The fall in the oil price these last few months has been a big help for anyone who drives a car and pays an energy bill. But I know that for the north-east that boon has come at a price. Last year, Sir Ian Wood, Aberdeen’s most successful businessman, left us in no doubt about the dangers facing the oil and gas industry in the north-east. It meant that, when I was preparing my Budget over the winter weeks, I knew full well that the country could not afford to sit idly by and watch one of our great British industries find itself in even deeper peril.
The oil and gas industry is continuing to ride a wave of challenges but it seems over the last year or so, the whole industry, has recognised the changes in the health and fitness of the offshore workforce. It is no surprise that the recent research by Robert Gordon University has indicated the body shape of offshore workers has changed with increases in weight and height, prompting industry groups to implement new processes and safety standards, which Falck wholeheartedly supports. As an offshore safety training and occupational health provider, we work very closely with delegates in terms of training and also on the healthcare side, so we are one of the first to notice changes in people’s body shape and actively try to advise delegates on health matters that could impact their job.
History will say whether Budget 2015 will be the end, or the continuation, of George Osborne’s drive to eliminate the UK’s deficit with a resultant reduction in national debt and a lessening of red tape. Across the energy sector, all eyes were on the widely anticipated tax reductions and incentives. The history of UK oil and gas will judge whether Budget 2015 was “just enough” or an opportunity missed. Last Wednesday’s announcements were partly expected and all welcome. The £1.3bn headline “tax giveaway” is all well and good. But this £1.3bn is arguably modest, and is the aggregate “tax reduction” over five years. More important than the headline, is the impact the measures will have on investment decisions.
“Necessity is the mother of invention.” So the saying goes and so it is true that crises can stimulate creative thought and challenge established norms in a way that seems difficult to achieve when all is calm and ticking over. In calmer waters thinking reverts to ‘continuous improvement’ and its promise of a more steady and paced level of delivery. With a familiar sigh of relief, comfort levels are restored and with it the pressure to challenge deeply held beliefs and working practices. So how is all this relevant to $60 oil? The answer is simple: The industry has an opportunity to make a real difference, to capitalise on a situation that is marked by great uncertainty but equally offers boundless possibility. It is a straight choice – the industry has only to give itself permission to frame it in terms of the latter.
A backdated tax cut? Am I dreaming? The Budget was good news indeed. Proclaiming eternal life for the UKCS was always above the Chancellor’s pay grade, but George Osborne’s headlines certainly help. The devil will be in the detail, and no doubt there will be some surprises (and I’m not talking of a winter fuel allowance for 4x4 drivers). Beyond his party’s faithful, for George Osborne the question is has he given enough to get your cross at May’s General Election? Before we declare a National George Osborne Day, let’s see how it pans out. Like an Easter Egg, this budget is definitely chocolate on the outside.
The Treasury certainly has been listening to the woes of the UK’s offshore industry, battered by the deadly impacts of collapsed global oil prices global oil prices and a fiscal regime that was totally unfit for purpose. Osborne, Alexander & Co have come up with a package of fiscal changes that definitely improve the situation. But do they go far enough? Oil & Gas UK’s chief executive Malcolm Webb certainly comes across as pleased in his initial statement; whether that view will be tempered once the measures have been fully digested remains to be seen. However, Alan McCrae, head of energy tax at PwC is an example of someone who is less sure. While acknowledging that the changes are for the better, his view matches mine ... that more should have been offered.
The North East needed a big confidence boost from the Chancellor yesterday when he stood up to give his budget. I believe that the tax cuts for the oil industry he announced plus the government’s support for a city deal for Aberdeen and Aberdeenshire gives us just that. As the north-east's most prominent oil and gas business figure Sir Ian Wood said, the Budget has provided an "essential lifeline" which "should help restore confidence." In short, it shows the North East is open for business with boosts to the economy, industry and infrastructure.
The Chancellor George Osborne in his budget has proposed reducing supplementary tax by 10% and to reduce petroleum revenue tax by 15%. Will these measures help save the North Sea oil industry from untimely terminal decline? For many decades the North Sea oil industry been the outstanding UK industry performer. In terms of high investment, job creation and sheer ingenuity and inventiveness it has raised the UK profile to record high levels. It has sustained the UK economy and safeguarded the UK’s energy security. It is a categorical imperative that it continues to do so for decades to come. Will Chancellor Osborne’s above proposals ensure that outcome?
As the 2015 budget is announced by Chancellor George Osborne, Energy's Editor Jeremy Cresswell gives his initial reaction to the measures which will be put into place for the North Sea oil and gas industry Looks like Treasury was listening. Obviously the single, basin-wide tax allowance was expected. So too the seismic survey allowance, which could prove a strategically shrewd move.
Budget 2015: Guest Editor Derek Leith says the current slump provides the oil & gas sector with an opportunity to reinvent itself
Following the slide in oil price, which commenced in earnest in July 2014 and by 31 December had fallen by more than 40% in 6 months, alarm signals have been sounding loud and clear throughout the sector. Collectively industry drew a deep breath on the 1 January 2015 as it pondered what the year would bring. Could the price go lower than the $57 recorded on the 31 December and how soon would the price rebound? Well the answer to the first question has been yes, to just over $45 on January 13, and the answer to the second is anyone's guess but looks increasingly like a slow recovery with many predicting an average Brent price of $75 for 2016.
DALLAS — Amid all the pessimism surrounding the plunge in oil prices since mid-2014 and the havoc it has unleashed on the industry, there’s a sense of calm in the sprawling conference room just north of downtown Dallas. I’m sitting next to the legendary Texas oilman T. Boone Pickens, who doesn’t seem worried at all. Ask Pickens what’s going to happen with oil prices, and rattles off an optimistic scenario: The US rig count will drop to somewhere between 750 and 1,000 working rigs (currently, it’s at a five-year low of 1,192). Then, the market will balance off U.S. production and West Texas Intermediate crude will return to about $70 a barrel by year’s end.
When the price of a barrel of oil falls savings need to be made but a company’s greatest asset is its healthy workforce.
2015 is a year with a multitude of anniversaries including the 50th anniversary of Churchill’s death, the 800th anniversary of the Magna Carta, with Waterloo, Agincourt and various World War one events to come. We will also have the 50th anniversary of the discovery of the first significant hydrocarbons in the North Sea, in what is now the West Sole field. This is a significant milestone for the industry and we should celebrate the growth of the UK oil and gas industry.
We all know the North Sea is in uncharted territory and the headlines over the past few months speak for themselves. “North Sea oil industry close to collapse”, “North Sea oil at point of no return”, and “oil price crash threatens the future of the North Sea oil fields” are just a few. I’m sure you get the gist.
The news that Total has apparently put its controlling stake in the Laggan-Tormore project in the West of Shetland sector up for sale at a reported £1billion is very serious. That the company might be offering the 80% interest in this pioneering gas-condensate project seems nuts, given the sheer cost of getting the development thus far and so near to first production. Check the internet and a variety of figures are given for the capital cost of Laggan-Tormore ... as much as £5billion, though the Total Fast Facts currently sitting at the top of the heap on Google says £3.5billion.
Recent weeks have seen much focus on whether Scotland will have the right balance of generation to keep the lights on as some of its older power stations start to close. There is, rightly, an intense scrutiny of the system’s capacity to ensure that electricity supplies are secure.
Uncertainty around the price of oil continues and once again the oil and gas industry must evolve. As companies adapt to the consequences of fluctuating oil prices, they also search for methods to streamline and economise processes.
In the current economic climate, operators know they need to realise their reserves more efficiently than ever before within new budget boundaries. They need to change the way they have traditionally worked.
The biggest slowdown in oil drilling on record is showing signs of reining in the US shale boom. American shale oil output is expected to post the slowest growth in more than four years in April, the country's Energy Information Administration (EIA) said.
There is no denying that the UK oil and gas industry is in the throes of a difficult year. The sudden and unexpected drop in oil prices has resulted in very difficult times for all UK continental shelf (UKCS)-related projects, creating uncertainty for North Sea operators, service companies and all those who work in the supply chain.
We may find ourselves in one of the most challenging eras our industry has encountered but, whilst there are challenges and consequences ahead for many, there is also the opportunity to look at what can be done to control the costs of oil and gas projects at planning and execution stage.
When emerging technologies and key trends are discussed there is a vast array of suggestions made and debated. They range from wearable technology, 3D printing, bio-computers, through to the "internet of things" and many more.
As the UK offshore industry anxiously awaits news from the Treasury regarding changes to the North Sea fiscal regime, let’s look at the historical context of a province where frequent change has been the norm. I write as a result of discussions with industry tax expert Phil Greatrex, MD of CWEnergy. Phil has been kind enough over many years to teach high level petroleum taxation at our annual UK Oil and Gas Law teaching week for CEPMLP of Dundee University. The special regime for North Sea taxation was first introduced in 1975, just as the first big offshore fields were coming on-stream.
Since the days of Henry Ford and the beginning of mass production, the benefits of ‘standardisation’ have been widely promoted and publicised. The automotive industry spear-headed standardisation and, with it, transformed manufacturing practice forever. The rationale for standardisation is as compelling as it is simple – we know full well that variation is more likely to cause errors, increase complexity and therefore impact everything from safety to operating costs. The oil and gas industry has been slower than many to adopt standardisation to the same extent, although some operators have been better than others at embracing the concept. Generally, the industry is still behind the curve. Nowhere is this more evident than offshore when comparing ‘ways of working’ across different shifts where it is not unusual to see a marked change in how things get done with the arrival of a new crew.
What a difference a year makes. Twelve months ago the shale revolution in the US was changing everything, from manufacturing competitiveness to traditional import/export flows and even longstanding geopolitical arrangements this side of the pond, shale exploration was pretty much on each EU country’s agenda, with shale gas often seen as the only way out of Russian dependency. Now we are in the middle of another quantum shift which is transforming everything again. Crude prices have plunged, Russia is in recession, experts are declaring shale investments dead in the water (too soon in my view) and government policies favouring renewables are under new scrutiny, as economics suddenly favour dirtier coal and gas. Whether you blame technology, politics, softening demand or a mix of all three, these ructions are testament to the dynamic nature of energy markets and the huge risks that emerge in a period of profound volatility.