The core task of the Offshore Supplies Office (OSO) was to raise the domestic content of UK North Sea expenditure to at least 70%. As Britain struggled to get to grips with its offshore oil&gas prize in the early years, it was deemed vital that the orders for platforms, pipelines and equipment were not lost overseas.
Assessing content was based on information on orders submitted quarterly by operating oil companies, which were also required to show whether or not they had given British firms “full and fair opportunity” (FFO) to compete for business.
An assessment of their FFO performance would form one of the criteria against which any applications for further offshore licence awards (then much in demand) would be made.
Establishing the quarterly return was straightforward and produced few complaints from operators, beyond those to be expected about “bureaucracy” and “time-wasting”.
The latter led to to-ing and fro-ing over issues such as the minimum individual order size to be recorded – which, in turn, could vary according to OSO’s interest in a particular market sector.
Though introduced in 1973, the returns and their audit did not become fully established until 1975, when a non-statutory memorandum of understanding (MoU) and code of practice (CoP) were negotiated between the Department of Energy and the United Kingdom Offshore Operators Association (UKOOA).
This toughly negotiated agreement ended the difficulty of “policing” FFO without a frame of reference agreed between the operators and the Government, an issue that came to a head after a Labour Government replaced the Conservatives in 1974.
However, it did not resolve the issue which “bugged” OSO from its beginning until its end. What was a British company?
The obvious answer that it was a company operating in Britain under the control British management and shareholders was soon found to be wanting.
For a start, many oil industry suppliers, ranging from major contractors such as Foster Wheeler and Bechtel to manufacturers such as Cameron Iron Works, had been established in the UK long before the North Sea was seen as being prospective.
Faced with the prospect of being discriminated against, such firms were quick to point out that they employed mainly British personnel, paid British taxes, exported from the UK and had sometimes received accolades such as Queen’s Awards.
Secondly, it had always been British policy to maintain an open door to overseas investment, treating all firms equally regardless of ownership.
Despite the difficulties it created on other fronts, OSO had no option but to agree that a firm would be treated as British for FFO purposes if it had substantial operations in the UK in the relevant supply sector.
This enabled “brass name-plate” sales companies to be treated as foreign suppliers and left it open to OSO to encourage their principals to genuinely invest in the UK, as many in fact did.
OSO also applied such pressure as it could to ensure that foreign-owned companies in general carried out development work in the UK and promoted British nationals.
Settlement of these issues enabled OSO to brief its political masters on overall levels of UK content and to provide useful leads for British industry.
By its own standards (vulnerable to criticism on a number of accounts, as we shall see in future issues of Energy), the statistics showed that OSO’s UK content objective was soon over-achieved.
The 70% barrier was decisively broken in 1979, when a figure of 79% was recorded. Thereafter, the figures consistently remained over 70%, except for a low point of 67% experienced in 1981. The period 1985-89 inclusive saw figures in excess of 80%, with an all-time peak of 87% achieved in 1987. The final figure published (for 1991) was 78%.
Norman Smith, a former director of the OSO, was honoured by Aberdeen University in 2008 with an honorary doctorate