Chancellor Alistair Darling’s latest visit to Aberdeen set me thinking – not least because of the Treasury’s “get lost” message to the North Sea oil&gas industry that came hot on the heels of his departure from the city, having apparently raised false hopes.
I am, of course, referring to the sector’s demand for strategic tax concessions to help perk up the ageing North Sea cash cow, the health of which is not all that $70-plus oil might suggest, partly because too few observers seem to take natural-gas prices into account.
Gas is currently more like $30 per barrel oil equivalent, which is buttons.
Moreover, gas currently accounts for 45% of gross UK North Sea hydrocarbons output. So the price currently fetched by an average barrel equivalent is more like $45-50, which isn’t particularly healthy.
But that’s not the subject of this month’s diatribe, so back to the thread.
Love or loathe him, Darling has at least shown his face in Aberdeen several times – as Chancellor, during his time as Secretary of State for Trade and Industry and as Scottish Secretary.
Moreover, he appears to be interested in the North Sea, tries to understand its dynamics and has demonstrated this by chairing at least one PILOT steering-group session.
However, where is the current energy secretary?
Nowhere to be seen – at least not in Aberdeen.
Ed Miliband was made Secretary for Energy and Climate Change in early-October 2008. He has been nowhere near Europe’s Energy Capital since. One year is, I think, long enough to have done that.
He managed a virtual link into Aberdeen’s 2009 All-Energy conference, but that doesn’t count.
There was, I recall, some talk of his coming to Offshore Europe, but he didn’t show up.
But at least Miliband’s ministerial envoy, Lord Hunt, came to fly the flag.
So I want to know why Miliband has never set foot in Aberdeen? After all, the city remains the epicentre of the UK’s still most important energy play and the one that coughs up the biggest chunk of corporate tax receipts that the beleaguered Treasury currently gets.
Perhaps he thinks that working through DECC’s depleted Aberdeen presence and Hunt is sufficient.
Perhaps he really doesn’t want to dirty his hands by making such direct contact with Big Oil.
Perhaps he is ignorant of just what a critical role the North Sea offshore industry will (not may) play in achieving the low-carbon future he clearly craves?
Perhaps the idea of setting foot in Aberdeen is beneath him because it isn’t low-carbon and a hotbed of climate rhetoric.
On the flip side, maybe oil folk in Aberdeen are so hacked off with Government that it would be a case of “Fa’s Miliband?” should he deign to show face.
I have to confess that I hadn’t noticed his non-appearance; it was pointed out to me by someone rather concerned that the politician in charge of Britain’s energy destiny (for now) is failing in his duty by not, at the very least, paying a courtesy visit to Europe’s Energy Capital.
Unfortunately, that sort of visit invariably encourages sycophantic behaviour among hosts. You know, the grovel-grovel stuff, forgetting that they voted such politicians in to represent their interests. I hate that sort of stuff.
Too often, I’ve witnessed the metamorphosis of politicians into superior, beings – numbered among whom are various former energy and trade ministers. They too often forget their place. They are our servants; we are not theirs. They talk down to, and not with, us. They are dismissive of, if not downright rude to, frequently deeply committed, fair-minded journalists.
Which reminds me. Former deputy prime minister John Prescott took the insults to the limit at a dinner in Aberdeen a year ago – so much so that I penned a note of protest on the back of my business card and handed it to him personally. He didn’t bat an eyelid. Said nothing.
That night, Prescott was hosted by – and paid a handsome fee by- a media company.
The man’s behaviour was detestable.
I’m not saying Miliband is like that. He seems highly intelligent. And the unelected Lord Hunt most certainly is not a fool; moreover he is very decent. Perhaps he could push his boss on to a plane bound for Aberdeen?
JUST a few days ago, I stood on the shores of the Cromarty Firth for the first time in too long. I counted seven drilling rigs – one jack-up and six semi-submersibles – stacked, plus a flotel lying idle. They are a sign of the bizarre times in which we are now forced to live thanks to incompetent politicians, greedy bankers and rubbish regulation.
I mentioned earlier the dramatic difference between oil and gas prices, and elsewhere in this issue is a review of the latest report by Professor Alex Kemp and colleague Linda Stephen – The Prospects for Activity in the UK Continental Shelf to 2040: the 2009 Perspective.
This is an excellent piece of work, even if it doesn’t model, per se, the current pricing scenario – though it does refer to the impact of the banking crisis on future progress in the North Sea.
One of those impacts is, of course, on exploration for remaining resources, a sizeable chunk of which appears to comprise gas – both wet and dry.
But beyond exploration wells currently planned, what is the outlook?
Put it this way, the answer is no longer as easy to calculate/estimate as it once was. Leaving aside the money thing, this lack of reasonable clarity is bound to make companies think twice about committing to the drillbit for all but the no-brainers.
Maybe this shows in DECC statistics. I looked.
Did you know, for example, that just 18 exploration wells were drilled in 1999 as a result of the 1997 through early-1999 oil-price slump? That compares with only 17 for the first nine months of this year.
By comparison, the appraisal picture turns out to be much better – 39 wells during Q1-3 this year, versus 18 in 1999.
But surely the most worrying statistic in many respects is the huge drop in development drilling activity. DECC records 239 such wells for 1999, but only 104 for Q1-3 this year. Little wonder UK production is falling so fast.