Oil and gas companies are seeking to prolong the life cycle of their projects, as the fallout from Russia’s invasion of Ukraine prompts fears of energy shortages.
Ken Gilmartin, chief executive of Aberdeen-based energy services company Wood Group, said some customers were looking to “extend the life of their installed assets”, partly because of concerns over energy security.
“What we’re starting to see is clients looking at greater efficiency in the assets that they have, extending the life cycle of the assets that they have, and as they’re doing that, looking at energy transition and decarbonising,” Gilmartin said.
Energy security has become a focus for policymakers around the globe since the surge in prices in the wake of Russia’s invasion of Ukraine in February. The problem has been exacerbated by the years of under-investment in the oil and gas sector as the world looked to transition to cleaner forms of energy such as wind and solar.
In Europe, where Russia’s state-backed gas monopoly Gazprom has slashed capacity on the Nord Stream 1 pipeline, gas prices have more than doubled since June. Belgium’s prime minister Alexander De Croo warned on Monday that Europe was in for “five to 10 difficult winters” as energy prices rose sharply.
Gilmartin said oil and gas companies were now asking: “How do we increase the output and the efficiency from the asset base that we have today? And how do we do that in a way that is as efficient from a carbon intensity standpoint as possible?”
The renewed appetite for oil and gas companies to extend the life of their assets contributed to Wood Group’s business in the first half of this year. Its order book, which it says is “an indicator of the visibility of future revenue”, rose nearly 5 per cent against the same period in 2021 to $6.42bn, the company said in its earnings report on Tuesday.
Wood Group provides consultation, management of assets and engineering services for the energy and materials sector, and has recently expanded into clean energy projects such as wind farms.
Revenue for the six months to the end of June was $2.56bn, down 0.4 per cent compared with the same period last year. Adjusted earnings before interest, tax, depreciation and amortisation fell 5.1 per cent to $185mn.
Shares in the FTSE 250 company, which earlier this year announced a $100mn charge on a US anti-missile defence project in Poland and delayed the release of its annual results, slid as much as 10 per cent to 134p in early Tuesday trading, but recovered most of their early losses. Wood Group shares were trading as high as 250p in May.
