A very recent issue of the trade paper, Renewable Energy News, carried an apocalyptic headline: “Wave and Tidal Staring Into the Abyss”. It is difficult to disagree, at least in the short term.
The gloom was prompted by the demise of two companies. Edinburgh-based Pelamis – which described itself as “the most advanced wave energy company in the world” – went into administration. Then Siemens shut down Marine Current Turbines along with the rest of its ocean power division.
Pelamis and MCT have long been seen as front-runners in their respective technologies. Considerable sums of public money have been ploughed into them. But failure to deliver evidence for potential commercial success has been their undoing.
I don’t particularly like Boris Johnson and I certainly don’t support his politics. I also resent his constant lobbying for London which, incidentally, I don’t really like much either. The museums are great but you can keep the rest of it. I’m a country boy at heart.
However, something Boris Johnson wrote last year I have to say I do agree with completely although I’d prefer you didn’t spread it around too much as it might damage my reputation.
Commenting on what he called the UK’s “sterile debate” over Europe he said that if it culminated in our leaving the EU then it would quickly discover “that most of our problems are not caused by Brussels, but by chronic British short-termism, inadequate management, sloth, low skills and a culture of easy gratification and under-investment”.
We’re mostly aware of the saying “May you live in interesting times”. However, it was not uttered by Chinese philosopher Confucius (551-471 BC); rather it is a 20th Century faux Confucian saying attributed to Frederic R Coudert at the Proceedings of the Academy of Political Science in the US, 1939.
Research reveals that what he actually said was, “May you live in an interesting age”.
While the “interesting times” bit appears obscure as to origin, US President Kennedy used it in a speech in June 1966: “There is a Chinese curse which says ‘May he live in interesting times’.”
This week we ran a video of a rare Porbeagle shark caught on a ROV pilot’s camera in the North Sea and it went viral.
The social share and reach of the story was fantastic but ultimately short lived. Energy Voice was soon asked to take the film, which was uploaded by its creator to the public domain, down because it was “commercially sensitive”.
What’s so sensitive about a shark you might ask?
It seems to me that oil and gas company bosses are in danger of becoming the new “bankers”, taking salaries and bonuses that smack of rank greed.
Helge Lund may be a top flight guy, and I have met him on about three occasions, but that does not get him off the hook.
To remind, a spokesman for BG said the £13.5million part of the overall pay deal, which includes a £1.5million salary, was at the top end of Lund’s potential pay in the job.
The figure is more likely to be around £9million, the “median CEO package for the global oil and gas industry”, he added.
Did Lord Smith even get your Christmas list? What is devo max going to deliver for this industry in Scotland? What did we ask for? Few would deny it would be a good year for a big present. There are limits to what London, let alone Edinburgh, could ever deliver. No surprise the UK will reserve our core tax decisions to London. However if you wanted $100 oil you always needed to speak to Riyadh -about the same population as Scotland, but without such excitement over Smith (or Santa for that matter.)
But don’t let our governments off the hook too quickly. I accept I’m aiming high on this one, (not least with a general election next year) but I think we need some ambition. Try this: are our cousins in the USA smiling because Washington has devolved power to Texas (or even lowered their income taxes, let alone cut global oil supply)? No. They are producing shale gas cheaply. Their government has a regulatory framework that has allowed the safe and successful extraction of shale gas on a massive scale. How about our governments collectively working on that for our Christmas present?
By Professor Alex Russell and Professor Peter Strachan
The recommendations of the Smith Commission on the powers to be devolved to the Scottish parliament have emerged through negotiation by the five major political parties in Scotland. It could not be otherwise.
One of the great drivers in the oil and gas industry today is the continuing skills shortage and the need to address the resulting challenges in order to maximise remaining natural reserves.
The picture painted by Sir Ian Wood’s report on the future of North Sea oil and gas is one of an industry that’s past its peak in terms of production.
Halliburton's takeover of Baker Hughes dominated headline space and rightly so. The move saw one major snap-up another - shrinking the competition pool and sending the office gossip talk into overdrive. Nearly every headline carried the billion dollar figure allotted to the bid. But more than any number are the thousands of people who now have a new employer or will soon be welcoming their once-considered rivals to come on board
In 1980, I sat on a summer bench with my friend Jimmy Steele. We talked about the future, our options, our hopes and our dreams. He had already left school and was studying civil engineering at Paisley Technical College, which was just outside of Glasgow, Scotland. I was about to enter my fifth, and hopefully final, year at school.
"So what are you going to do after leaving school?" he asked.
I told him art was my favourite subject, so I hoped to go to art college to study graphic art design. I wanted to become an illustrator of book covers and, more importantly, of album covers for the music industry. I was really into music!
I had ideas for fantastic landscapes and creatures that I felt would bring the covers and records to life — striking text and colourful fonts — all airbrushed and painted by hand. I imagined I would design dragons and angels, princes and thieves, lovers and rockers.
Jimmy cautioned me that the creative arts field is a tough industry to break into, that talent alone may not be enough. He said I might be better off to consider a more solid career option with better job prospects, even as a safety net or a fall back option. “A trade to fall back on” was how he put it.
I thought hard about it. The two roads diverged, and at the time, I was sorry I could not travel both.
Notwithstanding the regulatory hurdles still to overcome, it’s already time to pick the winners and losers of this $35billion marriage. The certain winners are my learned friends, the lawyers, not least amongst them Baker Botts. Congratulations to them. However, first off for the strategy session should be Schlumberger.
Whilst its turnover will potentially be eclipsed (reportedly $51.8billion v $45.3billion) size isn’t everything (as my friends at Baker Botts would tell you). Whilst it might take the shine off a few egos, being the underdog in the current climate isn’t a bad place to be. Turnover is vanity, profit is sanity. Whilst this month’s massive union story will no doubt attract lots of profile during the engagement, the honeymoon may be short. A competitor disappearing may well be good news for the likes of Schlumberger. Two that are absorbed by compliance and ominous internal restructuring looks like an early Christmas present. Schlumberger may even keep its turnover crown, depending on what businesses Halliburton may be forced to sell to satisfy competition regulators (more work for the lawyers).
By Professor Alex Russell and Professor Peter Strachan
Almost in line with falling global oil prices share value of oilfield service companies have slumped by around 25% over the past four months.
These are the same companies that have benefited greatly from the US fracking boom that transformed the standing of the US as an oil and gas producer; its position as number one oil consumer has never been at risk.
But the halcyon days of unfettered profits for US frackers and service companies look to be over.
Imagine two airplanes flying toward each other on a collision course. In the modern world of commercial aviation, two planes with conflicting flight paths would trigger alarms in in the air traffic control tower. That’s because the safety of commercial aviation relies on the use of real-time data to avert disasters. The same can’t be said for the offshore oil industry.
Four and a half years after BP’s Macondo disaster in the Gulf of Mexico, the industry remains reluctant to use drilling data it collects from rigs to enhance safety.
We’ve all been to one of those parties. It starts quietly with a handful of people and before too long, everything just seems to take off. Everyone who is anyone is there. Drinks are flowing, connections are made, news is exchanged. It’s busy and bustling. New friends seem like old friends and you can’t imagine life – and the next party – without them. Could this be the greatest party ever?
Anyone connected with the North Sea is bound to know that oil prices have been sliding since the summer. As I write this, Brent is hovering just above $80 and there are predictions that it could drop into the $70a range and possibly down another level to around $65.
Jobs are being shed and BP has embarked on a cast-cutting drive as are other operators, notably Chevron and Shell.
Given the timing of the BP announcement this week, it smacks of oil price knee-jerk, rather than the cost reduction imperative spelled out in the Wood Review.
Contractors like Wood Group PSN started the process months ago, the primary target than apparently being the one-man band contractors ... otherwise known as the IR35 brigade. That has a strategic Wood Review ring to it.
The proposal from the Department of Energy and Climate Change (DECC) to establish a sovereign wealth fund based on future revenues from the extraction of shale gas, is, in principle a good idea. Many countries now have such a fund, turning current oil and gas revenues into a national asset for the long term. Norway's fund is most often quoted as an example; another lesser known example is the state of Texas in the US which has such a fund for its universities.
The details of the proposal from DECC are yet to be released so its final shape and impact is unknown. Given the size of the UK economy, and our budget deficit, the idea that we can build a large financial fund of the type enjoyed by Norway is unrealistic.
However, I would argue that there is still a great deal that could be done with a shale gas fund. Most sovereign wealth funds build financial capital taking revenues from the oil and gas industry and investing them in the stock exchange. I would propose DECC consider a fund for human capital, not financial capital.
Most countries in Europe look on Norway with envy. As the UK and other European countries struggle with reducing public spending, Norway benefits from a sovereign wealth fund worth around £500 billion. It has wisely invested the income from its oil and gas reserves, with its fund considered by many to be the world’s largest.
2015 is going to be a fantastic year for some individuals in this industry. Big corporates’ profits are falling and their fixed costs are huge. Business leaders are struggling to rise to the challenge. Internal communications may be absent or demotivating. Control predictably will become more centralised at HQ. Local service standards will be under pressure. Entrepreneurial middle managers want better for themselves, their teams and their customers. Opportunity knocks.
When budgets are cut without differentiation (let alone consultation), and jobs appear vulnerable (notwithstanding the percentages shed are actually tiny) entrepreneurs sense an opportunity. The market may shrink but that doesn’t mean there is not room for new suppliers. Customers’ profits are under pressure too. They want cost savings. They want innovation. They want added value. Their loyalties are with individuals. People buy from people.
We like an underdog, particularly one that we have worked with for years, is light on their feet and who can now offer more for less.
For a country whose economy relies mainly on tourism and tea, the discovery of oil is one of the most exciting things to happen in development terms in the history of this East African nation.
The ability of a sub-Saharan country to be self-sufficient in energy has the potential to become an engine for economic development beyond anything seen in the area over the last 100 years. Clearly there are challenges, both to the extraction and the geopolitical sensitivity of the find. Kenya’s Lokichar Basin lies on the border with South Sudan, and it was its neighbour’s oil reserves that drove the civil war and recent independence of the South Sudan state from its mother country.
Clearly there are security risks, with this part of the coastline being party to raids from Somali pirates and terrorist cells – not to mention the potential for unrest in neighbouring countries, as they eye up such a large natural resource. This year, oil was also discovered offshore from Kenya – again causing security concerns, with similar risks from marauding Somali pirates.
UK Offshore Licensing Rounds attract attention and the government settled into a routine of offering ‘car boot sales’ and then saying that the latest offering has attracted even greater interest than before.
And so, when energy minister for the time being, Matthew Hancock, yesterday took the wraps off who is being provisionally offered what is the 28th Round, the predictable words were trotted out: “This successful licensing round, which is on track to be one of biggest rounds ever in five decades, is a boost for the UK economy and shows that our long-term economic plan is working.”
How come certain big American brands are looking to exit and are virtually absent as bidders? How come practically everything on the UKCS is for sale; in large measure because of a fiscal regime long past its sell-by date and the penchant for Treasury to treat the North Sea as a milch cow?
That said, there is quite a bit of interest as companies look to the future.
Energy was political and economic dynamite, and a key battleground on which the independence debate had been fought. Following the outcome of the referendum there is now some agreement that Scotland should have a much stronger voice when it comes to energy policy. In this short article we explore the conundrum between renewables and nuclear power, and consider further what new powers for Scotland the Smith Commission might consider. Working to a tight deadline the Smith Commission intends to produce a set of proposals covering financial, welfare and taxation powers by the end of November 2014.
The renewables versus nuclear conundrum
Westminster has promised some big new powers for the Scottish Parliament, but there appears to be little agreement on how to close the policy gap between Holyrood and Westminster on renewables and nuclear power. Where are the proposals to give the Scottish Government some influence on how to spend incentives for renewable energy? At the moment, when it comes to financing, Westminster has the power to decide what it wants, regardless of what the Scottish Government thinks.
It is now clear that Westminster is planning to spend a lot of money on building nuclear power stations after 2020, and the Conservative Party has stated that it will stop incentives for onshore wind. So where does this leave a Scottish Government which opposes building new nuclear power stations and which wants some ability to make its decisions on what renewables should be supported rather than being dictated to by Westminster based Conservatives?
Many Conservative MPs are sympathetic to the aims of anti-windfarm groups like the Renewable Energy Foundation (REF). The REF say that Scottish consumers ought to pay more for renewables deployed in Scotland. Well in that case, why should Scottish consumers pay for nuclear power stations in England and Wales?
September 18 has been and gone and now we are less than a month from another critical political event.
On December 3, George Osborne will undertake his Autumn Statement - often a damp squib, but this year vitally important.
The contents of the speech could have wide-reaching impacts for the North-east of Scotland and England, East Anglia and a number of other UK regions.
However, in the short-term it will have the most impact offshore in the UKCS.
We’ve spoken with our members and the view is clear, the Chancellor has to make a positive announcement on the fiscal regime in the UKCS in four weeks’ time.
Operators tell us the UKCS fiscal regime is unpredictable, unnecessarily complex and simply too burdensome.
The North-east asks are clear - we want a reduction in the headline rate of tax in the UKCS, we want exploration to be made more attractive, we want allowances to be simplified.
However, these asks are not parochial as they are important for the rest of the UK too.
Iraq is now more violent than at any time since the bloody 2006-2007 insurgency period. The country experienced an average of almost 80 violent incidents a day between July and September. Hundreds, possibly even thousands of people are being killed every month and there are no signs that the conflict will rescind in the near future.
As violence continues to rage, the energy sector remains concerned with developments affecting Kurdish Regional Government (KRG) territory, as well as oilfields in the south.
International military assistance has bolstered the position of the Kurds and for now, this will act as a major safeguard for the region's interests.
At the time of writing this article, the Brent crude oil price benchmark had fallen to $85 from $115 in June on concerns of abundant global oil supply and weakening demand.
Goldman Sachs, the international investment bank, earlier in the week released a price prediction of $80 for 2015 having reduced this from $100 previously.
Markets are spooked and bearish sentiment is plaguing the energy sector. Concerns are that the cost and operational challenges we have witnessed in 2014 in the UKCS, compounded with commodity price reductions, could spell a difficult time for investment and activity in our home market.
