There is now clear evidence that banks are destroying opportunities – both oil-related and offshore wind – so undermining jobs and the ability of companies to survive the downturn. Given the IHS/CERA report of just a few days ago that warned of serious consequences if there is not a rapid recovery of investment in boosting oil&gas output, short-sighted decision-making by the banking fraternity is plain stupid.
One hears of little let-up in their mean-mindedness, and two astonishing examples of this have come to Energy’s attention just lately.
One involves Lloyds TSB’s alleged role in the loss of a £300million opportunity with SeaDragon Offshore to fit out a new semi-submersible drilling rig in the English north-east. This work will instead go to Singapore.
The other involves institutions that pulled the plug on Belgium’s offshore windfarm programme just as the first row of wind turbines had been installed at Thornton Bank, in the Southern North Sea.
On March 26, SeaDragon issued a statement rejecting Tyne Tees Rigs (TTR) bid to complete the SeaDragon 1 semi-submersible drilling rig. Earlier, in January, SeaDragon had dumped an earlier bid by Tees Alliance Group (TAG). The Jurong Shipyard will land the contract for the sixth-generation semi.
The loss of this contract is a huge blow to the English north-east. Basically, it represented the biggest project of its kind in the UK for more than 20 years and would have provided a significant stimulus to the local economy and restored its reputation as an important player in offshore fabrication, moreover, drilling-rig construction.
As many as 1,000 jobs would have apparently been created by the fit-out of the SeaDragon 1 hull, which has already been completed at the Sevmash yard in Russia. The north-east of England had been in the frame to get the task as far back as 2006, and a second rig from the same company was in prospect.
SeaDragon has said little about its reasons for removing the project from the UK other than it decided to have the work done at a yard with more experience. That may indeed be the case. However, as exposed by the local paper, Northern Echo, a decision by Lloyds TSB not to get behind TAG in the first place must have influenced decisions made.
The final nail in the English north-east’s coffin for this project, however, appears to have been two negative “independent” assessments of the capabilities and facilities on offer in the Tyneside/Teeside area.
John Darlington, chairman of SeaDragon, wrote an e-mail recommending dumping the UK in favour of Singapore to his board. But then he made a mistake – he also sent it to Jon Dale, director of Tyne Tees Rigs.
Key lines from that e-mail included: “I therefore recommend that we terminate discussions with Tyne Tees Rigs and finalise the contractual arrangements with Jurong.”
And: “This will undoubtedly lead to adverse PR and some political response, but that seems to be unavoidable.”
The SeaDragon contract already had, in any case, been in jeopardy since Lloyds TSB pulled the plug on financing that could well have made the difference and encouraged the drilling-rig firm to stick with the English north-east.
SeaDragon said back in January that it had decided against staying with TAG, and the Echo revealed then Lloyds TSB’s role in this debacle.
So now the guns are turned on Lloyds TSB and the Government.
The basic question being asked is: how could a 65% publicly owned bank get away with such a critical decision and, by the way, could the Government have done more?
Time and again, the British Government seems to make stupid decisions. In my view, a spectacular example is the £7.5billion order for new trains placed with Hitachi of Japan instead of placing it with the Bombardier plant at Derby – Britain’s sole remaining rolling-stock plant, albeit foreign-owned.
Most of the manufacturing jobs are likely to go to Japan, with the bodies and engines shipped to Britain for assembly. Some deal.
And yet UK Trade Minister Lord Davies of Abersoch has just called for engineering firms to lead the UK out of recession. Davies said that British firms will be vital to kick-starting the economy and that a new export drive by the advanced engineering sector will play a crucial role.
So why import almost the entire next generation of UK inter-city trains? I suppose we will import practically all future North Sea production platforms and floaters as well.
Crass? Words fail me, just as they do with the millions spent on the latest bit of export-related re-branding – UK Energy Excellence. OK, its broader than anything before, but I’ve so far lived through four or five such re-labellings. Confusing or what? Please don’t change things again.
However, such idiocy is not confined to Britain. Consider what’s happening in Belgium’s offshore wind sector, which currently faces decimation thanks to, er, bankers.
This sad tale came to light in Aberdeen at a Scottish Enterprise seminar on North Sea energy opportunities. Its teller was Pieter-Jan Provoost, of the Belgian Oil & Gas Group, otherwise known as BOG.
Having raised a laugh, Provoost outlined how the Belgian maritime wind dream had struggled through numerous setbacks since mid-1990s, eventually lining up three projects – Thornton Bank (consented), Bligh Bank (consented) and Eldepasco (in process).
Last year, six five-megawatt machines were installed at Thornton Bank. Then, as Provoost put it, the credit crunch hit and stalled the 300MW project; plus it hammered Bligh and Eldepasco.
At Thornton Bank, which is a C-Power development, the first six turbines were financed by Dexia Bank, one of the institutions that ran into difficulties and was bailed out by the Belgian government.
C-Power needs about 850million euros (£790million) for the entire project, of which 152million euros (£141million) was found before the credit crunch hit.
Provoost said he was unsure as to when the situation would improve for Thornton Bank – or the other two projects.
One wonders how many other North Sea wind projects have already been hit by banks refusing to lend or setting ridiculous financial hurdles in place. I believe the 2020 targets for offshore wind – UK and wider North Sea – were already too tight prior to the debacle that has hit all of us. I can see a five-year setback – easily.