Terry Murden: Rumours of North Sea’s demise greatly exaggerated

THOSE who predicted the early demise of the North Sea as an oil region are having to eat their words. Its death has clearly been exaggerated if plans announced yesterday are anything to go by.

Government approval for the £4.5 billion Clair Ridge project, the second phase of the giant Clair field to the west of Shetland, brings total investment by BP and its partners, Chevron, ConocoPhillips and Shell, to £10bn. The facilities will be in production for 40 years.

BP had been thought of as a want-away oil major, scaling back its involvement in the region as it sought more promising opportunities elsewhere, and prompting questions about the North Sea’s medium to long term future.

Instead, this is the latest in a sequence of investments in the area. BP and German firm RWE are investing £550 million in the Devenick gas field in the central North Sea while BP is pouring a further £3bn into the Schiehallion and Loyal fields.

Yesterday’s announcement is also a boost to the oil services companies which were concerned that a drift away by the majors would starve them of work. Wood Group is tipped to be among those to benefit.

The Clair Field was discovered in 1977, the early years of the North Sea’s development when some were predicting it would be exhausted as early as 2000. The implications of extending the life of the North Sea region well into the middle of this century should not be underestimated. Apart from the boost it gives to the cluster of supporting companies, it will also encourage innovation and technological development, provide work for a generation of oil workers and underpin the economy in the north of Scotland.

But there is also a message here for government ministers who choose to meddle in its progress with indiscreet taxation.

Some will argue that yesterday’s announcement proves the oil majors were crying wolf with their threats to scale back investment after the latest tax grab by the Treasury, but they need to tread carefully.

Companies will invest where there is a decent return and the high price of oil just now compensates for increased levies.

Lewis’s move does not mean end of M&B struggle

THE decision by the Bahamas-based billionaire Joe Lewis not to proceed with an offer for pubs group Mitchells & Butlers will calm things down after months of boardroom turmoil, but it won’t necessarily be the end of the ownership struggle.

Lewis, through his Piedmont vehicle, will remain an active shareholder but will not bid, probably because he knows he was trying to get the owner of the All Bar One chain on the cheap.

A putative £2.30-a-share cash offer was below suggestions that £3.50 would be closer to an acceptable price and was where the shares stood at the turn of the year.

Analysts are arguing that short-term weakness in the shares should not be a reason to sell and for all its problems they remain bullish about the business’s prospects. Some expect either a higher offer from Lewis or another suitor to emerge.

Young thrusting Scottish companies are a big draw depending on your point of view, the sale of promising Scottish health care companies this year has been a good or bad thing.

ProStrakan, the Borders drugs developer, was bought by Japanese company KHK and the acquisition of Dundee-based medical testing kit company Axis-Shield by New York firm Alere is all but complete.

Critics will view these developments as a lost opportunity to build home-grown champions, others as a recognition that Scotland is producing quality companies making desirable products and that new owners provide them with the resources to support their security and growth.

Yesterday shares in Optos, another small firm in the sector, were up as much as 20 per cent on the back of a positive trading update. There are no bidders circling that we know of but this is another gem of a company that must surely be attracting the attentions of the big players.