June 24, 2022

Do you have a plan for your regulatory or decarbonisation capacity building?

There are two particular areas where capacity building is very critical - governments of developing countries which need to regulate and drive their emerging exploration and production industries; and established oil and gas operators which need to bring increasing amounts of low or no carbon solutions, or 'energy transition', into their mix - and also count it.

Capacity building is a strategic project for any organisation, and one which can be achieved by thinking it through carefully, and where necessary, bringing in expert guidance. But you don't want to be reliant on the outside experts as your long-term goal.

For governments of developing countries embarking on oil and gas regulation, such as Guyana or Namibia or Uganda: you want to understand what expertise you want to have on your team. You need to understand what E&P companies are proposing to do. You need to be able to navigate the choices of incentive and taxation systems which have been used around the world. You need the knowledge of how your country compares to others, so you know the strength of your hand in negotiations.

You need to be able to assess whether the proposals being submitted, and the companies behind them, have the risks well managed - which means you need HSE expertise. You want to encourage local content, but probably not if it increases the safety or commercial risks of the overall project. You want an understanding of the various options for developing the field, their costs and benefits, in financial and environmental terms, so you can better choose which solution is right for the country.

You can make a map of all of these things - which skills and expertise you have now, and what you want to develop. Then you can determine, perhaps with outside help, which of the skills you can train your own people in, or recruit within your country. Perhaps others you would employ outside experts for a limited time, with a brief to pass on what they know.

For established operators seeking to improve their capacity in decarbonisation - again, the first step is to make a map of where you need to get to. Are you focused on the enormous range of different factors which could be included in an ESG report? We could call this 'horizontal' expertise. Are you focused on the one big factor - decarbonisation? We could call that 'vertical' expertise.

For the horizontal expertise - you probably want people comfortable with large amounts of paperwork, but also who understand hydrocarbon data of multiple forms and how to work with it.

For the vertical expertise, this is very different. Decarbonisation is expensive, but so is emitting - but the prices of emitting are not always transparent, unless your country has a CO2 or ETS cost like the Netherlands or Norway. Perhaps an internal CO2 price would help manage your modelling.

There will be some subjective decisions, such as to engage in carbon capture projects although they offer no immediate return. Perhaps you can add in financials to support internal decision making, such as a value on carbon capture projects you engage with (even if you are paid to do it by another client such as a steelmaker).

All of this requires a much different basket of skills, or 'organisational capacity' - financial modelling, perhaps business development.

Whatever your situation, Future Energy Partners can help your organisation map out its capacity building needs, and then deliver to this map, with our network of former senior oil and gas industry executives, with deep and broad knowledge of how the oil and gas industry operates, is best regulated, and best decarbonised. If you are interested in discussing with us how we can help with capacity building, please let us know here.

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