As Leader of Aberdeen City Council I felt it was important to try and take a lead on how politicians interact with the Oil and Gas Industry.
Aberdeen is a global city that has achieved so much success thanks to the Oil and Gas industry being on our doorstep.
It concern us all that the price of oil has dropped so heavily in such a short space of time and whilst we accept there will always be fluctuations in the price of oil I believe the time is now right for the industry and governments at all levels to work together to maintain confidence in the North Sea.
At a difficult time for the oil and gas industry when we are addressing a range of challenges including the rapid, steep drop in oil price, we can fully appreciate why Aberdeen City Council has called for an oil and gas summit.
We are well aware of the concerns across the region regarding jobs and the future for businesses in the area and recognise that a summit, which involves the participation of such a wide cross-section of politicians, industry representatives, and trade unions, will focus minds and join effort on what needs to be done to sustain Aberdeen's position as the oil capital of Europe.
We welcome this positive and collaborative approach, but it is also important to acknowledge the truly constructive work being undertaken by the industry and the Government on a number of fronts to help secure the next phase of development on the UK continental shelf (UKCS).
It goes without saying that if you work offshore, you work in a physically demanding and hazardous environment. So when the European Court of Justice rules that obesity can constitute a disability, then of course safety must come into the discussion.
Before we get into things, we must remember that the EU’s judgement states that obesity is only classed as a disability in certain circumstances, not in every circumstance. It’s only a disability if the person has a long-term impairment that has been induced by their weight.
In these interesting times we may need to look outside our usual patch to keep our people busy through 2015. But Bethlehem? OK, not exactly Bethlehem, but perhaps not far away from that little town.
Israel just announced a major new gas discovery (reportedly 3.2 trillion cubic feet). While many of us were transfixed by the oil price, Israel was holding its first ever international oil and gas conference.
There used to be an Israeli joke that Moses had delivered the Jews to the only place in the Middle East with no oil or gas.
As we watch the oil price go down, with no indication of how low it will go or how long this trend will be sustained, it’s increasingly clear that the impact of this – alongside a double whammy of falling production levels plus cost inflation - is being keenly felt by operators across the UK Continental Shelf (UKCS).
In recent weeks, we’ve seen Christmas parties cancelled, free meals curtailed and shareholder revolt on CEO pay as well as plans to cut onshore and offshore contractors pay in 2015.
There is also the prospect that up to $150bn of global projects could be labelled as uneconomic next year, resulting in them being mothballed or cancelled altogether.
Robin Watson’s career boils down to two things - adventure and family.
Growing up on the west coast of Scotland, his appetite for adventure was shaped by the wide expanse of the neighbouring sea.
He quickly joined the merchant navy before later transiting into the oil and gas sector.
In the midst of his career climb he met and married his wife. And according to Wood Group’s new chief operating officer, his business success is a credit to his firm family foundation. For him, one could not exist without the other.
Energy Voice sat down with the newly promoted executive for its latest instalment of The Journey.
He discusses how he manages risk, making tough industry firsts, the challenges the service sector currently faces and what it was like to take up the reins at one of the biggest service companies in the global sector.
Watch the full interview below or browse our highlight clips based on topic.
Robert Gordon University (RGU) student Alexandra Pate, 20, has won the competition to design a trophy for this year’s Offshore Achievement Awards (OCA).
The design brief was to capture the awards’ key themes of “innovation, creativity and out-of-the box thinking”.
Miss Pate’s winning entry has already led to a prototype, which will be developed into a final version – made of steel and granite – for winners of the OCAs at Aberdeen Exhibition and Conference Centre on Thursday, March 12.
Tightly wrapped under our Christmas tree is my son's first rugby ball.
As his appetite for the sport grows he'll soon learn the rules and watch highlights of some of the most historic games.
And then maybe somewhere down the line, a coach, a teammate or a fellow fan will teach him about the very important 'game of inches'.
I can't help but think the industry, now more than ever, could take a cue from this sport's playbook.
Humphrey Walters, who is known in both sport and business arenas, coined the phrase.
There is no doubt that the oil and gas sector is facing challenging times – on-going cost pressures and the fall in oil prices are reducing margins for both operators and supply-chain companies, and it is important that Government does everything it can to support the industry during this period.
I believe that North Sea oil is a fantastic asset for Scotland and will continue to be so be for decades to come.
There are up to 24 billion barrels of oil and gas equivalent remaining, and it is essential that we have stable and proportionate fiscal regime which encourages the investment, innovation and exploration required. This is even more important in light of the recent job losses in the sector.
I read with real concern the comments yesterday that the UK offshore oil & gas industry was “close to collapse”.
These comments are over the top for an industry which thinks and plans long term, has significant momentum from current production and from major investments made over the last two or three years, and where the operators make their investment decisions based on the anticipated price of oil in two to three years’ time.
It’s important to have a balanced perspective at this time. The UKCS does face a very difficult year to 18 months which will see a slow down in investment, the loss of some offshore production, up to 10%, and the possible loss of around 15,000 jobs within an industry which employs 375,000, although this is difficult to estimate.
It will be a tough time for the industry and the people that work in it, but we are entering a downturn from which we will recover.
There is no doubt these are worrying times for the North East of Scotland. Not just for those in the industry but also for the businesses and jobs that rely on what the oil industry does for the local economy.
But the North East of Scotland has seen many a storm before, and weathered them all. With the support of the new Oil and Gas Authority, and the UK Government – particularly the tax breaks which I have implemented at the Treasury – we can certainly weather this one, and even emerge stronger and more resilient.
That’s not to say that the fall in oil price to below $60 a barrel is not troubling. Oil and Gas UK’s figures suggest that only about 10% of projects are unprofitable at this level, but that’s still 10% of an industry that employs around 240,000 people across the supply chain. I know that a lot of people reading this today are genuinely worried about the future.
The UK Government moves like lightning to tax the industry when oil prices are high but moves at a snail’s pace when oil prices are low.
In a glaring example of oil tax hypocrisy, George Osborne announced a shale oil fund for the north of England in his Autumn Statement.
This is before a single barrel of oil has been produced, yet, Scotland, with more than 40 billion barrels of oil is still waiting.
The big economic development this year was one which no economic forecaster had predicted – a dramatic drop in the crude oil price. Brent crude has fallen around $50/barrel from the average price in 2011-13.
The most significant impact so far has been on Russia and the value of the rouble. The other very large oil producers in the world – Saudi Arabia and the United States – should be less heavily affected. The US is a net oil importer so consumers will gain more than producers lose. Saudi Arabia has very strong financial reserves to weather the storm.
Yesterday, the European Court of Justice issued its judgement in the case of Karsten Kaltoft, a 5ft 7in child minder from Denmark who, in his 15 years in that role, has never weighed less than 25 stone.
Mr Kaltoft's employment was terminated, and he felt that it was on the grounds of his obesity.
The European Court of Justice was asked to rule on two key questions: First, is it unlawful to discriminate against someone on the grounds that they are obese? Second, can obesity amount to a disability, which it is unlawful to discriminate against?
North Sea “close to collapse” says the man from Brindex. I am of course referring to remarks made to the BBC by its chairman Robin Allan, who then goes on to say that the UK’s offshore industry has been in such territory before.
The 1986 oil price crash was a shocking event and did terrible damage at the time. However, it also marked the start of a turning point as the North Sea gradually started to mature. Various initiatives in the 1990s designed to tackle key issues like rocketing costs helped and they were timely given the next slump that started with a gradual oil price slide in 1997, bottoming out in late 1998 at less than $10 a barrel for a few days.
International Tubular Services (ITS) has become the second Scottish business to self-report having benefited from a potentially corrupt payment, and reach a civil settlement which sees them paying over a substantial sum to the Civil Recovery Unit.
My advice to other Scottish firms with bribery and corruption “skeletons” would be to come clean now to reduce the risk of being subject to a criminal investigation and more significant penalties after a self-reporting deadline expires next June.
Aberdeen-based ITS admitted it had benefitted from a profit of £172,200 as a result of a corrupt payment made by a former Kazakhstan-based employee to secure additional contractual work in the former Soviet republic.
The decision by Wood Group PSN to chop the rates paid to its limited company offshore and onshore contract workers and freeze the pay of most onshore employees here in the UK comes as no surprise.
Wood Group PSN is right to take a stand, especially on the issue of independent contractors, given the rates that they have been able to command over the past decade or so.
OK, this is the second reduction that the group has sought to impose on the so-called IR35 brigade, bringing the total cut announced this year to approaching 20% for some.
By Professor Alex Russell and Professor Peter Strachan
Over the past 3 months the share price of the Wood Group has fallen by 21.5%.
The recent announcement of the creation of a possible 150 new jobs on the back of winning a £500 million contract for BP may help stabilise this price slide.
But like all oil service companies their share price fate is dependent on the price of a barrel of oil. And the once powerful international oil industry appears to be impotent to influence prices one iota at present.
By Professor Alex Russell and Professor Peter Strachan
The problem with the UK’s North Sea oil sector is that its production costs are higher than those in most other world regions and have been spiralling upwards at an alarming rate for the past 10 years.
With oil prices falling worldwide, a lot of attention has been focused on what the decline means for drilling programs and energy industry employment.
As a wave of austerity washes over the industry, companies should remember that cuts made in response to a dip in oil prices now can have devastating repercussions for years to come – especially when it comes to programs such as safety that aren't seen as contributing directly to the bottom line.
With crude prices at five-year lows, capital budgets have come under scrutiny and some companies are cutting back. ConocoPhillips, for example, said it would slash its capital budget by 20% next year because of weaker prices.
The North Sea has been producing oil and gas for half century next year and the challenges the region faces are well documented.
The ‘Fuelling the Next Generation’ report released this week showed the scale of the skills shortage is much less apparent than it was 12 to 18 months ago. This means that all the work the industry has been doing from grassroots level in schools right through to engaging with potential transitioners and the wider public is working.
The study, commissioned by Oil & Gas UK, OPITO and the department for Business, Innovation and Skills, has delivered the truest reflection of how life is going to look for those of us in the sector over the next five years.
The oil and gas sector is vital to Scotland and it is important we have the skilled workforce required to strengthen our overall ambition as a major centre for energy activity.
The oil and gas UK study highlights the need for the UK Government to continue to put in place measures to sustain long-term investment in the UKCS and for industry to work with our colleges and universities to ensure they are delivering the skilled workforce they need and deliver the best value out of the public investment that we provide for the training of the current and future workforce.
But unfortunately the Autumn Statement last week failed to provide the oil and gas industry with the tax measures it both requires and deserves.
We at Oil & Gas UK recognise that there will be changes in employment patterns, and these will affect employment across the sector.
It is worth pointing out the 9% decline in employment will be across the UK - not just Aberdeen or Scotland.
The forecast reduction in oil and gas industry jobs comes from an anticipated decline in capital expenditure over the next five years.
Wow ...12,000 new entrants to join offshore oil and gas industry in next five years headlines the industry report. Brill!
But, over the same period, around 9% of the current workforce, for long said to be around 450,000 but now discovered to be 375,000 will disappear.
I’m curious about the apparently sudden drop from 450,000 to 375,000 direct and induced. It doesn't seem to be explained.
That’s a heck of a reduction and begs the question as to the accuracy of the old overall workforce number. I have to assume that the methodology that generated the 450,000 figure a decade or so ago was as rigorous as the one that EY has applied for this latest study.
Stock markets, oil companies, service companies and investors are reeling from Saudi’s shock decision not to support a cut in OPEC production in order to balancesupply and support prices, and the consequent slump in oil prices.
This stance is a radical departure from Saudi’s previous behaviour when supply and demand fell modestly out of balance.
In the past, a few words of support have been enough to have the oil traders scurrying back to their desks to close their short positions.
Why the change of policy on this occasion?
