Leaders: North Sea needs investment not rhetoric

Today sees two Cabinet meetings in Aberdeen, two conflicting government declarations on energy policy and two sharply divergent opinions on the implications of Scottish independence.

Energy is the latest battleground in the battle between Alex Salmond and David Cameron. Picture: Contributed
Energy is the latest battleground in the battle between Alex Salmond and David Cameron. Picture: Contributed

Energy – and North Sea oil and gas investment and extraction in particular – are the latest battlegrounds in the intensifying battle between Scotland’s First Minister Alex Salmond and Prime Minister David Cameron.

The two Cabinets may be meeting in Aberdeen, and nearby Portlethen to be precise, but there is no meeting of minds. Mr Cameron argues that the strength of the UK’s broad-based economy can “make the difference” and that we should “continue to use the UK’s broad shoulders” to invest in the oil and gas industry to attract businesses, jobs and skills.

Mr Salmond says he is “talking so much hooey… All we have had from Westminster over the past 40 years is a change of oil minister every single year and a regular change in taxation regime, which has delayed some of the huge investments… Westminster’s track record has been abysmal, just as Norway’s has been excellent.”

Oil industry leaders can be excused a sense of resignation that oil politics is not only becoming increasingly confrontational but that it is also set to intensify. They would like to see positive, constructive specifics rather than exchanges of fiery rhetoric. Their immediate concerns on rising costs were highlighted by Centrica chief executive, Sam Laidlaw, last week when he warned that cost pressures were forcing the group to focus investment plans on Norway and in North America. He said Centrica would be investing £180 million per year less than it planned in UK waters.

It was a sharp reminder that, whoever is in charge after 18 September, attention should focus on the proper alignment of tax incentives with increasing costs and risks, rather than simply treating the North Sea oil industry as a convenient cash cow.

Meanwhile, anxieties over the disparate and disjointed system of regulation are set to dominate a major report this week from retired oil tycoon Sir Ian Wood into the future of the industry. His interim report recommended a new regulator to oversee the industry. Mr Salmond says the Scottish Government would create an Energy Department for Scotland if it secures independence. This will be welcomed by many.

But it begs the question, raised by Scottish Labour’s finance spokesman Iain Gray yesterday, as to why the SNP has not used the powers it already has to address the fragmentation across government – with different bodies dealing with consents, research, infrastructure and skills – rather than adding this to a lengthening list of referendum “Yes” vote goodies.

Thus, while the North Sea oil industry may feel it can only benefit from the ever more competitive wooing by Westminster and Holyrood, the downside is further delay, uncertainty and inaction until the referendum issue and its aftermath is resolved. By that time, further critical investment may be put on ice – or even, as is the case with Centrica – lost altogether.

Ukraine needs sympathetic handling

Ukraine’s dramatic dethronement of its president, Viktor Yanukovych after ferocious rioting and the deaths of 88 people is already one of the most epochal developments in central Europe since the end of the Second World War – and it is far from over.

The country is deeply divided. Ukraine’s future leadership and direction is not at all settled and appears more akin to a smoking volcano that has erupted with extraordinary violence. There is no clear coalescence around an alternative leader. And Russia, which has been the dominant force over the country’s history, has still to play its hand.

Hidden from view in the spectacular confrontation in the centre of Kiev is a chronic economic and financial crisis. Whoever is in charge will need to tackle pressing issues to secure continued Russian funding of the country’s debt – without this, a more widespread collapse is threatened.

And the EU needs to look critically at its mooted trade agreements with the country to ensure a fair balance of reciprocal benefits: the criticism at present is that it favours EU exports over Ukraine’s famously well-
endowed agricultural sector. In these circumstances, it is not just Russia but also the West that needs to proceed with great caution over the coming weeks.

The opposition forces in Ukraine are deeply divided, hatred of the now fleeing president masking profound differences in belief and ideology. Setting out a path to normalisation may hardly be the stuff of heroic martyrdom in the capital’s central square. But an early and sympathetic engagement is vital if Ukraine’s revolution is not to shatter the country and spark dangerous unrest across the entire region.