The future of energy production and supply has been much discussed in recent year. Today, energy prices and energy security are at the forefront of strategic thinkers, economists and leaders across the globe.

In parallel, the energy transition is in motion, and managing it effectively, domestically and internationally, is key. With that in mind Clare Munro, a partner at Brodies based in the UK, and Josh McFadzen, partner at Brodies Middle East based in Abu Dhabi, discuss the significance of the UK and the UAE to our global energy future.

Click here to listen to episode one of our 2024 energy series 'Scotland, cleantech and the energy transition', featuring Mark Anderson of the Net Zero Technology Centre and Brodies partner, Martin Ewan.

The information in this podcast was correct at the time of recording. The podcast and its content is for general information purposes only and should not be regarded as legal advice. This episode was recorded on 01/02/24.

David Lee, Podcast host

David is an experienced journalist, writer and broadcaster based in Scotland. He has been the host of Podcasts by Brodies since 2021.

David Lee, Podcast host]



00:00:05 David Lee, Host

Hello and welcome to Podcasts by Brodies. My name is David Lee and in this episode we discuss energy with two experts, both of whom have huge international experience within the sector.

Energy prices and energy security are at the forefront of government thinking across the globe, and so is ensuring that energy supply is managed effectively, domestically and internationally. With that in mind, I'm delighted to welcome Clare Munro, a partner at Brodies, based in the UK, and Josh McFadzen, a partner at Brodies Middle East based in Abu Dhabi, to discuss the significance of these regions. The Northeast of Scotland and the Middle East in our energy future. Welcome to you both.

Clare to come to you first, energy is a big issue now. So let's start with a bit of an overview. What are the main market pressures affecting the energy industry?

00:01:06 Clare Munro, Partner

Energy has been in the news a lot, hasn't it? Over the last few years, and from a UK perspective, I think there's been two main influencing factors in that, you've mentioned both already in your introduction. The first is climate change generally, we all have a collective desire across the globe to reduce our dependence on fossil fuels, and that's really a huge focus in the UK and the second one, again, in the UK has been the recent energy price shocks for consumers and that was largely brought about by hikes in the wholesale energy markets due to the war between Russia and Ukraine, and both of those issues have become very political and both are currently influencing policy on the markets.

00:01:59 David Lee, Host

More broadly, Clare, how would you characterise the current status of the energy industry in the UK?

00:02:07 Clare Munro, Partner

So, that sounds like a very straightforward question, but it's one with a big answer because the energy industry is a multifaceted industry. Our focus in this section is on the supply.

Thinking about oil and gas production first, in the UK, we are still facing challenging times for oil and gas producers. We've got a really mature basin, we've got many fields which are approaching the end of their production and that means they cost more to run, they produce fewer hydrocarbons so they're obviously less economic. In the basin, we've now got a mix of decommissioning activity, so things which are finished producing and must be dismantled. We've still got production activity in some fields and then we have some new field developments as well. With new field developments, things are getting really complex, there's a lot of public scrutiny, decisions on those are seen as very political, so that's causing some complexity. We still have the energy profits levy in place, so that's an additional 35% tax on oil and gas companies, which means their effective rate of tax is 75%, which is obviously very high. These higher taxes also make activities more uneconomic obviously and lead to earlier decommissioning so there's a lot going on in the oil and gas side and challenging times. On the renewables side, there's obviously a huge amount of interest in that, there's a big appetite to invest, there's certainly the public support, and I think on also the political will there are still barriers in relation to renewable energy development. One of these is the power markets. We've got power markets designed around conventional power generation because they're historic power markets and probably need to be changed to consider the more intermittent production nature of renewables. One of the main structures that we do have to support renewables investment in this country are called contracts for difference and in the latest round of awards last year there wasn't one award for offshore wind because the maximum bid price for that energy was set too low for any of the projects to be economic. So what we see with some of the current projects, which people entered a few years ago and with a lot of enthusiasm, is that their economics have been hit by high interest rates over the last couple of years and also the soaring construction costs and that's lead to some being paused and others being cancelled completely. I think we all know a lot of investments needed across the board for the infrastructure that we're going to need for the energy transition, part of that is in relation to our National Grid to make it fit for purpose and at the moment there's some issues getting grid connections. I think grid connections now are into the late 2020s, early 2030s, so there's a lot of appetite around renewables investment, but there are still a lot of problems associated with that as well. So it's a complex picture I think would be the answer.

00:05:46 David Lee, Host

Thank you, Clare. So you've put into perspective there the challenging backdrop for oil and gas projects and the big appetite for renewables, but obviously still significant challenges there. You touched on that energy transition between the two, and we've talked about that in more detail in another episode in this series, but what do we mean and where are we on that transition journey now?

00:06:17 Clare Munro, Partner

The energy transition, we generally speak about that as being our move away from our reliance on fossil fuels towards a future where we can produce our energy needs either without fossil fuels or with minimal reliance on them. It's our journey towards net zero which many people talk about, and that's where we have cut greenhouse gas emissions to zero or to amounts which can be absorbed by the atmosphere. You'll be aware the UK is committed to reach net zero by 2050. In terms of where we are on that journey, we're probably a couple of steps into it, we're pretty much at the beginning. We all know where we need to get to and there's a lot of interest in doing that, nobody disputes that we need to do that, but there's a huge amount to be done before we get there. There's estimates that in every year of the next 30 years to reach our international commitments globally, we would need about $5 trillion of investment each year to achieve what we all wish to achieve. So it's a huge challenge.

00:07:43 David Lee, Host

That’s quite a figure and another very deceptively simple question, Clare, that demands a very long answer. What is the best bet at the moment to what that future energy mix might look like?

00:07:59 Clare Munro, Partner

It depends at what point in that pathway you're thinking about. All of our infrastructure right now has historically been set up to work on hydrocarbons. So we're very dependent on gas in this country for heating our homes. We're going to need to change that. We're very dependent on petrol and diesel for running our vehicles. That's going to need to change too. So at any point in that path, we'll be on a blend of trying to wean ourselves off fossil fuels onto renewable energy and hopefully by the time that we get to 2050, we'll have largely managed to do that, but it's a huge task.

00:08:44 David Lee, Host

Thanks very much, Clare. The Northeast of Scotland has obviously played a very significant part in the UK and the global energy industry. How would you assess those strengths that that industry has developed over the last few decades and particularly that skills base? How that can potentially be harnessed to support the energy transition?

00:09:11 Clare Munro, Partner

One thing the oil and gas sector has done well is build a capability to carry out large capital projects. So, the projects that must be undertaken for oil and gas are capital intensive, they cost a lot, they need a lot of planning, they take many years and that is a very similar position to investing into any big project, renewables as well. This ability to carry out these large projects, all the expertise that's built up around that, things like project management, our engineering expertise, our commercial expertise, logistics, procurement, legal, all these elements of carrying out a large project can be utilised in other areas and are well suited towards turning them towards renewables. We have a lot of the same companies who want to carry out renewables projects that have been carrying out oil and gas projects, so they're in a good position to pivot and use those skills in other ways.

00:10:29 David Lee, Host

Thank you very much. We'll now move from talking about the Northeast of Scotland to the Middle East and over to Josh.

Josh, first, again a bit of an overview, if you can summarise the current state of the energy industry in the Middle East. And talk a little bit about the level of reserves and where we are in terms of the production of oil and gas. Is that production still increasing in the Middle East?

00:10:55 Josh McFadzen, Partner

Of course, David, it's an exciting time to be in the Middle East in the oil and gas sector because it's becoming a cornerstone of the global energy industry. We're talking about an area of the world with some of the highest reserves, lowest lifting cost per barrel and the ability to produce low carbon energy. So, it's a very important role and what we're observing out here is that the largest energy companies in the world are positioning themselves to try and respond to the increasing need for more and more hydrocarbons to be produced, but not only produce, produce cleaner and at a lower cost.

00:11:56 David Lee, Host

When you're talking about producing cleaner Josh, what does that look like in in practice in terms of how methods of extraction are changing?

00:12:07 Josh McFadzen, Partner

Of course. So what we're observing is the larger producers looking at new technologies to really reduce their carbon footprint, reduce emissions, they're looking at carbon capture and storage projects and really front of the market type projects that require a large amount of capital investment, like Clare was talking about, but this part of the world has proven over time and over the history of the oil and gas industry that is capable of delivering those really large novel, complex projects and I see that as being important to the transition that is ahead of us. I don't see it as being a straight line, it won't be a linear process and part of the narrative that we're observing is that it is very much the case that we still have a very heavy dependence on hydrocarbons, traditional fuel sources, and until such time as energy supply can transition to use the word to alternative fuel sources, then there still will be a reliance on hydrocarbons. At the moment, with the oil price where it is, that's really fostering the upstream CapEx investment from some of the big oil and gas companies in places like Qatar, Saudi Arabia and the United Arab Emirates, which means a lot of activity in this part of the world.

00:13:51 David Lee, Host

Thanks very much and you've certainly partly answered this next question already, Josh, but why did Brodies choose to open it's office in Abu Dhabi and have some energy experts out there on the ground.

00:14:08 Josh McFadzen, Partner

Brodies have a long history with the Middle East. We've serviced clients from our offices in the UK for several years and it was a natural next step, but very carefully considered and we opened our first Middle East office with a view to servicing our clients in the UAE, also in Qatar and in Aman. It's partly to answer another question that you will ask, it is in response to the particularly expertise that Brodies Oil and Gas lawyers have that we are seeing is in high demand in the Middle East.

00:14:55 David Lee, Host

What are the benefits of being on the ground out there and being able to spend time with clients? How does that help Brodies offer that expert advice more effectively?

00:15:10 Josh McFadzen, Partner

It makes a real difference, David, because when you have proximity to your clients, you have a better ability to understand their business. We don't provide legal advice to a client in a vacuum, we provide advice to our clients which is very technical and very operational focused. And when I say that for people who are listening or reading the transcript that are not even in the oil and gas sector or are not legal professionals, what we mean by that is we provide legal advice to an energy or an oil and gas client where we assist them to get their hydrocarbon product out of the ground and to their end market. In order to do that, you have to have a very particular set of capabilities and expertise but you must also have industry experience to understand how these clients operate their businesses. It's very particular, it's very technical and why we have found so much success here is because we can relate to how oil and gas companies operate, and a lot of that experience comes from our international careers and also comes from our grounding, if you will, in the North Sea in the UK because it has such a long history with oil and gas that directly translates to the trajectory that the Middle East has for development of its hydrocarbon.

00:16:52 David Lee, Host

Let's just talk about one or two of those projects that you've mentioned, the Hail & Ghasha project for example, why is that significant and what is Brodies role in that project?

00:17:06 Josh McFadzen, Partner

The Hail & Ghasha project is very unique. It is the world's largest offshore sour gas development. It's an incredibly capital intensive, complex offshore gas project where the gas is extracted from offshore fields and transported to processing facilities based on artificial islands offshore, separated and refined and then transported onshore for distribution. So projects like that require a very particular expertise from lawyers because again, going back to what we discussed earlier, you really need to have a deep understanding of how an energy company undertakes such an operation like that at such a scale, and then that combined with the speed that oil and gas companies operate at here is quite unfounded. Projects of this scale multi-billion dollar projects, the demand is for these to happen very quickly and in short turnarounds. That just adds an added layer of complexity. It's projects like that that we see in the UAE, we work on projects like that in Qatar and in Aman. Very complex but equally for an oil and gas lawyer like myself, very rewarding.

00:18:43 David Lee, Host

You're talking there about those broader projects, not just Hail & Ghasha, you’ve got other big projects happening in the region. When taken collectively, what do those large scale projects mean for the energy transition and for that continuing role of oil and gas as a fundamental component of that energy mix?

00:19:07 Josh McFadzen, Partner

I see them as being very important. The Hail & Ghasha project, for example, is one of the first projects of its type to be a Net Zero emitter. When we look back at large, complex upstream oil and gas developments like that where we were in the past versus where we are now, we've really come a long way in that process. Those projects play a pivotal role in trying to get the industry to a point where we are producing lower carbon and hydrocarbons. We are producing cleaner energy sustainably in a way that can assist us move, from what we said before, where we are now to, not a straight line position, but an energy transition nonetheless.

00:20:04 David Lee, Host

Bringing it back from the Middle East to the Northeast, Josh, and what Clare talked about earlier on about some of that expertise built up over decades in the Northeast of Scotland, how can that expertise help the transition of the energy sector over the coming decades in the Middle East.

00:20:24 Josh McFadzen, Partner

I have a strong affinity for the oil and gas industry in the Middle East, David, because to me it's still in its infancy. When you look at the time that the sector has had to develop in places like the North Sea, you really have, as Clare said, a very mature oil and gas industry. Whereas here in the Middle East we still have an industry which is characterised, not only by its infancy but,

the development that needs to occur over a long period of time, as Clare said, we're talking about very complex developments in the oil and gas sector. These are high value, mega capital projects that the industry undertakes so what the North Sea has is a very highly regulated environment and a very particular set of skills that people who have operated in that environment develop over a long period of time and that is where we've seen the Middle East really gravitate towards because we can bring that expertise and experience from markets like the UK North Sea to the Middle East and play a small but very important role in helping the industry here bring those projects to life.

00:21:56 David Lee, Host

Both of you have outlined quite a complex picture there in both the Northeast of Scotland and the Middle East. So, if we can end with a bit of an assessment of where do we go from here? What does energy future look like in this hugely complex environment? Clare, I'll let you get your crystal ball out first.

00:22:20 Clare Munro, Partner

I think we're always going to need energy, that's the fundamental truth. People in society really can't now develop as we want to without having energy so in the future, we'll need to develop that energy as we know, in a greener way. So, there must be much investment as we said. We are on that path of changing the mix that we have from the current heavy dependence on fossil fuels towards renewable energies and that inevitably will lead to development of a lot of new technologies and a lot of investment in infrastructure. So I think there’s a lot to be done, it’s really interesting times.

00:23:08 David Lee, Host

Josh, some final thoughts from you on where we go from here?

00:23:12 Josh McFadzen, Partner

I'll obviously focus on the Middle East. Just to look at a few numbers, David, if we look at the current estimates, they're talking about something like 80% of the world's proven oil reserves are in OPEC countries and then of those 60% are in the Middle East and then if we look ahead, the forecast is for something like 40% of global supply to be coming out of the Middle East by 2045. It really is a very exciting time in the oil and gas industry in the Middle East. We’re very happy to be here and be playing a small part in in that development and we really look forward to what's on the horizon.

00:24:01 David Lee, Host

Thank you very much to Josh McFadzden and to Clare Munro for their excellent insights today on how the energy transition and the state of the energy industry is impacting on what Brodies is doing both in Scotland and the wider UK and in the Middle East. This episode is one of the Podcasts by Brodies, where some of the country's leading lawyers and special guests share their Enlightened Thinking about the issues and developments having an impact on the legal sector, and what that means for organisations, businesses and individuals across the various sectors of the UK economy and wider society.

If you'd like to hear more, please subscribe to Podcasts by Brodies on all your favourite podcast platforms and for more information and insights, please visit


Clare Munro


Josh McFadzen

Partner, Brodies Middle East LLP