Exclusive Interview: Malcolm Webb, CEO of Oil & Gas UK

In an IRJ exclusive, CEO of Oil & Gas UK Malcolm Webb talks all things Oil & Gas in the UK—including the association’s goals to strengthen the long-term health of the offshore oil and gas industry in the United Kingdom. Webb talks about government and other stakeholder relationships, the need for one body to represent the industry, and exactly how oil and gas is fundamental for the nation’s energy securities for years to come.

Nuala Gallagher: Let’s set the scene. You came from a being an English solicitor, working in the oil industry circa 1974 with the Burma Oil Company, to the British National Oil Corporation, on to the PETROFENA GROUP of Belgium where you moved from law to working as General Manager then becoming Managing Director. How did you go on from here with the formation of Oil & Gas UK?

Malcolm Webb: After that I say I retired, but what I actually did was to go back to university and do some research—Kingston University Business School. I did some lecturing for them and then somebody came along and said, “Why don’t you work for a trade association?” I had never even thought about it but the UK Petroleum Industry Association was looking for a Director General, so they approached me and asked if I would consider it. I hadn’t thought about trade association work but it seemed fascinating so I joined them. That was an association that was looking at the refining side of the business. That’s the other thing to have happened in my career: for the early years I spent most of it in exploration/production, but with Petrofena I got involved in the downstream. I joined UK PIA and had three very eventful and fun years there, helping the association to raise its profile and develop itself.

UKOOA (the United Kingdom Offshore Operators Association) was advertising for a chief executive—and I must say that my passion in the industry has always been on the upstream—so I put my hat into the ring for that job and was very pleased to say that I got it. I joined them in 2003. UKOOA was in the process of a revamp of its organisations, known as, ‘raising the game.’ The idea was to move that association away from a secretariat organisation, where the members did most of the work, to more of an executive focus where a smaller professional executive team took on more of the workload, and generally helped the association raise its game. I think we were pretty successful, we had a strong team that quickly came together within the UKOOA. But UKOOA was an association which just represented the operator companies, I think we had 32 members and they were all of the significant operators playing in the North Sea at the time. But there were just the 32 members. We felt that there was something missing, because there was no one voice for the whole of the offshore industry in the UK, so we agreed that we should think about moving on and creating such a vehicle; that’s how Oil & Gas UK came along.

[The association is] built on the foundations of UKOOA but it’s a very different animal—in that unlike UKOOA, it’s open to the membership of anybody participating in the offshore oil and gas industry in the UK—and our membership is now well over 100. Yes, we still contain all of the leading operator members, we’ve even grown on that front and have more operator members than we had before, but also very importantly we’ve grown on the contractor side as well. We’re now an organisation that can legitimately say that we have membership spanning all of the offshore UK and that we seek to advocate that position of the entire industry to government, opinion informers and, of course, the media.

NG: It sounds like an exciting way to retire! Can you embellish on how the members came to you? There must have been some difficulties in embarking upon Oil & Gas UK?

MW: We were fortunate in that we had some broad foundations to build from. There’s an industry government organisation called Pilot which was formed in around 2000 and it is designed to bring the industry into contact with government. It’s chaired by the secretary of state for energy and it has leading people from the industry and government. It concerns itself with the sustainable future of the UK offshore oil and gas industry. With those contacts UKOOA was very much involved, to begin with on the sidelines, but latterly particularly with raising the game more prominently with Pilot, and I became a member of Pilot when I began working for UKOOA. Through Pilot there are also people engaged from the supply chain, so a number of leading contractors in the UK were operating with Pilot. Frankly what we did in the first instance is latch on to that and say, “Look, we’d like to change UKOOA. We’d like to bring the supply chain in. How about if you guys who are involved in Pilot come and join us?” There was a negotiation between the existing members and these new prospective contractor members on a new constitution for the organisation; the membership structure and the like. That took us just under a year to do, and we ended up with a very strong model which we then launched in April 2007.

NG: How about growing Oil & Gas UK from that point? Obviously the need and industry interest was there on inception, prompted in no small part by the doubling of Supplementary Corporation Tax, but how did your member base expand and where does the association stand today?

MW: I think it’s fair to say that in the first year or two of Oil & Gas UK we were rather intent to prove the worth of the model; that this coming together of the contractors and operators could work. We weren’t aggressive member-seekers at that point, our membership grew almost instantly on the launch of the association and we went up to almost 50 members. Then we grew gradually up to about 60 or 70 within a year to 18 months. Then having proved that the model works, and I believe it does so on various levels, we were much more aggressive in membership recruitment. That’s when we got to about 110 members and we can see it growing strongly on from there. It was a gradual process, one might say an evolution, although at times it did feel slightly more revolutionary to go along and say to some people that this was the time for everybody to get into the tent together. Some people were suspicious about whether that could ever work, believing that commercial pressures could drive us apart, but in fact the behaviour there is extremely good and people don’t use Oil & Gas UK to lobby their individual commercial interests. That’s not its purpose. Its purpose is to speak for the whole of the industry and make sure that the purpose of the industry is well-understood.

NG: Let’s talk about the social reception for the oil and gas industry in the UK. How is the industry viewed and its work appreciated? What needs to be done to inform people of the work going on today and how will Oil & Gas UK play a part in that?

MW: It is not as well appreciated as it should be. Here’s an industry providing employment for upwards of half a million people. Here’s an industry which is the largest industrial investor in the UK economy. Here’s an industry which is the largest corporation tax payer in the UK economy, and here’s an industry which is largely unknown by the population of the UK.

That’s true north and south of the border. One might expect that in Scotland the importance of this industry is understood, but the sad fact is that that’s not necessarily so. Yes it’s very well-understood around Aberdeen, but as soon as you come out of the north-east, knowledge of the industry declines rapidly. We often reflect on what the reasons for that lack of knowledge are, and I think there are many. One might say that a lot of that is because what we do happens out of sight; off the horizon. I think that this is also a highly competent industry. Yes, of course we’ve had our unfortunate incidents along the way which grab the headlines but mostly the industry just goes about its business professionally and doing so extremely well. It’s not been a struggling industry, it’s not one that goes to the government asking for subsidies or help or anything like that. We don’t make a lot of noise there, that’s maybe another reason why it’s not so well-known. Frankly, I think the other reason is that the industry hasn’t had enough to promote itself in a way, I think the industry has been quietly content to get on with the business and think that maybe being out of sight and mind is no bad thing.

NG: If the industry is self-sufficient and unlikely to make much noise on a media and/or governmental level, does that demonstrate the ongoing successful way in which it works?

MW: I think if you’re out of sight and out of mind, people view you as irrelevant and they can start to make decisions with regard to you that are ill-founded because they don’t really understand what you’re about and the importance of what you’re about. I think that’s a view widely shared with our membership and that’s why UKOOA was formed to raise its game and why Oil & Gas UK was formed—to try and raise the profile of the industry and to bring to people’s attention its importance.

It’s hugely important economically for this country and in terms of energy security. It’s a massive contributor in both of those areas and will be for many decades to come. That was the other problem we faced: the UK is a mature basin. We have no doubt passed the peak level of production from the UK, but unfortunately a lot of people have translated that into thinking the game’s over, which it isn’t. Nothing could be further from the truth; this industry has decades yet to provide this country in pure energy and economic contribution. We also seek to battle against that prejudice which is to some degree fed by the fact that the ‘sexier’ energy sources out there these days are not oil and gas. What grabs the attention is renewables, aided of course to some degree by the concerns over global warming and the desire for economies to move towards lower carbon fuel bases. We don’t deny those aspirations and we can see why society wants to go there, but our message is that we must keep our feet firmly on the ground and stay here with the realities of the situation. The reality of the situation is that today the United Kingdom is 75 per cent reliant on oil and gas for its primary energy supply.

NG: Let’s look at the objectives for Oil & Gas UK today. Have these changed at all since the association formed and how are these acted out in the work that you do?

MW: The dual objectives of our organisation, and it’s important to note how these have changed since we formed from UKOOA, are to try and work with all stakeholders in the industry, government and elsewhere, to maximise the recovery of the remaining reservess—which we say is up to 25 billion barrels yet to be found: a massive prize. Our second objective is to work determinedly to promote the long-term sustainable future of this magnificent supply chain that we have here in the UK. The central hub is the north-east and Aberdeen and there are important sub-hubs. It’s a hugely important economic animal, turning over £13 billion a year in the UK, but also importantly it’s doing about £6 billion in the export of oilfield goods and services.

This supply chain is a recognised centre of global excellence and that’s particularly true for subsea. I think there’s no doubt that the UK is the global leader in subsea engineering. This is a tremendously professional leading supply chain with an international reputation which we’re keen to make sure it exploits. That will be to the benefit of not only the companies involved, but also to the nation. It’s one of this country’s great manufacturing centres of excellence as well. As countries need to rebalance themselves now, this industry should be a shining example of that. Those are our two big central plays, then below that we do a mixture of things: firstly looking at the production side and trying to maximise the reserves which causes a lot of government interface. The government are the other big stakeholder in that whole process. We don’t have a state oil company here in the UK anymore, it’s the oil companies that are doing all of the activity but the regulator of course is government, through regulatory function and through the tax regime, so we need a strong engagement with them.

NG: Do we have the correct regulatory and taxation systems in place to accommodate this? How does Oil & Gas UK work on the industry side to ensure adherence with the systems in place and/or to shape progress there? How do you marry regulation and taxation to industry development?

MW: Quite frankly, no, we don’t (have the correct regulatory and taxation systems). We’ve got a scheme that was set up in its earlier more ‘barn-storming days’ and we say that if we’re going to maximise recovery we need to refine both the regulatory side and the fiscal side to make sure that we get every last drop of oil and gas out of the basin.

NG: Back to your work within industry and the activities you undertake in pursuit of Oil & Gas UK’s dual objectives, how is activity structured and what different sorts of bodies, departments and other offerings are available to your members?

MW: On the industry side, we encourage companies to work collaboratively to make sure that market opportunities are maximised, that the market is as open as possible and so that opportunities can be realised. We do things like sponsor Codes of Practise, on access to infrastructure, on commercial practice, on dealings with the supply chain as well, so quite a lot of internal industry work trying to promote positive market practise.

Our work on the second side, on supporting the long-term futures of the supply chain, we’re newer kids on the block, but we’re going about it in a very determined way. We’ve set up a new directorate in Oil & Gas UK focused exclusively on the supply chain. What we’re seeking to do right now is better understand the needs of that supply chain so we can advocate their position and make the ‘asks’ on behalf of them to government both at central level and regional/local, while also stimulating good market activity within the supply chain as well. In both cases we work through member forums, we have a council of all of our members which meets jointly and in two separate enclaves – we find sometimes it’s better to go right to the operator community because they have some asks which are very specific for them such as production taxation. On top of the whole thing we have a board of directors which is set up under our constitution to make sure that it has an appropriately spread-representative nature. There are so many spaces set for operators and contractors, I also sit on the board representing the directorate. Throughout on all of this what we’re trying to do is to make sure that we’re well-connected to our membership within the context of our remit.

NG: It’s very interesting that you touch on the different sorts of vehicles available within or related to the association. Could you tell us more about these, particularly the non-profit subsidiary companies involved? Perhaps we can start with the well and seismic data storage company?

MW: The biggest is Common Data Access, set up by Malcolm Flemming and a team of six based in Aberdeen and London. As its name implies, it’s there to deal with the data side of our business and its aim is to encourage good practise, good standards and good behaviour around data and to make it accessible so that those in the industry who want to access it can do so. It’s also got an efficiency arm to it so it provides the industry with ‘industry-owned stores’ where they can put their data. CDA runs two major stores; the well data store and the seismic data store. The well data store is the older of the two and I think the largest well data store in the world. The seismic data store is much younger, launched in September 2009, but again tremendously strongly taken up by the industry and seen, I believe, as a very useful tool. We’re seeing the benefits of those at the moment. As you know there’s a new licensing round coming up in the UK at the moment and the demand on those two stores in the first three months of 2010 was the highest ever, showing its worth. Under the UK licensing regime organisations have to promise to make this data accessible to people in perpetuity which is a bit of a big ask for commercial companies. CDA, effectively through these data stores, makes sure that can happen and we have an understanding with the National Hydrocarbon Data Archive whereby the click of a switch the data can be made available.

NG: There are also two more, Logic and Step Change in Safety. Perhaps we can look at each of these also?

MW: Logic is a company around which we gathered together a number of the tools the industry uses to help with operations on a collaborative basis in the North Sea. The most important tool, which is supervised by Logic, is Vantage POB System a system through which we log every movement of every person offshore, so if you like it’s the passport system for offshore. It’s hugely important at all sorts of levels including particularly if there’s an incident and you need an accurate figure quickly as to who was on which platform or helicopter. Another thing which Logic looks after is something called Master Deed. As you know, most of the activity done in the North Sea is run by rather large joint ventures so there’s lots of parties looking after them. When they transfer assets or such like, this can mean people have to sign a lot of bits of paper. With Master Deed, in effect, you don’t have to get 50 people in a room to sign bits of paper, the two principle parties sign and then Master Deed allows a signatory to sign for everybody else. It’s sort of giving someone the power of attorney to sign agreements as accepted in the industry. It hugely shortens the times needed to be spent upon administration and the transfer of assets.

The third of our subsidiaries which operates rather differently to the other two, Step Change and Safety, is rather a service we give to the industry. We provide the means in which Step Change for Safety can operate, but its management direction is through the Step Change leadership team which is not controlled by us, it’s drawn from representatives of the industry, from the safety regulator – the HSE (Health and Safety Executive) and the trade unions. We provide them with the offices, materials and staff in order to achieve their safety initiatives. Step Change is a very well-respected safety body which has done great things in the North Sea and we’re intent upon giving it all the support that we can.

NG: Looking at Oil & Gas UK, what plans are in the works? What are the goals and milestones in place, and what do we really need to understand about the work of the association today?

MW: The big strategic goals are still there: maximising production and helping to sustain the long-term future of the supply chain. What are important to that? The interface with government is hugely important and with elections coming up, it’s obviously going to change the political landscape one way or the other. We’re an a-political organisation, we think it’s for the voters to decide who their government is, but when they decide we’ll need to strongly engage with the government and that’s quite an important issue for us at the moment.

On the supply chain I think we understand we’re still building up our capacity and competence. We will this year, for example, be producing a supply chain report. Each year we produce an economic report which is very well-received and regarded as an authoritative document upon investment plans for our industry. We plan for the supply chain report to have the same sort of standing as regard the supply chain.

Last year was a dreadful year for safety with the loss of 17 lives—that was awful. We’re determined to work both in Oil & Gas UK and do whatever we can to support Step Change and Safety to make the UK the safest place to work, in the world.

Both safety and the environment come down to our licence to operate. If we don’t look after those two (concerns) then we’ll be in trouble so we’re also concerned to make sure that our operations here in the UK are done in an environmentally-friendly way.

The importance of oil and gas in the world’s energy mix going forward must not be ignored, understated or brushed aside. It’s hugely important for all of us.

That’s not to say it isn’t important to progressively de-carbonise the energy stream, but to get to a carbon-free energy stream overnight is an illusion. We need to go about this in a sensible way that doesn’t create societal tensions. If we run out of energy we’re going to be in real, real trouble, and therefore we need to make sure that we have plentiful supplies of energy and oil and gas is a vital component in that. Our main purpose still remains to stand up for oil and gas and ensure that in a UK and European context that the importance of oil and gas and this fantastic industry is well-understood.