Need to keep the home fires burn­ing

‘No’ camp is mud­dy­ing the wa­ters on Scot­tish oil, be­lieves Stu­art Dar­ling

The Herald Business - - Opinion -

IT is the orig­i­nal tril­lion pound in­dus­try. Yet for all its value, the oil and gas sec­tor has ex­isted only in the fringes of the Scot­tish psy­che. The im­pres­sion is of huge sums of money flow­ing out to sea in in­vest­ment – even greater wealth re­turn­ing with the tide. But Lon­don­based po­lit­i­cal par­ties have broadly fo­cused on the mor­tal­ity of the in­dus­try rather than the po­ten­tial.

Cu­ri­ously, the oil and gas in­dus­try was not men­tioned once as a pos­si­ble ca­reer op­por­tu­nity dur­ing my high school or univer­sity days. And so the story goes for thou­sands of Scots in a coun­try that is home to one of the world’s most tech­no­log­i­cally ad­vanced in­dus­tries.

Many skill sets are needed to re­alise the large scale in­vest­ment in the North Sea. Around 440,000 peo­ple work in the UK oil and gas sec­tor and this is set to grow by 15,000 over the next five years. It would be good to think we had a work­force in Scot­land ready to meet this de­mand.

I am in­volved in the off­shore Seis­mic Sur­vey busi­ness. Last year, there were more sur­vey ves­sels in the North Sea than ever be­fore. And 2012 saw the UK’s largest ever re­sponse to a li­cens­ing round with more com­pa­nies look­ing to drill in more blocks.

Oil and gas is the sin­gle largest in­dus­trial UK in­vestor; a third of all UK in­dus­trial in­vest­ment is in the sec­tor. Yet this is rarely high­lighted in the in­de­pen­dence de­bate. The UK econ­omy isn’t as di­verse as the an­ti­in­de­pen­dence cam­paign claims.

In a re­cent on­line Q&A, Alis­tair Dar­ling, head of the Bet­ter To­gether cam­paign, was asked two im­por­tant ques­tions about oil and gas:

1. In the event of sep­a­ra­tion (sic), do you think the UK will gladly hand over 90% of the oil like the SNP as­sert? Wouldn’t the UK ar­gue that since it in­vested in oil and gas, it should have a larger share?

2. The SNP claims 90% of North Sea oil and gas rev­enues by virtue of ge­og­ra­phy but there is no West­min­ster/Holy­rood agree­ment to back up the claim. As a UK as­set that would need to be ne­go­ti­ated over in the event of In­de­pen­dence, then on a pop­u­la­tion ba­sis Scot­land may only be en­ti­tled to 10%. What is your view on the share of North Sea oil and gas rev­enues that an In­de­pen­dent Scot­land would legally ex­pect?

Dar­ling’s re­sponse was: “Both th­ese ques­tions are dif­fi­cult to an­swer in that it would have to be sub­ject to ne­go­ti­a­tions be­tween Scot­land and the rest of the UK. That’s not the only ques­tion. Who would meet the mas­sive decom­mis­sion­ing costs in the North Sea, for ex­am­ple. This is an ex­am­ple of one of the many is­sues that could take some years to ne­go­ti­ate.”

This char­ac­terises the anti-in­de­pen­dence cam­paign: sup­press the re­al­i­ties of Scot­land’s wealth and cre­ate ‘unan­swered ques­tions’ where ques­tions don’t ex­ist.

First, oil and gas rev­enues will be de­ter­mined by the same in­ter­na­tional law that gov­erns the rest of the world – the UN Con­ven­tion on the Law of the Sea. Ge­og­ra­phy de­ter­mines own­er­ship of nat­u­ral re­source and Scot­land is for­tu­nate to have an abun­dance of oil and gas, with 90% of cur­rent pro­duc­tion in Scot­tish wa­ters. Off­shore rev­enues be­ing dis­trib­uted by pop­u­la­tion share is a non-starter.

Sec­ond, pri­vate busi­ness op­er­ates the oil and gas sec­tor in the UK. Alis­tair Dar­ling is fully aware of UK reg­u­la­tory rules that op­er­a­tors have the fi­nan­cial re­spon­si­bil­ity for en­sur­ing sat­is­fac­tory decom­mis­sion­ing which ac­counts for only about 10% of the £300 bil­lion of cap­i­tal in­vested in ex­plo­ration, ap­praisal and pro­duc­tion up to the end of 2010. Costs are sim­i­larly dwarfed by the £293bn paid in cor­po­rate taxes over the past 40 years.

The full po­ten­tial of oil and gas has yet to re­ally fea­ture in the referendum de­bate. In­stead, the fo­cus has been on how long it will last.

Es­tab­lish­ing a Scot­tish National Oil Com­pany, for ex­am­ple, is one op­tion for fun­da­men­tal change. Im­prov­ing the link be­tween ed­u­ca­tion and the in­dus­try would also be a big step for­ward, with per­haps ini­tia­tives to es­tab­lish off­shore ap­pren­tice­ships. En­vi­ron­men­tal groups could also be en­gaged in dis­cus­sion about how to man­age the process and pro­ceeds.

The in­dus­try has in­vested heav­ily on max­imis­ing re­cov­ery from some ex­ist- ing fields. But it is only hap­pen­ing in se­lect cases, as many op­er­a­tors can’t ac­cess the tech­nol­ogy and cap­i­tal re­quired. A National Oil Com­pany could act as an en­abler by pro­vid­ing fi­nan­cial sup­port for in­de­pen­dent op­er­a­tors.

It could be stip­u­lated in the li­cens­ing process that a com­pany won’t be al­lowed to start a de­vel­op­ment pro­gramme with­out de­tail­ing a strat­egy for max­imis­ing re­cov­ery. The Nor­we­gian li­cens­ing process has al­ready ad­vanced in this man­ner and it is no co­in­ci­dence that their National Oil Com­pany, Sta­toil, is con­sid­ered to be one of the world’s lead­ing com­pa­nies in en­hanced re­cov­ery tech­niques.

It isn’t too late for Scot­land. But if we leave the in­dus­try in the hands of the UK govern­ment there is a high risk that we’ll fail to use th­ese years of fi­nan­cial wealth to di­ver­sify our econ­omy suf­fi­ciently.

Scot­land’s so­ci­ety suf­fered badly when our heavy in­dus­tries were dis­man­tled un­der the UK govern­ment. Only a Yes vote next year will en­sure that we can en­hance our econ­omy to en­able a smooth tran­si­tion on the day that the oil does run out. The author, Stu­art Dar­ling, is Ser­vices Di­rec­tor for a lead­ing ser­vice and tech­nol­ogy provider to the seis­mic sur­vey in­dus­try. He is writ­ing in a per­sonal ca­pac­ity; the views ex­pressed are his own and do not nec­es­sar­ily shared by his com­pany.

Le­gal guide­lines make own­er­ship of oil and gas re­serves per­fectly clear, de­spite what politi­cians might say

Stu­art Dar­ling feels the in­dus­try’s po­ten­tial is be­ing un­der­sold

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.