of carbon dioxide; and ways to remove the darned stuff from the air if at all possible. This is neatly summed up in categories Energy Substitution, Energy Efficiency and Decarbonisation. And will inevitably lead to Decommissioning.
Energy Substitution
Perhaps this is the first true energy substitution? We’ve had fuel augmentation before – adding coal on top of wood, and oil on top of coal. Sure, there was a little displacement, but mainly it was new growth that accounted for the new fuel and we continued to consume the old stuff pretty much at the same rate as before. The method for conversion from chemical to mechanical-power did, however, change – steam, internal combustion, turbine. This time is different as we’re transitioning on three fronts simultaneously: the primary method of capturing energy; displacement of established uses; and finding new (more efficient) ways to consume.
The benefit of electro-mechanical conversion
Direct use of electric drives to replace fuel combustion is occurring in both transport and in industrial settings. There are some areas that prove harder to electrify – especially when heat is the desired end-product. These include steel making, cement manufacture, distilling, cooking, and domestic heating.
There are positive drivers pushing the direct use of electricity in mechanical drives. This method provides excellent controllability using complex sensors, computer control and high-power semiconductors. It also provides excellent scalability – very small motors up to massive monsters. Electricity is also relatively easy to distribute.
The downside to electricity has always been difficulties related to is use in temporary, new, or moving applications. This relates to portability, transport, and storage. Battery technology is an issue as is gaining a connection and maintaining grid reliability. Users tend to fall back on diesel-based generation for both portability and reliability.
In transportation (especially aviation) weight is an important factor because, unlike fuel tanks, batteries do not get lighter when they are empty.
The business drivers of electric energy adoption:
Falling cost of direct electricity generation from wind and solar
Increasing battery performance
Requirements for fine-control and monitoring driven by computer control enable new solutions
Opportunities for efficiency from system level monitoring and prediction coupled with intelligent distributed control
Obstacles are:
Cost of infrastructure for grid establishment
Time to establish connection
Difficulty in transporting stored energy
Difficulty of use in mobile applications (battery storage and weight)
The societal drivers are:
De-carbonisation
Energy security
Under the current business rules, when positive drivers are strong enough and the obstacles small, users will naturally substitute. To maximise the societal drivers (or public good) regulation changes may be required to tip business decisions. These can come in the form of subsidies, penalties or license-to-operate. The decision is dynamic – what doesn’t make sense today, may do tomorrow (note the 82% fall in the price of solar over the last decade). The more that electrification occurs: the more technology is developed and the more the price falls; the more experience we gain and the less risky the outcome becomes. As demand and volumes fall for older technologies, they become more expensive and less convenient. Over time tipping points are reached and business decisions become easier to make. I explained this dynamic in relation to electric cars here LINK
There is a great piece by Tim Harford examining the shift from steam to electrical drives at the turn of the 20th Century. It provides a framework for understanding the drivers of the elongated time lines required for a transition. LINK
Scale Matters
Renewable generation used to be a cottage industry, but scale matters and it’s starting to swing the economics decidedly in favour of renewables.
Solar power is a factory manufacturing and construction problem. Site operation is pretty much zero intervention. Factors that have driven down cost will continue to do so with manufacturing costs decreasing and per-cell-output rising. While it’s unlikely to rival Moore’s law, research into cooling, focussing and reflected energy is promising a 10x improvement in output, which will compound the learning economies we’ve already seen. Solar is already the cheapest way to make power, and result of development may mean that we see a further 10x fall in price per MW generated.
Scale in wind power matters. GE are trialling a 12MW turbine in Rotterdam LINK It won’t be the last.
Standardised production
Unlike oil and gas platforms each turbine is essentially the same as the last one. There is no top-side processing to be designed and no process modification during its life. Wind has already achieved the standard, reusable, modular offshore design that Oil and Gas have been talking about for so long and never managed. This will lead to reduced requirement for engineering design and economies of scale and learning for installation and operation.
Oil and gas have been very wasteful for decades by creating bespoke engineering solutions on a field-by-field basis. There are many apocryphal stories of cost escalation in oil and gas facility engineering. Including one operator specifying 20 shades of yellow for sub-sea valves, which may or may not be true. But here’s a link that makes me think maybe it is LINK
Large generation assets promise cheap, reliable power distributed by a common connection. That’s a welcome development because small-scale generation posed unexpected public-good problems. In several underdeveloped countries central generation is unreliable, and users are tempted to go off-grid. Unfortunately, this has a detrimental effect on the public grid subsidy and leads to a death spiral for national utilities resulting in even worse service for citizens.
Energy Efficiency
There’s not a huge amount to say about energy efficiency other than its about stopping waste which means: for heating more insulation; for energy conversion making less heat and noise; and for moving parts less friction and less weight. Overall, it means stopping doing what’s not really needed – such as unnecessary journeys by better planning and routing, and not heating or lighting spaces no one is occupying.
This leads to energy reduction technology using predictive algorithms, sensing and fine control of systems.
Examples include google reducing energy consumption of its data centres by 30% by predicting the weather. LINK
High-power semiconductors enabling DC power transmission and reduced line-losses.
And there is tons of work going on using big data and AI to reduce logistics costs. LINK
There are activities that can not only be made more efficient but also completely replaced by new technologies. For instance, additive manufacture and additive construction may displace some of the need for energy used making materials such as cement and steel, thereby increasing construction efficiency and reducing energy requirements and carbon emissions.
Decarbonisation
I’m not a climate scientist but if enough smart people tell me there is a problem, I tend to believe them. Though, in my view, this is not about saving the planet – the Earth will be fine – it is about preserving an environment within the tight tolerances required for the human life we’ve come to expect.
For climate change, my reading of the situation is that we have a problem related to imbalances of gasses and particles in the atmosphere. Energy substitution and energy efficiency will naturally reduce carbon emissions in some areas. It may help continued growth of middle classes across Asia and Africa without a proportionate increase in carbon emission. However, this won’t be enough as there are still areas where electrification is not yet practical, and efficiency gains not enough.
This leads to two approaches to decarbonisation: chemical fuels which are not carbon based; and methods to rid the atmosphere of un-eliminated carbon emissions.
Alternative fuels maintain the thermal cycle but don’t produce CO2. The two most often noted are Hydrogen and Nuclear. I would not want either if it were not for the carbon argument (in almost every application it’s a compromise) but they may be necessary as sub-optimal answers until better ones can be found. Hydrogen wins on portability and Nuclear on reliability and capacity (and portability in applications like marine warfare and space exploration).
Its unfortunate reactions with steel aside, hydrogen is interesting as replacement fuel in domestic settings where pipes, compression and metering etc are available. Like copper phone lines, it is unlikely that any country that does not already have the legacy infrastructure would invest in it now.
Capture and storage
Talking of legacy, the oil and gas folks are pretty good at drilling holes, moving fluids, and running large pipelines. They also have some bits of kit in the North Sea (and pipes running to and from them) that it would be great to find a use for these when the oil stops. There is a lot of interest in finding ways to pump CO2 through the system and store it in underground spaces vacated by the oil that was pumped out.
I can see why you’d want to do that if you owned the infrastructure, and it’s an interesting short-term measure but it doesn’t seem like this would be a scalable solution to on-going growth and just like oil wells run dry, storage facilities will eventually get full. The idea that we have to add a complete industry with scale and complexity of oil and gas solely to deal with the emissions of other industries adds a layer of inefficiency and cost that, if allocated correctly, would make them even more open to replacement by alternatives.
Fuel Cells
The use of hydrogen in fuel cells makes little sense in the long run if battery and super-capacitor storage improves. Generating electricity, to convert to hydrogen, to transport under high pressure, to convert back to electricity seems absurd to me.
In my view, hydrogen is not part of the endgame of energy transition. It may be an interim step where direct electrification and transport/time-shift of stored electrical-energy is not yet practical. It does make sense to accelerate decarbonisation when an alternative has not been established, but it is inferior to many other forms of chemical energy except for its emission properties.
Hydrogen is more viable while legacy resources and assets exist in abundance such as low-cost infrastructure, fabrication facilities, mechanical engineering, and process engineering. It would require a lot of careful handling under pressure, temperature and, combustion. Luckily it can be consumed (less well and with modification) by legacy assets such as internal combustion, jet engines and domestic boilers.
Nuclear
The same arguments apply for Nuclear energy, but not so strongly and even less for fusion. Nuclear fuel is abundant and (with care) easy to transport and energy conversion is centralised. Energy is, however, still derived from the release and recapture of heat and the physical movement and containment of molecules and (and particles) under extreme conditions.
Decommissioning
When thinking about decommissioning my mind normally turns to removing infrastructure from the North Sea at the cessation of oil and gas operations. To be fair with an almost £80Bln prize at stake in the UK alone it’s not surprising that there is interest. LINK
But there is much more. If we are going to move to a low carbon world based on electrification, then there are many more assets that need to be decommissioned or refreshed. Ranging from filling stations, pipelines, car plants, car scrappage, domestic boilers, lorries etc.
If we combine this with the other changes in technology coming from the fourth industrial revolution, we are also going to find new uses for car parks, high streets, out of town retail centres and the list goes on.
It goes without saying though, that we will have to make sure we can decommission without emitting carbon dioxide in the process.
Implications
Implications: Energy Substitution
Even now, without any change in the incentives there are many areas where renewable generation is the best commercial choice. It is only going to get more so as more breakthroughs occur in generation and grid-level and portable energy storage.
The demise of internal combustion engines will have knock-on effects for manufacturers of components including radiators, hoses, vibration dampers, seals, drive belts, spark plugs, lead-acid batteries, gearboxes, and pumps. Innovators may want to consider how to reskill and serve power engineering, distribution systems and electric control. Additionally, they may want to consider which ancillary manufacturing assets will be affected (either interrupting supplies or creating opportunities for low-cost acquisitions). Innovation is also likely to be available in any area which relies on diesel or other fuel oil to create electricity or provide non-transport related rotary motion.
Will cars and solar panels be manufactured and sold as consumer white-goods and semi-conductors? In which case they are going to come from Taiwan, Korea, and China.
As turbines become common place and large ones most economical, they will become like the Airbus A-380. There will only be a few manufacturers. They may not be operators. Unlike an oil-field that starts as a risky proposition but then provides a natural monopoly, offshore wind generation will become routine and be open to competition. Capital may be cheaper, but the returns will be lower. The bloat of the oil and gas industry cannot continue to be supported.
Implications: Energy Efficiency
Anything that can be done to increase the amount of useful energy output from the energy we consume will help. This comes in two forms – reducing the things that need to be done and improving the way they are done if they are unavoidable.
Innovation will come from increasing the utilisation of energy through sharing, careful planning, insulation, and conversion efficiency. Search out unoccupied space in containers, trucks, and aircraft. Plan who goes where when and in what sequence. Predict when power will really be needed and when it’s not. Any process that gets hot when heat is not its primary objective should be examined.
Transmission of energy is inefficient, as is standby generation. Expect to see DC supply, smart grids, community generation and local storage/recharge solutions emerge. Expect the need for AC power to diminish – semiconductors and high-frequency switching is much more efficient, light weight and controllable.
Look for opportunities to displace concrete and steel in manufacturing processes, perhaps finding a new use for solid-state carbon fibre or graphene and for additive manufacture.
Implications: Decarbonisation
In the absence of market distortions there is no business case for decarbonisation. But the world needs it to happen. This will require a combination of intervention policies (subsidies, penalties, regulation) and a willingness for consumers to pay extra for low-carbon products.
Programs to capture carbon at source and sequester it in some form add to the costs of production and only make sense if the alternative (in the form of penalties or sale of credits) tip the balance. The cost of carbon-inclusive production will provide opportunities to innovate in no-carbon alternatives at price points not currently viable, once these products start being adopted, learning and scale economies will kick in to speed adoption.
As carbon pricing becomes widely adopted across industries, innovation is likely. From understanding sources of carbon in supply chains (and engineering it out), planning for low carbon production and finding alternative ways to operate that do not produce carbon.
Fundamental research opportunities are still available for atmospheric scrubbing and short-term opportunities may be available around capture and storage of carbon from industry.
Implications: Decommissioning
Unfortunately, no-one wants to pay for decommissioning. The activity does not create productive assets so there is no return on investment and traditional business cases don’t work. It’s only done because it’s mandated and because there is a sense of responsibility for the environment (which may have brand and license implications).
Contracts will be let to the lowest price operators; innovation will therefore be required to reduce the cost to enable profit while bidding at the lowest price. All Seas managed to do this with their vessels – low cost but, by moving first with large capital assets and capacity to dominate demand thereby deterring competition. They can charge a low price but well above their cost resulting in healthy profits. LINK
When it comes to decommissioning infrastructure such as high voltage AC power transmission lines, domestic boilers and old cars, efficiency in the operation will be important, but so will re-use of the materials. Removing old infrastructure and scrapping cars may not sound like a gold mine, but perhaps it is. Literally.
Decommissioning old power stations, nuclear or conventional, is risky business where quality will count. There are stringent standards for Nuclear and projects that will last for decades. Conventional can be a little more “cowboy”. With wide scale decommissioning perhaps new rules and regulations will be needed to avoid this sort of tragedy? LINK
Points to Ponder
As of January 2021 ExxonMobil was valued at about $175 per barrel of oil equivalent from upstream production over the past nine months. French nuclear generator EDF is valued at $280 per barrel of oil equivalent produced over the same period. Spain’s Iberdrola, with its high renewables output, trades at $1,200 per barrel of oil equivalent produced. LINK
There is some evidence that there may be a squeeze on oil supply in the short term, and there may be a last hurrah of the oil and gas industry, but the writing seems to be on the wall.
We are likely to see more policy interventions around CO2. Business cases need to be dynamic and make space for emerging scenarios. The direction of pricing is clear but magnitude and timing are yet to resolve.
I fear for my friends in Aberdeen and Stavanger who expect to be involved in renewable generation. Despite these places being repositories of skills and expertise, I doubt there will be labour shortages significant enough to drive a search for talent – and the inflated labour prices and high-cost working practices are unlikely to be appealing.
Areas such as decarbonisation are likely to be subsidised. Engineering skills bases exist in the North West ship building areas, in Teesside, the Welsh Valleys as well as the South East coast of Norway, southern Sweden, Northern Germany, industrial Belgium and Denmark. There is no obvious reason that governments will bestow subsidies on the oil-rich provincial towns, and there is no unusual depth in high-power electrical engineering skills or modular manufacture that creates a pulling force. Look to Airbus and RollsRoyce for a hint on which locations may be subsidised.
Energy production is turning into a 4th industrial age process now. Over time energy will become essentially free to western consumers (in the absence of new taxes) and will become affordable for developing countries providing the elements required to swell the educated middle classes
Tax and Trade
In the UK fuel is taxed at the point of consumption, domestic electricity is taxed at a lower rate than petrol. North Sea oil has its own tax and royalty regime (on a field-by-field basis). When electricity moves cars and oil stops pumping, these tax revenues will need to be replaced. Expect changes to the tax system.
Globally this tax issue is one of national wealth, balance of trade and currency. Many economies are supported by petro-dollars. That may cease. Even if impoverished populations can benefit from cheaper energy, it is still likely that there will be political tensions within and between many countries.
As we continue to electrify there will be increased demand for copper, nickel and rare earth metals. These extractive industries are out of keeping with 4th industrial age processes. Perhaps we will see a boom in resource rich areas such as Africa and south America until such time as we can harness graphene and ceramic based super conductors.
Business models that are based on bespoke designs, complex operations, resource scarcity and speculative exploration are likely to be replaced by ones supported by more standardisation, predictable un-manned operation, with steady, predictable returns. This will lead to reduction in man-power requirements, creativity, and variability. Cost structures and operating characteristics (and associated returns) across the energy industry are likely to evolve to resemble those of other utilities such as water.
Large oil and gas companies are currently moving to re-invent themselves as renewable energy companies. They have spotted the trend, but there is no guarantee that they will bring the right behaviours to the table to be able to operate in the way that will be required. Their strong balance sheets, engineering skills and ability to operate in harsh environments internationally may provide them with a well-financed head start.
During the 1980s RACAL was a military radio, radar and missile guidance provider. They were highly experienced in complex frequency hopping radio systems. This gave them a well-financed head start into a new industry, just like oil companies have today. Racal were well placed to develop mobile phone technology.
However, Racal was the wrong place create a consumer marketing and general-public-facing service. By 1991, as the technology became mainstream, the Racal board took the wise decision to float the division and spin it out as a standalone company that could develop its own culture. RACAL ceased to be independent when it was acquired by Thales in 2000. Vodafone, the division it spun out has done rather well. LINK
Perhaps we will see the renewables divisions of Shell, BP and Statoil spin out and compete with Iberdrola if they want to be utilities or Siemens, GE and RollsRoyce if they want to make turbines. Unlike Vodafone, their spin outs will be competing with established successful companies with long track records. It may not work out as well as it did for Racal shareholders.
Innovation is Key
In whatever way this pans out there is one thing clear – there are lots of unknowns and lots of variables. The only way to survive will be to be vigilant of the macro forces and constantly innovate to evolve offerings as events reveal themselves.
I am more concerned to know if I am on the right road than “being right” – I believe that we are at the starting phase of the fourth industrial revolution (4IR). There are several technology trends leading to breakthroughs in productivity across many industries. I am only going to touch on what these effects are – as information on this is now widespread, easily found and I don’t want to repeat myself. But if these are true, then perhaps there are far-reaching consequences and profound questions that should be considered. It is in these areas where I feel the greatest risks and greatest potential for innovation will be found.
2020 gave me both time to reflect on this and an insight the types of situations that might arise. Rather than write a large piece covering every aspect, I’ll write this as a series, each post looking at aspects in isolation. This post deals with information and communication.
How this will improve efficiency
There are vast amounts of information created, it’s easily stored and transported, and – with increased compute power and new algorithms – it can be quickly analysed. This is leading to opportunities for increased productivity. This is only achieved if we know what information to collect, can understand what it means and – most importantly – change how we act based on it.
I am finding examples in the fields of computer vision, satellite imagery and remote sensing. Technologies such as LIDAR, LoRAN, Hadoop, ESP32 are commonplace in industrial settings meaning that the cost of measurement, distribution and storage of information has fallen dramatically.
We are connected by mobile devices, we hold multi-way video calls with colleagues, customers, and suppliers. We can track packages from factory gate to end user, we can store every aspect of manufacture and store it directly on an object.
There is little excuse for not knowing exactly what is going on, understanding the consequences of that, and acting to make things better.
The unintended consequences
As an industrialist it is tempting to see all these advances in information and communication solely in terms of their positive impact on the workplace. It is tempting, and wrong, to think the world around the workplace and those working there will remain static. They will not. The world will change because the general population have access to these tools and they will impact your workforce in ways that you won’t control.
Information influences behaviour
Information has become more influential as it has become quickly available at scale. Modes of transmission have rapidly evolved; society is moving further away from long formal written communication towards short media-rich content bursts. On the one hand this is leading to rich emotion-laden communication between previously unconnected and perhaps illiterate people. On the other hand, it is reducing consideration of more complex issues and drowns out nuanced voices expressed through traditional means. It is also becoming harder to remember and prove what information led to which decisions and why.
There are an increasing number of artificially created video characters (referred to as deep fakes) which can either be entirely fictional people or manipulated images of prominent people made to look like they are endorsing a false message. Backgrounds and images can be created that are almost indistinguishable by humans. This means that we could soon see (or may already have seen) reports from wars and atrocities that never happened. Perhaps, even if you see it with your own eyes, you will no longer be able to believe it. Persuading emotionally charged people (who may not understand how a fake video image can be created) to change their minds might be very hard.
This site creates a unique image of someone that does not exist each time you load the page. These people are totally fictious. https://thispersondoesnotexist.com/
This has been predicted for a while – Have a read of Victor Pelevin’s Babylon published in 1999 – (or watch the film) [….]Tatarsky is invited to join an all-powerful PR firm run by a cynically ruthless advertising genius, Leonid Azadovsky, who invites Tatarsky to participate in a secret process of rigged elections and false political advertising.[…]
Are you seeing the other side?
We are exposed to so much available information that a person can easily succumb to their own biases and seek out only items that reinforce their snap judgements. This has led to fractionating, polarised camps who no longer share a “Mutual Reality”. They have great difficulty in engaging in reasoned debate as each side has fundamentally different frames of reference. These frames induce them to interpret observations in very divergent and (to the other side) incomprehensible ways.
It is possible that our future wars will be between ideologies and triggered by insults, or that – in the face of popular internal revolt – governments will launch “defensive” hostilities to stop the influence of their populations by alien states. Propaganda may cease to be a tool to assist armed conflict and instead become the sole purpose of hostilities. Perhaps the lines of conflict will not be those of countries but between ideologies, vested interests, and traditional institutions. Maybe we should watch the Hong Kong situation more closely?
In 1984 I received a UK transmitting license for a radio set. At that time (and in the decades before) the license permitted someone to use a station for experimental purposes and research into radio propagation. Of course, I also (and mostly) used mine to chat to my other geeky teenage friends. The point of bringing this up is because the government realised I was to be granted the power to communicate across the world. I, therefore, had the potential to find information and broadcast local conditions to others. Not only was an examination required to obtain a license, once acquired it was very clear about what topics I was allowed and not allowed to discuss. I had to identify myself using a centrally registered callsign. Violation of the rules would mean revocation of the privileges. Now anybody, with no training, no examination can say pretty much anything to anybody (and everybody) without restriction. They can say it anonymously. This is new in human history and the results, so far, are mixed.
Cyber security is currently focused on preventing people from seeing information you want kept secret or preventing people denying you access to your own files. In the future security may be required to prevent others from injecting false information into systems and influencing your or your staff to behave in the wrong way. That could be by planting rumours, or direct manipulation of operating data, financial reporting, or automated firing of workers.
Business has been slowly taking advantage of information and sensor data and transmitting it around the world. Remote working has been trialled and tentatively used when there were no alternatives. Now this technology is ubiquotous and in use by the “average Joe”. This is leading to new ways to communicate, new ways to manipulate the unwary and new expecations from workers.
Innovation will be the key activity for all companies that want to operate in this new environment. Setting up systems of work that promote the new and commercialising it quickly will be imperative.
I believe that it will be a responsibility for leaders – including business , political, spirtual and community – to use the tools available to them to continue to promote ordered society. Some of our most important human developments around organisation of effort, support for each other, goals for shared endeavours and, jointly agreeing what we fundamentally value, will depend on it.
The cost of innovation is going down, barriers to entry are falling
Keeping it special
If you work in heavy industry and are near technology, you will know that there are some very robust pieces of kit out there. What I’ve always been surprised at is:
1. how simple many of the devices are in terms of functionality; and
2. how “special” they are in terms of obfuscating the obvious.
The effects of these two factors has been, for years, to reduce competition. By making it difficult to get hold of units (via price) and creating a jargon around the obvious configuration/deployment it has promoted a closed shop approach.
Keeping up standards
In some ways keeping out the riff-raff can be promoted as a good thing – it provides assurances around quality and safety. But it slows down innovation. You might say that perhaps this is good. Maybe you don’t want to be too innovative around safety and compliance systems. Afterall making mistakes is expensive and dangerous.
Keep up!
One of the aspects of the 4th industrial revolution that will challenge that thinking is simulation. I used to think that digital twins, virtual worlds and simulation would help reduce the cost of maintenance, let the experts create new ways to work and basically bring down the operating costs for the incumbents.
What if it leads to a whole new raft of competitors? What if anyone can have low-cost access to a virtual oil rig, or virtual power station, or virtual chemical plant? Not only will they learn how it’s supposed to work, they can try things and see what happens – learn by doing, learn by breaking, but do it virtually. Perhaps this will lead to:
they might come up with much better ways to operate it that you do; and
train themselves to operate it before you hired them
Result: Better ways of working, access to more talent, incumbents get beaten.
If you have ever witnessed teenagers playing fortnite, you will know how fast their thinking can become and how fast their brain-hand connetion is. Imagine how quickly they will be able to react to real-world situations and think through the information being thrown at them.
Examples
I’ll provide two examples of where “public access” and “new ways of working” are already influencing established hierarchies. It won’t be long before these mechanisms appear in heavy industry.
Don’t expect today’s engineers to enter the workforce unprepared nor unwilling to take on the establishment. Watch out for competition from smart people who are not part of the established hierarchy. Don’t think the way you work today, will be the way you work tomorrow.
Example 1: Team Huub-Watt bike
I was lucky enough to see this cycle team win gold at the Track Cycling World Cup in December 2019. The team is comprised soley of amateur racers and they ran a completely novel strategy calculated using simulations and software. Their budget is £15,000 per year. They beat Team GB who have the best coaches, facilities and trainers available – and a budget this year of £26m. That’s over 1,000 fold decrease in cost and substatially BETTER performance.
Response from the establishment was to change the rules, enforce the status quo. This may not work forever. It probably won’t work for you.
They were not, however, afraid to make use of the technology for their own ends. Zwift is a cycle simulator that people can use at home and join in real-time cycle events and ride-outs while collecting performance statistics. It is now being used by pro-teams to identify and recruit talent.
In the gentleman’s toilet at the Royal Automobile Club in Pall Mall – in the heart of establilshment London – there are a series of framed caricatures of some of motor racing’s greats from the last 100 years. These include W.O. Bentley and Mike Hawthorn. Motor racing is glamourous. And costly. The money needed to race in formula 1 are legendary, but even the karting in a 125cc class will likely cost you the best part of £50K a season. Developing cars, tracks and drivers costs money.
So what do you think will be the outcome of last weekends win for James Baldwin in the first of the British GT Touring Car championship races? It’s a pretty big series, and winning a race is not easy.
Especially if it’s your first race you’ve ever competed in.
James honed his skill as a driver in a simulator he set up at home for under £1,000. And his talent was found when he entered a competition in an “E-Sports” event.
Turns out that the simulation prepared him surprisingly well.
It’s an economic emergency. Every company is having to rethink what they do and how they operate. Together with AGM Transitions we’ve asked our networks to share their recent experiences. We’ve written three guides:
Since I published my post on March 9th the world turned upside down. Covid-19 is a “big one”, certainly when considering the economic impact of the measures taken to stop its spread.
Couple that with the shocks to both supply and demand in the oil world and members of the Bestem Network have been left slightly shell shocked.
What will happen next?
We are starting to understand where we are – but we’re battling to understand where we will need to go.
As Gordon Ballard said in the FT on Saturday: “In the past, activity decreased then picked up again — each time, we saw it come back,” he said. “Now it’s not entirely clear if things just come back as normal. Everything has changed.” [Link]
For some context however I should point out that even with 30% drop in oil demand we are now only at the level that was normal in 1996 [Link]
What have I been up to?
Alongside my hour’s cycling, home cooking, housework and playing with electronics:
Looking after my clients
Contributing my skills to my community to innovate systems to support neighbours in need; and
Working out what we have to do to come out of this ready for the next phase.
I hear that 2020 is shaping up to be quite the year in the North Sea with many projects ready for approval and a glut of maintenance around the planned Forties pipeline upgrade.
New offshore wind farms are being commissioned, cables are being laid.
My EPC friends tell me they are entering 2020 with healthy back-logs of business.
The OGA are show-casing energy transition plans including “gas to wire” where generation is performed offshore with associated carbon captured and pumped back into the reservoir.
As I write this in Late November 2019, we are in the middle of the oddest British general election campaign I can recall. It is by no means clear what the outcome is going to be, and the choice seems to be choosing an irrelevant option or picking a party that might be the least damaging.
We are in an era defined by what (or who) people are against, not what they are for. Debate is framed by blaming the “others” for what they have done/will do and simply stating that you are for the opposite of that. None of the political parties offer policies that stack up using the accepted logic or economics of the late 20’th century. Nor are they willing to justify them in those terms. This is a dangerous time where sub-groups (old, young, migrants, followers of religions, business owners, workers, environmentalists, the fossil fuel industry, etc.) are at risk of being pitted against one another – each blaming the other for causing the situation they believe is comming. Fearful that one group has stolen the others’ hope.
We are in globally unstable times. Perhaps energy supply is a contributory factor.
The UK became a net exporter of Oil in 1979 and our economy boomed. In 2005 we became an importer again. Things became bleaker. Shale Oil has recently led to the USA becoming self-sufficient for the first time since the second world-war. China is an importer of energy.
The USA have no energy-related interest to protect by managing global tensions but perhaps China now does. Could this be part of the reason that the world feels less stable? Look across Europe, North and South America, Hong-Kong Australia and the Arab World and see how divisive and “entitled” the politics and associated direct-action has become.
One area where there is broad agreement, however, is on climate change. We are in a net carbon zero goal-setting race. And we’re in good company – other countries are falling over themselves to do likewise (with notable exceptions of course).
This is a topic that the world has rallied around to fight a common “enemy”. Big themes (such as the previous “war on terror”) can be used to justify the case for actions that are irrational if viewed using other frameworks – such as logic, or economics.
Is it right that we permit large nations to pollute our planet and if not, how can we stop it? As an example, today’s FT reports that the Permian basin is set to flare 7BCM of associated gas this year – for comparison, the whole UK gas sector produces 45BCM per year.
Weighing up the pro’s and con’s of reduced carbon emissions, understanding the winners and losers and the national self-interests is not easy, and the result will not be determined only by logic and economics. Politics and the opinions of the uninformed could be decisive. And disastrous.
Currently, anyone expressing a view other than that we should halt emissions and reverse climate change is lambasted. The Oil and Gas industry needs to be careful to understand and react to the political climate (i.e. the opinions of others) and not rely on the logic of days-past and the economic models from the 70’s. Lip service, ignorance or faux-concern is the wrong approach.
We risk losing the license to operate in the UK and this will damage us all.
I like to look across sources for analogy and stimulating ideas. A couple of things have recently caught my eye.
I find it amazing how hard it is for people (including me) to see the implications of new technologies and ways of working. In retrospect, once a change has happened, it’s obvious what the outcome would have to be. But when the change is happening it’s not so clear.
Going up
Ground floor
Perfumery, stationary, and leather goods, wigs and haberdashery, kitchenware and food. Going up…
Can you remember the theme tune to Are You Being Served?
I’m old enough to remember the lift operators in Aberdeen’s E&M and Watt & Grant department stores. They were replaced by automated lifts in about 1980. The stores have both succumbed – one to the shopping mall, the other a victim to digital retail.
Being a lift operator was a skilled profession, making sure that you stopped the elevator car level with the floor and opening the concertina iron-work doors with the brass handles. Apparently New York’s last lift operator was only made redundant in 2009 Link
The Economist 1843 magazine just ran a story making the connection between the elevator operators strike and the adoption of self-driving cars. We could probably do the same with roles in the oil field.
The elevator strikes in 1945-47 crippled the city, and led to calls to redesign the city so that only low-rise development was permitted – to reduce the power of unions.
Of course, the answer was – as we know – automated elevators. But a lot of change management was required before people started to use them. Innovations such as emergency stop buttons, telephones for help and recorded announcements all came about in this time.
I’ll wager that we will look back at some of the manual ways of operating an oilfield we use today in the same way was we look back at the anachronism of the elevator operator.
Electricity – who’d want that?
Another story that I picked up on and found illustrated a point was this one [Link]. It’s written by the BBC’s Tim Harford. He asked and answered the question why did it take so long for electricity to displace steam in the factories in the North of England. It was decades after the invention that it was fully adopted.
He explained that it required a redesign of factories before the economics made enough sense for people to abandon centrally powered manufacturing and move to individually powered machines. We’ll see the same adoption economics in oil field operations and technologies such as 3D printing.
Digital Marketing – a lesson for oil and gas?
Today I found another article that resonated. This one is from Marketing Week [Link]
Mark Ritson makes the case that the separation between Digital Marketing teams and Traditional Marketing is ridiculous. What I think he’s saying echoes my point that there should be no separation between “IT” and “The Business”, because IT needs to be just how things are done around here. It’s true in Marketing, it’s true in Oil and Gas too.
“… On the one hand you need to avoid being precious about your digital creds. Signal early you are entirely comfortable losing the D prefix from your title and, for good measure, add something re-assuring like ‘I do not even know what digital means anymore’ or ‘isn’t everything digital now?’.
The merger process means that anyone who is a member of the extreme digerati will be the victim of the new regime. You know the type: obsessed with AI, convinced in the long-term value of VR, boastful that they don’t own a TV. They will be the first to go when the revolution comes.
Digital experience is a prerequisite
But make no mistake, it’s no good proclaiming that digital is wank and it’s time to get back to basics, pull all the money from Facebook and get it back into ‘proper’ media. The post-digital era cuts both ways.
While idiot digerati will be exposed, so too will those who aren’t open to the potential of all the new research and media options that have appeared over the past decade. When Alastair Pegg, the leading marketer at Co-op Bank, noted that that there was “no such thing as digital marketing” he followed up with the corollary that “all marketing is digital marketing”.
I think I can see the parallels between what he’s saying is happening in Marketing now, and what will overtake the world of Oil and Gas operations in the next 3-5 years. What do you think?
My first post of the year – a look ahead for 2019 – was a bit tongue-in-cheek. Now The World Economic Forum (WEF) is meeting in Davos, Switzerland, I thought I would provide a more insightful analysis.
The WEF will be considering the implications of the 4th Industrial Revolution as the headline theme for their annual conference. If you’re new to all this here is a I4.0 primer from CNBC [Link]. 2019 is going to be a year where industrial innovation takes centre stage.
The thinking from WEF is always good, detailed thorough. I think that some of the crucial themes for unlocking innovative value will be focussed around opportunities and risks. Here are some of my current favourites.
The Opportunities
Using information and reconfigurable platforms to provide new solutions to stakeholder experience. This will establish new ways to create, deliver and consume the core outputs from industrial processes.
Removing the idea of separation between “IT and the Business”. The two are now conjoined. Being good at tech will be a prerequisite of being good in business. Technology will be embedded in every way that work is done, products are created, consumed and delivered.
Empowering the front-line will be crucial. The winners will be faster organisations where workers make autonomous decisions and are rewarded for outcomes. As an analogy think of Deliveroo drivers. For many reasons, more refined models of work-coordination are required but the core autonomous nature of the work is being previewed here. Decentralised decision-making and autonomous action guided by technology removes many of the tasks performed by middle management. I hope we will start to see teachers, dentists, doctors and nurses no longer filling in spreadsheets and working as relecutant automatons directed by ill-informed command-and-control resource-allocation systems.
With power comes responsibility. Without middle management, new forms of controls (and motivation) will be needed to spot problems and reward behaviour. Surprisingly for some, I don’t believe it is the front-line worker, but middle management, that is most under threat from AI, visual computing and big-data. I hope the CFO won’t push progress only on AIQ but that marketing and talent managers will push the AEQ agenda. It’s important we understand not only economics but also pride, satisfaction and feelings of accomplishment.
Innovation may not be in new forms of technology. The tech available to us now is far ahead of our application of it. Deployment options are already available but not used. Innovation will come from the application of existing technology to new areas of business. Those stuck with old infrastructure will not be able to reconfigure fast enough to keep up. Value will arise from designing new ways of working. Capturing the value will rest on finding ways to get the rest of us to work that way too.
And now the risks
Innovation will come from networks. Big companies will look to small companies for ideas, small companies will be formed from collaborative networks of individuals. Ideas will be mashed-up to cross-fertilise creativity. Guards must be in place to avoid exploitative situations – if they arise unchecked it will mean that the small-guys can’t and won’t play for long. Without them, brilliant ideas will never be used. Rights management is crucial for the distribution of the value created. In the way that song-writing credits generate performance fees for artists. Licenses for ways-of-working are needed to stimulate innovation, and society needs to enable easy access to legal enforcement to uphold claims against copying without permission.
Massive generalisation follows: Young people are frustrated by old-people’s inability to embrace new ways of working. Technology savvy folks are orders of magnitude more productive than their peers. They are quicker to make decisions and to multi-task. This leads to not only high-productivity but also to high-error rates. Iterative short-cycle experimentation and learning-by-doing is the hall-mark of agile strategy. This is not an approach that has been adapted to high-risk industrial work-settings. This leads to a clash of culture and an inability to attract and retain talent.
Innovative individuals will continue to pursue independent careers in increasing numbers. Old industries will die, vested interests will be disenfranchised. The world of work, taxation, social contracts, pensions and access to finance will have to evolve to cope with this. To create a consensus and establish a sense of fairness new-politicians will need not only wisdom but also to deploy the old-tools of oratory and persuasion. There will be big disagreements across society and between nations. It will be necessary to create hope for those who fear being disenfranchised. They will not go quietly into that good night.
Politics of property will come to the fore – the control of assets will be important. Whether that is physical real-estate where low-paid important workers are unable to afford to live where the people who need them reside; property from an accumulation of historical data that provides an unassailable lead and monopoly positions; or the “IDEA” that one person has spent 10 years creating that is exploited by a large corporation without reward. Society will need to find ways to address the control and distribution of property in a world where labour and working-time may not function as a distribution & motivation method.
I will spend time exploring these themes during the year – I have a number of initiatives already kicking off for the year and I hope that you’ll be able to help.
As we enter 2019 I’ve managed to already break my first resolution – to get this blog post out before everyone gets back to work. As an excuse I’ve had a very busy start to the new year. As a warning, I think we will all have a busy year this year.
When looking forward, I often find it useful to reflect first on the past and see how thoughts are changing. After you’ve read this post, please revisit this one [link]. It was written in March 2016 – Trump had not been elected, the Brexit Referendum had not occurred, Cambridge Analytics had not been exposed and Russian interference in the US election was not known about. An extract from the post reads as follows:
With modern communications and the ability to mobilise quickly we’ve already seen massive changes in the way the people (or, in Greek, demos) interact with conventional democratic systems and capitalism. [….] Whether that’s the Arab spring, so-called ISIS, Brexit, the mass-migration of populations or the astonishing rise of Donald Trump, things are getting decidedly odd in traditional politics. […..]
Cyber-politics is a whole new dimension. Whether cyber aggression is aimed at accessing private information, denying or altering the dissemination of information or compromising the physical integrity of machine-based systems the ability of people to alter the course of events through “hacking” has never been so great.
As the 4th Industrial revolution unfolds there will be more disruption ahead.
On the positive front, last year we saw the unveiling of the first industrial strategy for Britain for a generation link. I’m seeing the ripples of this throughout the industrial landscape of Britain, including a member of the Bestem network who told me about some very innovative work he’s doing with the railways – all funded from central government. The funding he has access to is much larger than the whole OGTC [link] annual budget and he just needs to fill in a form to get it. It’s very light weight, no committees, websites, offices, equipment, industry sponsors – just get on with it. And he has. Big time. Oil and Gas is still not innovating, but we are good at committees and wasting each-other’s time.
My top predictions for 2019
Attention will continue to swing away from economics & finance and towards science, inventiveness and engineering (genetic, information, computing, transport).
Competition between nations will intensify with value-capture swinging towards creators and away from traders and rent-seekers.
Politics will continue its rise – no more will debates be settled on the economic benefits of an argument. Politicians will start to use emotive language more. Manuals on speech-writing for rhetoric, bathos and pathos will be dusted off along with words and phrases including: trade, craft, pride, sacrifice, service, future, humanity, community, future-generations and “for-our-nations-children”.
Language will continue its progression-regression. Old words take on new meanings. In my field the fourth industrial revolution became digitalisation, I am sensing that this is now becoming “innovation”. Again.
Productivity will increase and the british economy will grow. Not, you understand, because it will objectively do so – but because the way we decide to measure it will change. We are already moving to double-deflation accounting in April [link] . You can expect more of this type of thing. It may be good for us.
The Oil business will still be ruled by old-world economics and yesteryear-practices. I remember the dot-com boom in the late 1990s when there was genuine fear in my part of the Schlumberger world that we may be acquired by Yahoo. Now Google (which was only formed in 1998 and not floated until 2004) could swallow Schlumberger many times over – but frankly, my dear, doesn’t give a damn. It’ll be the same this cycle, the Oil business will still work, be profitable and vital – but paradoxically become increasingly (and proportionally) less relevant to measured world economic activity.
The Big-Oil innovation committee will, after a multi-year tender programme, finally hold a committee meeting to issue the PO for the automated remote light switch. After their youngest member retires on full final-salary and is the last to leave the building this will be used to turn off the lights. By SMS. Sent by his secretary. From the last electrons of his dying Blackberry.
Elon Musk will either be killed in a freak mid-air collision between him and Richard Branson, or will buy a small nation (to be called Matrix) and will be joined John McAfee [link] and Larry Ellison. They will declare independence.
2019 looks like it will be a fascinating, scary, depressing, joyful and amazing ride. Strap-on, tune-in and don’t drop-off. All the best my friends, it’s going to be a wild-one.
