Turning a funding gap into an opportunity

Nelson Ogunshakin
26 July 2017

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Energy

The fall in the value of oil and associated energy prices presents some real funding challenges for the industry with key players having to look at new opportunities, writes Nelson Ogunshakin.

At the end of 2016, I highlighted five big challenges for the industry ahead. While one of those challenges, politics, has presented our industry with largest amount of public attention to the inherent risks of change, the remaining challenges identified must also be addressed within future business plans and engagement efforts.

For years our industry has seen a substantial amount of funding for infrastructure coming from the flexible income of gas and hydrocarbon. Particularly for parts of the Middle East and Africa, this revenue source has provided unprecedented opportunities for our industry to build a modern, innovative landscape with funding sourced from the lucrative sale of non-renewable resources.

However, the dynamics of this have changed. The value of oil and associated energy prices have fallen worldwide, with these prices likely to plateau for the long-term future. This presents some real challenges ahead for our industry. 

Filling the funding gap

With less liquidity and flexible funding available, how will our industry fill the potential funding gaps? Will the increasing participation of pension funds fill the gap or will the perceived construction risk continue to be a barrier to attract participation in greenfield infrastructure investment projects?

These funding gaps, in the Middle East and Africa, have decreased the desire of companies as well as individuals to work in these areas, as they are deemed to have more business risk and fewer possibilities for exceptional innovation.

Particularly for those emerging markets that have a sovereign wealth fund derived from oil and gas revenue, with depleted reserves, the funds are looking to recycle and regenerate wealth in other ways. One of these alternatives for wealth generation is through renewable energy production. Saudi Arabia for example, after having a budget increasingly curtailed by the flattening of oil and gas prices, has changed their revenue stream to nuclear, mitigating the slowdown in funding for national infrastructure projects.

Compounding the impact of energy revenue shifts on our industry, is the increased level of energy consumption around the world, begging the question of not only how this will change the sources of revenue used for infrastructure, but also how alternative energy sources will impact global infrastructure needs. 

Engage now to seize the future

Many of the renewable sources of energy are currently held back by the cost of production as well as some existing reluctance in fully embracing what this will mean for our cities and ultimately the form of our infrastructure. The question facing all of us, as industry leaders, is whether we will sit back and monitor how the evolving energy palette impacts infrastructure or whether we take a leap of faith to fully engage in developing this future reality. 

Much of the changes in energy mix are dependent upon technological advancements, and as advancements continue, the declining cost of such technology. This technology and its accompanied big data are key drivers for current and future investments. 

We already have much of the technology needed to revolutionise not just tomorrow’s energy mix but also the shape of tomorrow’s infrastructure. 

The question is, do we as an industry have the passion to seize this as an opportunity, or will we look longingly at the past when substantial infrastructure funding could be derived from non- renewable resources?

I encourage all to seize this as an opportunity to engage and help shape how energy sources, societal needs, technology, big data and infrastructure will interact. 

Seemingly unconnected to the wider industry engaged in infrastructure, the change in energy prices, as well as usage, directly impacts all projects. And as the prevalence of solar rises around the world, the price of the technology itself has decreased. 

This autumn will see the launch of the first ever European CIO conference for our industry. Hosted by the Association for Consultancy and Engineering, we will be focusing on many such contemplations of how new technologies interact with the ever changing global market and how best as an industry we can make the most of future opportunities. I encourage all technology leaders across the industry to attend.

Dr Nelson Ogunshakin OBE is the chief executive of the Association for Consultancy and Engineering.