A lot has changed in the UK’s oil and gas industry in the past two years – mostly for the better.
That’s the view of ex-energy minister Charles Hendry, who more than three months out of the role has visited Aberdeen more times than his successor, John Hayes.
The UK Treasury has started to recognise the importance of the industry, Pilot, the industry-government body, is hoping to start to make real strides in 2013, work to resolve uncertainty over decommissioning tax relief and liability is moving forward and there are signs of optimism in the industry few would have predicted 18 months ago.
But, Hendry says there are still questions.
“The dilemma, I felt, was literally where are we actually in terms of investment?” he said, visiting Aberdeen last month.
“When you look at some of the exploration and development activity it shows worrying down turns. Yet the last two licensing rounds have been the busiest.
“Some figures suggest trouble, others unparalleled interest. We have not got to the bottom of which is right.
“Some of the drilling figures could be explained by Total – they had to drill the two relief wells which tied up some drilling equipment for months. But we need to now understand what is behind the figures.”
Another question, being worked through by Pilot, a body revived under Hendry, is how much of a role government needs to play in resolving some of the industry’s issues.
“Pilot is still work in progress,” he admits. “We have looked at a long list of things to tackle and hopefully we will see some conclusions come out of that in 2013 – some industry led, some government led.”
Issues being looked at include access to infrastructure, a long-term bug bear in the industry, and enhanced oil recovery and improved oil recovery.
“There is a real agreement between industry and government that these areas need to be addressed,” said Hendry.
“The work now is finding who should be responsible to find solutions. My preference, as a minister, would be industry.
“But there are times when government needs to get involved. Companies have different commercial drivers and government would not take sides.
“When you have infrastructure, long-term liability is critical to whether you let someone use it.”
With a referendum on Scottish independence looming, government, both in Westminster and Holyrood, also need to provide a clear and “cohesive” picture for investors, he said – without the politics.
The local content drum also needs to continue to be banged. While he had no powers to enforce using the UK supply chain, a phone call or requesting a company boss in to the department would do wonders – if only by alerting them to opportunities they didn’t realise were there.
“Two years ago, I’m not sure it mattered where content came from,” said Hendry. “Now most would go out of their way to see who could meet their needs in the UK.
“The impact of that is literally thousands of jobs created at BiFab, OGN and Wilton at Teesside. I think we’ve got extraordinary resources, which can still be taken advantage of – at Nigg and Invergordon – and areas that have seen long-term industrial decline and now see a revival with quality jobs.”
So what of the new minister and will he pay such close detail to the UK’s supply chain? In the time John Hayes has been in the job, Hendry, has spent more time in Aberdeen.
In fact, Hayes has yet to visit the Granite City, widely regarded as Europe’s oil capital, since picking up the energy brief in September.
It’s a visit he should make, says Hendry, who was visiting the city last month – a trip he had been making about every two months while energy minister.
“You can’t understand this industry without coming to Aberdeen and getting to feel how this city works,” he said. “Hopefully he (Hayes) will be able to have that opportunity.
“It is to me one of the most exciting parts of the UK energy sector. Its importance is widely misunderstood and not just what it does today, but what its potential for another 30-40 years is, which would have seemed impossible a few years ago, as we move towards a more decarbonised economy.
“Seismic, horizontal drilling, technology and attitude of the companies has turned this from an industry in quite sharp decline to one with decades of life in it.”
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