Decommissioning has been on the oil and gas agenda for many years, although to the majority within the industry it was something not to be concerned about “now”. It would be carried out “mañana”, and by someone else.
Energy Voice has launched an event aimed at ensuring the next generation of industry innovators don’t get lost in translation amid a market downturn. One of the first ports of call should be looking at what companies are spending and where they’re spending it during a crunch. The last economic recession in 2009 led to the slashing of budgets allocated for workplace training within companies. A survey undertaken at the time found that in the private and public sector, 33% and 34% of respondents reported reduced training funding.
So much for “all the above.” President Obama’s “clean power plan” for combatting climate change, unveiled Aug. 3, makes it clear that the U.S. strategy is to plunge head first into renewable energy -- no bridge fuels, no gradual migration to a low-carbon future.
I ask for advice and guidance all the time – I always have. For me, it isn't always about the answers I get, but the way it makes me think differently about the subject. Let me give you an example. In late 2008, many economies were heading toward recession. I had been PSN’s CEO and had never led a business into a downturn before. I wondered who could help and give me some good advice on things to do, things to say, contingency plans to make.
There are a lot of important things related to the number 42. There are 42 US gallons in a barrel of oil. The three best-selling music albums – Michael Jackson’s Thriller, AC/DC’s Back in Black and Pink Floyd’s The Dark Side of the Moon – all last 42 minutes. Buzz Lightyear’s spaceship is called 42. Cricket has 42 laws (apparently!) I’ll leave you to decide which is the most important out of those. According to Douglas Adams’ Hitchhiker’s Guide to the Galaxy, the number 42 is “the answer to the ultimate question of life, the universe and everything!” But for us as an industry, it represents a great division of opinion. Why? Think about it; what does three on/three off, or 21 + 21 equal? 42.
£250 a night to stay in a kid’s tree house! Worse still is being stranded in the Aberdeen Exhibition & Conference Centre (AECC) car park. The oil price isn’t what it was, but some things remain the same. I recently slept in a hotel room that will cost £3,364.09 for Offshore Europe. I have heard a speaker in the hotel’s function room equivocally refer to it as “beauty comes in many forms”. At least the hotel fits in with the Aberdeen industrial estate around it. My own experience wasn’t bad, but Northsound over breakfast was more couthy than continental and I wasn’t tempted to pack the hotel’s toiletries. Hopefully its September visitors will get more VIP treatment; good news that the Marcliffe Hotel is still with us to set the standard.
With Brent crude prices falling below $50, widespread trader views of continuing oversupply and massive cut-backs in the oil and gas industry, Shell has begun drilling in one of the world’s highest cost locations, endeavouring to tap the huge reserves of the offshore Arctic! So what’s going on? We all know, but often choose to forget, that the oil industry is an extremely cyclical business, the continuing victim of regional wars, global geopolitics and macroeconomics. After nearly 20 years of subdued prices, oil convincing broke through $50 in the second quarter of 2005, surging to exceed $140 in summer 2008 before collapsing again to $40 during the global financial crisis.
Did you know six Scottish Saints call the North Sea home?
Ofgem, the gas and electricity regulator, has just published a report on Electricity Security of Supply which it dryly sub-titles: “A commentary on National Grid’s Future Energy Scenarios for the next three winters”. A commentary, perhaps, but also a substantial indictment. One of the basic responsibilities of government is to keep the lights on and the wheels of commerce turning. Nobody reading this report will be encouraged to believe that such outcomes are guaranteed. Not that the current government deserves any particular blame. This is a long-term problem that has its roots in electricity privatisation; at which point the responsibility for investment passed to private companies which generally found it more profitable to keep old plant running than replace it in good time. Public policy focused on promoting renewables while failing to take account of the pressing fact that ageing nuclear power stations and environmentally unacceptable coal generators were dropping out of the system.
I find it impossible to feel anything but raw anger towards the Westminster Conservative Government’s policy on renewables and energy policy in general. Here is a government stating on the one hand that the country has to support the “makers” and export more yet on the other effectively stamping out a globally important growth industry with huge potential. So far, Cameron & Co have scrapped or dramatically reduced support for onshore wind, solar, biomass, the Green Homes scheme, is selling the Green Investment Bank, has done away with the policy of building Zero Carbon Homes, reduced the incentive to move to lower emission vehicles and, of course, decided that the Climate Change Levy, which had been restricted to providers of non-renewable energy to businesses, will be imposed on renewable energy providers as well.
Last month saw a significant moment for this offshore oil & gas industry. What might be considered the single biggest change to affect domestic offshore health, safety and environmental management in many years came into force – the EU Offshore Safety Directive. Following the Deepwater Horizon incident in the Gulf of Mexico in April 2010, the European Commission (EC) refocused attention on the potential for major accidents and, in particular, major environmental accidents, deciding that consistent standards were required for offshore operations across the European Union (EU) – particularly as many other European countries, such as Romania and Cyprus, were at the early stages of offshore development. The initial proposal for an EU Regulation was met by strong opposition from Oil & Gas UK among others – against the threat that Regulation would have swept away our entire legal framework, which is recognised as world-class, used as an example of best practice by countries as far away as Australia.
The onshore shale gas and oil revolution has transformed the fortunes of the domestic US petroleum extraction industry.
The oil industry in Scotland is going through turbulent times. The continuing low oil prices are threatening investment and blighting confidence in a sector which has seen prosperity through what were some pretty tough years for the rest of the economy.
Offshore workers are the people on the front line in North Sea oil and gas. When workers on the front line are fed up, the rest of us should sit up and pay attention. After all, North Sea oil and gas generate huge benefits for the UK and Scottish economies, provide a very good living for many people who rarely venture offshore, and sustain strong local and regional economies across the North and North East. Of course, it’s not just terms and conditions which are under threat. Shell has just announced thousands of jobs to go across the globe, in the belief that there will be “a prolonged downturn” in the price of oil.
Quelle excitement! The latest UK offshore car boot sale results; or rather the 40 or so 28th Round licence offers that required a bit more deliberation because of environmental sensitivities.
“Happy to meet, sorry to part, happy to meet again - Bon Accord!”. Aberdeen’s official toast is more than an excuse to stretch your legs during a civic dinner. Skills shortages will come back round, but retaining teams without the right work for them atrophies skills and erodes shareholder value. Offshore Europe 2015 is taking “inspiring the next generation” as its theme, but that’s not the only strategy for managing the next skills shortage.
I’ve received many questions following recent articles on how to manage during difficult times. Readers are asking what specific things they could do, or I have done, or we are planning to turn the generic advice into practical measures. Well, I suppose it all depends. My business situation will be different from everyone else’s, so my decisions may or may not be relevant to others, but I am happy to share some of the tactical options we took to make our business less vulnerable during the current downturn in our industry.
So you’ve decided you can’t cost directly any more. You approach is now to improve processes for maximum efficiency. But what excuses are you likely to meet in rolling out these processes? And what can you do to counteract them? Through work with Operators, Service Companies & Contractors of all types both in the UK and further afield here’s STC’s ‘top excuses’ (and our most effective approaches to making them go away!):
Oh Yoko!
Scotland’s oil and gas industry has a vibrant future. Yes, there’s a sharp reduction in investment, in jobs and in projects but the strength of skills and experience built up over the decades will sustain the industry and ensure it remains a significant contributor to the Scottish economy for decades to come. It’s now six months since the First Minister announced the creation of an Energy Jobs Taskforce to help support Scotland’s oil and gas sector through the current challenging period.
It’s not much longer than a year ago that the offshore helicopter operators were expressing real concern over the lack of experienced pilots being attracted into the industry. At the time this problem was being blamed on the smaller number of trained personnel leaving the armed forces. That particular problem has now solved itself but not – sadly - in a good way. The announcement that Bristow is to reduce their staff levels by 130 personnel which includes around 66 pilots implies a rapid reversal of fortunes for that operator and I’m sure others will eventually follow suit.
The eagerly awaited Energy Bill was published on Friday, setting out the proposed new statutory powers anticipated by the Oil and Gas Authority (OGA) Framework Document published in April of this year. The Bill sets out the details of the tools that the OGA will use to implement the MER UK Strategy, working in conjunction with other governmental departments and the oil and gas industry. Undoubtedly it is the new powers to be conferred on the OGA – rather than simply the transfer of existing powers from the Secretary of State – that will be of particular interest to those in the sector.
Twelve months ago, the Wood Commission report ‘Education Working for All’ set out in front of parliament, the need for closer links to be forged between educational establishments and businesses to ensure a future for the country’s young people and ultimately strengthen the economy. Led by Sir Ian Wood, among the issues the document identified was the significant change required by schools, colleges and employers to challenge the cultural misconception that vocational training is less important than a purely academic route. The Commission prescribed the need for long term partnerships to be established between secondary schools and employers within three years. And by 2020, it recommends that the quality of both work experience programmes and career guidance should be increased significantly and made available to every pupil.
Many of us are old enough to remember buying vinyl albums. After you bought a new one, you would study every detail of the cover, and, then, you would play it repeatedly until you knew every track. Not only that, you knew the order of the tracks. I find good music inspirational. Some of you will already know that I write a weekly message on Core Values to my employees, and I always use a musical reference as a hook. So today, I want to share my playlist for leading in difficult times.
The UK Government’s decision to widen the scope of the investment allowance in the Summer Budget is a positive measure, and something which the Scottish Government has previously called for – however, this Budget represents a missed opportunity for the North Sea. As the First Minister outlined at the Oil & Gas UK Conference last month in Aberdeen, and as I reiterated in my letter to the Chancellor, further action is still required to incentivise exploration, promote stability across the industry and boost investor confidence. The Scottish Government’s latest summary of the oil and gas sector identified the North Sea as the largest oil producer in the EU by a considerable margin and the second largest gas producer in the EU after the Netherlands, supporting around 200,000 jobs and with a supply chain with international sales of more than £11billion.