Leaders: Boosting North Sea oil is essential

Discoveries have got smaller and the cost of exploiting them has rocketed. Picture: Getty
Discoveries have got smaller and the cost of exploiting them has rocketed. Picture: Getty
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ANYONE who thinks that discovering an oilfield in the North Sea is a licence to print money should read Sir Ian Wood’s report on what needs to be done to ensure maximum production and think again.

The key problems confronting the industry are not the difficulties of operating in deep waters in harsh weather, but more human ones, of getting people to collaborate and dealing with the fact that much of the production infrastructure is well past its design life.

Among the issues Sir Ian sets out is that in the past two decades, the number of oilfields has grown from 90 to more than 300 today. The number of giant oil firms has dwindled, while the minnows have expanded enormously. Discoveries have got smaller and the cost of exploiting them has rocketed.

It means no production facility is a self-sufficient island; all have become interdependent through the linked use of pipelines and subsea equipment. But that infrastructure, through ageing, is becoming more expensive to keep working in a safe manner that does no harm to people or the environment. Better technology is not necessarily an answer either, because it is costly too.

Sir Ian, however, has answers. They entail companies working together more, for example on building infrastructure that can be used by other operators and by agreeing that other companies can use existing pipelines. What is stopping this kind of co-operation, he reckons, is inadequate regulation, particularly of the kind that has the power to arbitrate in disputes and knock heads together.

So he has called for a new regulator, with more people to handle the highly complex issues overstretching the 50 employed by UK Department of Energy and Climate Change and which should operate at arm’s length from ministers, much in the way that other industry regulators such as Ofgem do. It should also be financed by the industry.

It’s sensible-sounding stuff. Sir Ian’s plea is that his report should not become politicised. But when he argues that his recommendations could lead to production increasing from 20 billion to 24 billion barrels over the next 20 years and future North Sea production is a, perhaps the, key feature in the independence campaign, his hope looks forlorn.

Nevertheless, and irrespective of the referendum outcome, enhancing North Sea output is an essential part of economic recovery. The investment required to reach that higher target is probably as important to the economy as are the tax revenues that may flow from it.

Ministers of both governments therefore have more to gain from it than by point-scoring over such things as whether it makes an independence oil fund more viable or not. This report is not just about barrels of oil, it is about thousands of well-paid jobs. That’s what ministers need to concentrate on, because that is mostly the voters’ priority too.

Major is tilting at windmills

SIR John Major, prime minister between 1990 and 1997, was the son of a music hall performer turned garden gnome maker, who left school with three O-levels and rose to the highest office in the land. Now, he says he is shocked that there are not more people with his kind of background in public life.

The upper echelons of power, he says, are still largely the preserve of the privately-educated upper middle classes, richer people in other words. For this state of affairs, he blames the last Labour government.

This is distinctly odd stuff. What on earth does he mean that Messrs Blair (privately-educated) and Brown (state school) should have done? Surely he cannot mean that as a Conservative, he would have applauded if they had abolished private schools? Or introduced quotas for the number of privately-educated members of the Cabinet?

Private schools are not short of critics. Some are being investigated to see if they are doing enough to recruit children from disadvantaged backgrounds, a job required of them to justify the perk of charitable status. But the fact remains that they do play a role in producing people peculiarly well-equipped to reach high positions in public life.

It is regrettable that too many of these relatively few elite people have little experience of life’s harsher realities, but abolishing these high-flying pathways would do little to improve the chances of the many. The challenge for governments is to make these opportunities more widely available than they are now.

It can be done; after all, half of our prime ministers over the past two decades have come from the state-school educated lower middle classes.