“North Sea oil and gas needs an image makeover”, according to Bill Yuile, managing director of Aberdeen-based consultancy Apply Altra.
Yuile was speaking at the End of Year Gala dinner hosted by AFBE-UK Scotland – an organisation that seeks to inspire people into and in engineering. The theme of the evening was Scotland’s Energy Future.
“It’s very rare these days not read something about Energy in the news whether this is about rising household bills or political infighting with treasury about what decarbonisation targets to set and when to set them and our members who work in every sector of Scotland’s thriving industry are interested to know how the Government’s proposed transition to a low carbon economy affects our lives, jobs and industry” said Ollie Folayan who chairs AFBE-UK Scotland.
Guests were informed of AFBE-UK’s mentoring program Make Engineering Hot which has reached over 850 young people. AFBE-UK also started a series in 2012 called Transition which aims to help university Students and young people make the “transition” into working life.
The Keynote address on Scotland’s Energy Future was delivered by Mr Fergus Ewing MSP Scottish Minister for Energy Enterprise and Tourism. In his speech the minister emphasised the Scottish government’s investment in Carbon Capture and Storage and the potential benefits that Enhanced Oil Recovery are set to bring to the Scottish economy.
Ewing applauded AFBE-UK for their efforts in promoting Engineering among young people and emphasised Scotland’s appreciation for the talent it attracts from all over the World.
In a speech on North Sea Oil and Gas: Challenges and Opportunities Yuile noted that we were really looking at two sides of a coin i.e. every challenge is an opportunity; every opportunity is a challenge.
He noted that the following issues need to be addressed for the future:
1. Image
a. Many see the oil and gas sector as low-tech, old fashioned, dying and dirty and nothing could be further from the truth. The industry does not do enough to publicise all the good that it does
i. The oil and gas industry provides 73% of the UK’s primary energy requirement i.e. heating, electricity and transport and 50% of this demand comes from the North Sea.
ii. Even if the UK’s 2020 renewables targets are met, 70% of the UK’s primary energy requirement will still be derived from oil and gas and 50% of that from the North Sea.
iii. Around 440, 000 jobs and over 3000 supply companies serve the oil and gas sector which is also the largest investor in the country with over £500bn invested in the North Sea.
iv. In 2011 alone the North Sea saved the UK from having to import £40billion worth of fuel
v. Last year the production sector of oil and gas alone supplied 25% of all the corporation tax gathered by the exchequer.
vi. Scotland is leading the world in the development of the technology required to develop oil in new regions such as deepwater and the arctic.
It is incumbent on every one of us to help in getting the word out. Oil and gas is a clean, hi-tech, progressive and exciting industry and is populated by people who care and contribute massively to our standard of living. People who work in the oil and gas industry are not “anti-renewables” however we tend to also be pragmatists.
b. Aberdeen – competing favourably with Inverness and Dundee does not cut it. As the energy capital of Europe our challenge is to compete with Houston, Singapore, Melbourne and the like. Take a trip across the North Sea to Stavanger to see how well a city can prosper with oil and gas revenue then take a long hard look at Aberdeen
c. Safety – Whilst North Sea oil and gas has a better safety record than many other industries, there is still a lot of room for improvement. The goal of zero incidences and injury is attainable and that is what we must strive for.
2. Fiscal – Oil companies are not charities but businesses with shareholders. The super major oil companies cannot get the “bang for buck” that they can get elsewhere and this has led to them selling up their assets to smaller operators, often venture capitalist driven. Yuile says that this is natural and a good thing as it ensures that much of the natural resource is recovered from a field prior to being closed in.
George Osborne’s surprise windfall tax rendered a number of marginal but viable options not worth doing leading to less production and lower tax revenue, this led to lower employment and less interest from the Major oil companies which also means lower tax revenue.
3. Resources – There was a period between 1990 and 2005 in which there was very little recruitment. The result of this is that there is now a severe shortage of qualified people between the ages of 35-50.
4. Infrastructure –
a. Many of the assets on the North Sea have paid for themselves many times over but charge small operators excessively high tariffs to use their infrastructure. This is a disincentive for small operators.
b. OSPAR’s instruction to restore the North Sea to how it was before drilling began might be naive as putting the seabed back to its original state could actually cause more environmental damage
c. Decommissioning is a growing sector that could be worth £30bn and the challenge is to get it right.
5. Contractor Power – Not so long ago, Aberdeen had 6 large operators at the top of the supply chain and numerous small contractors who depended on them. These days we have six large contractors and numerous small operators. The result of this is that the companies that really know how to operate assets Offshore, how to prepare for an emergency and how to update a safety case, how to relate with the government and authorities are leaving in their place two groups of companies that do not have these resources. In the unlikely but not impossible event of a Piper Alpha or a Macondo type incident, it is feared that these smaller outfits would not have the wherewithal to cope. It is therefore important that the super majors and the majors remained tied in some way to an accountable in the North Sea.
6. Cost – The operating cost of the North Sea are growing ever more expensive and we should guard against this. The Average cost of a barrel from the North Sea is $18 whilst the total cost of producing is $50. This is compared with an operating cost of $6 in Saudi Arabia and $31 in the US.
A significant future of the North Sea lies further afield, West of Shetlands and Aberdeen must stay central to the innovation of the technologies required to make the best of these opportunities.
By Ollie Folayan
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