There I was, sitting at my study desk, half listening to the UK’s current and hopefully short-lived chancellor, George Osborne, droning on through his 2011 Budget speech.
Ah, I thought, after about an hour, almost there and nothing to worry about regarding the North Sea.
But then, like Brutus doing for Julius Caesar in the Roman forum, he slyly slipped in the knife. In what seemed like the same breath, he promised a sop to motorists and then said the offshore industry would be milked to pay for it – to the tune of £2billion or so a year over the next several years.
Like so many associated with or directly involved in Britain’s upstream oil & gas industry, I swore. Not one but several expletives tore forth. The air was blue. Only the dog and the kids’ guinea pig witnessed my utterances. Just as well as The Management would have roundly told me off had she been present at the time.
Not long ago, Osborne pretended to understand the strategic value of the North Sea to the British economy. On two occasions that I can identify, he told Energy’s parent, the Press and Journal, that there was a choice: nurture it for long-term gain or pillage for a quick fix.
In an attack on Gordon Brown (then masterfully pushing Britain towards disaster) at a Subsea UK conference in Aberdeen, Osbourne said: “The reality is that the UK Continental Shelf is a mature resource with rising costs and declining average discovery sizes. To be sustainable in a fiercely competitive global market, the tax regime for oil and gas must reflect economic and geological reality. The choice is between maximising revenues in the short term and maximising the life of a national asset for the long term.”
He said something else; something about predictability: “The industry understands that North Sea oil and gas is a national asset and that the government has a responsibility to ensure a fair share of the profits for the nation as a whole.
“But under the current system this is entirely up to the discretion of the Treasury – no wonder business can’t invest with confidence. We should aim to establish a tax regime that will stay in place for the rest of the life of North Sea oil and gas.”
Well, Mr Osborne (and your advisers), the North Sea is significantly more mature than when you uttered your clearly worthless politician’s fine words.
You duped Aberdeen that February day in 2007. And the fact that the UK economy is in far poorer shape now than then doesn’t wash with me.
It gets worse. Also in February 2007, Osborne said of the Brown decision to increase North Sea taxation: “By squeezing the maximum amount of tax revenue from Britain’s oil & gas assets, Gordon Brown is putting further offshore investment at risk.”
He accused the Treasury of failing to understand that the UK Continental Shelf was a mature resource competing for investment in a fiercely competitive global market.
He went on: “They don’t recognise that investment in the North Sea cannot be taken for granted when there are potentially more profitable opportunities in West Africa, Mexico or Brazil.
“In short, Gordon Brown risks denying future generations the benefits our generation has enjoyed from the North Sea.
“He’s more interested in cash today than investment tomorrow. The result is that Britain’s North Sea inheritance is in danger of being squandered.”
Unbelievable.
I’ve been scribbling about the North Sea for more than 20 years (shock, horror), and I’ve hammered out the strategic value message time and again to the point of being boring.
For the third time in the life of the UK’s domestic oil & gas industry that I can count, the North Sea is being used as a lifebelt to rescue our benighted economy, which has been perfectly mismanaged by successive governments, the Civil Service, the dreaded banks in harness with the greedy City of London and, of course, big business.
Osborne, through this latest budget, actually proposed some very useful measures for small businesses, including in the context of research and development, but he has totally blown it with the North Sea.
These days, the North Sea is frequently referred to as a cash cow. And in classic business-school speak that is precisely what it is – getting long in the tooth but still capable of delivering a decent enough return, so long as it is husbanded appropriately.
Grabbing extra taxes by mounting a smash-and-grab raid in this manner is not the way. Osborne talks of getting an extra £10billion out of the province over the next five years.
Notwithstanding currently very healthy oil prices, if he gets his way with the proposed measure, the North Sea will stagger and head downhill far faster than the most dire predictions. Believe me.
As I mused about the stupidity of the Osborne demand – which said nothing about gas, even though it accounts for 48% of current UK Continental Shelf output – my thoughts turned to the Maasai.
Why? Simple really. Cattle lie at the heart of traditional Maasai culture. They were, until very recently, central to the diet of this proud African people, providing milk, meat and a sustainable supply of blood as food.
The blood is obtained by nicking the jugular vein, and mixed with milk to prepare a ritual drink for special celebrations and as nourishment for the sick. While the inclusion of blood in the traditional diet is waning due to the reduction of livestock numbers, according to the Maasai Association, it is rich in protein and is good for the immune system. It is even used to treat hangovers.
However, its use in the traditional diet is waning due to the reduction of livestock numbers and switch to eating cereal-based foods. And so too the North Sea is on the wane and has been for more than a decade. But this is a cash cow whose lifespan can be measured in decades, if correctly managed.
Through his proposed measure, Osborne will in essence be slicing at the jugular of the North Sea to bleed off additional taxes, so threatening its longevity in the process.
It stands to reason – the older a cow gets the greater the care needed. Push your luck too far and one risks killing the source of the life blood one needs long term.
For heaven’s sake, the North Sea is already delivering a massive windfall to the Treasury, one far larger than any mandarin could dream of. Yet it wants more.
And so I jump to another nutty mind picture. From Maasai to Oliver Twist. Oliver is in the workhouse. He’s desperately hungry. He asks the master in cook’s uniform: “Please, sir, I want some more.”
“What?” replies the master.
“Please, sir,” repeats Oliver, “I want some more.”
Oliver at least asked. Osborne intends to take. Stupid, stupid man.