North Sea oil bosses call for political unity

A North Sea oil rig in the Miller Oilfield. Picture: submitted
A North Sea oil rig in the Miller Oilfield. Picture: submitted
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TOTAL spending by Britain’s oil and gas industry soared past the £20 billion barrier last year for the first time since black gold was discovered in the North Sea almost 50 years ago.

Capital investment alone in the drive to develop existing reserves and new discoveries reached £11.4bn in 2012.

And industry trade body Oil and Gas UK forecasts that capital investment will this year reach a record £13.5bn, as the development of a number of large offshore fields continues and spending on other smaller discoveries are fuelled by new field allowances.

However, the organisation’s annual economic report also reveals a worrying and continuing plunge in North Sea production after the industry was hit in 2011 by its biggest ever fall in output.

Yesterday, North Sea leaders called on both the Scottish and Westminster governments to join forces with the industry to address the production fall and appealed to both sides in the referendum debate to stop treating the industry as a “political football”.

However, both pro and anti independence politicians immediately seized on the new economic figures to back their referendum campaigns.

Tom Greatrex MP, Labour’s shadow energy minister, said: “Oil and gas are an important part of the Scottish economy, but being part of the UK means we are better placed to manage the volatility in tax revenue we get from the industry.

“A separate Scotland’s over reliance on such a volatile commodity would put our economy at risk. There are significant challenges for the North Sea ahead, and the importance of stability in fiscal and safety regimes cannot be overestimated.

“Scotland and the rest of the UK benefit from sharing energy resources, risks and rewards. There is no sense in putting this at risk.”

Energy and Climate Change Minister Greg Barker said: “These figures from Oil and Gas UK predict that 2013 will be a record year for North Sea investment and are further evidence the industry is in excellent health.”

He added: “The coalition government has been working with industry to create the right conditions that will ensure the North Sea continues to provide energy security, jobs and investment to the UK for many years to come, as part of a diverse, balanced energy economy.

“The report shows the positive impact the government’s fiscal policy has had on the UK Continental Shelf (UKCS).

“The UK government can afford to provide this support, even at the expense of short-term revenues, because of the size and diversity of the UK economy.”

But Maureen Watt, the SNP MSP, said the record investment in the North Sea flew in the face of the “negative picture of the industry that anti-independence politicians have tried to create”.

She said: “With the right handling, Scotland’s oil and gas industry can continue to thrive for many decades to come and the negativity with which the No campaign treats the sector has made it clear that this can only happen in an independent Scotland.”

John Swinney, the Scottish finance secretary, hailed the report as a “major vote of confidence for the industry”.

He said: “With up to 24 billion recoverable barrels with a potential wholesale value of £1.5 trillion, more than half of the resources in the North Sea, by value, still to be extracted, it is clear that the industry will make an important contribution to the Scottish economy for decades to come.”

But Malcolm Webb, the chief executive of Oil and Gas UK, told The Scotsman that the industry body’s stance on Scottish independence was one of “studied neutrality”.

He said: “What we are expecting both sides to do is not allow this very important industry for UK – no matter what the constitutional set up is – to be damaged by this process. To date I don’t think that has happened.

“But this industry is hugely important for the rest of Britain and for Scotland and I would prefer if it was not used as a political football in the debate.”

The economic report, he said, showed that the industry had “turned the corner” after a decade of uncertainty and volatility in the market place.

But it would require the co-operation of both the Scottish and UK governments to help the industry achieve its aim of recovering the estimated 24 billion barrels of oil and gas still to be won from the remaining undeveloped reserves in the UKCS – a prize for which an estimated total expenditure of £1tn will be needed.

Mr Webb said the renewed government and industry commitment to extract as much of the remaining oil and gas in the UKCS was likely to drive investment to an all-time record of £13.5bn this year.

He said: “The offshore oil and gas industry generates almost £40bn a year for the economy by producing oil and gas worth £32bn and by exporting oilfield technology and expertise worth £7bn.

“The recent sharpening of focus within government and industry on the business environment required to grow that contribution in future has given investors the confidence to develop new fields and redevelop older fields, so we are now seeing the highest-ever investment.

“This is heightening the business opportunities for the UK’s world-renowned supply chain and is boosting employment to 450,000 jobs across Britain.”

According to the report the record 19 per cent fall in production in 2011 was followed in 2012 by a production decline of 14.5 per cent to 567 million boe (barrels of oil equivalent) or 1.54 million boe per day.

North Sea production is now at its lowest level since 1977. Production problems on ten large fields accounted for 37 per cent of the production loss reduction.

Some large fields had lengthy maintenance shutdowns, but a gas leak at the Elgin field in the central North Sea in March led to the closure of seven platforms feeding into the Seal pipeline.

Oil and Gas UK’s updated forecast is for production to be in the range of 1.2 to 1.4 million boe for 2013 overall.

Turbines only able to generate enough to make a few cuppas

SCOTLAND’S long hot summer has left wind farms struggling to produce enough electricity to make more than a few cups of tea, it was claimed yesterday.

Output from wind farms dropped dramatically as warm, settled weather dominated the country over the summer. On 16 August the green energy masts in Bilbster, near Wick, could only muster up enough energy to boil about 180 kettles, according to figures from German power company RWE.

Wind farms in Wales fared even worse, with the Trysglwyn wind farm in Anglesey, which has an energy capacity of 5.6 megawatts, produced just 21 kettles worth of electricity (64 kilowatts) on the same day.

The Scottish Government has a goal of generating the equivalent of 50 per cent of the country’s electricity from renewable sources by 2015 and 100 per cent by 2020.

But critics called for a change of official government policy with fears of higher consumer prices and less energy as new figures have revealed output from wind farms changed dramatically day-to-day over the summer.

So far this month wind turbines have contributed 667MWh (megawatt hours) into the national grid, or 5.1 per cent of the total input.

Dr John Constable, director of the Renewable Energy Foundation, said the margin between generated and consumed electricity in the next few years will be “uncomfortably tight”.

UK Energy minister ‘blocks negative report’

A UK Government report on renewable energy and the rural economy is being blocked by the Energy Secretary, it has been claimed.

Ed Davey has blocked the report carried out by the Department for the Environment and Rural Affairs (Defra) over fears it could expose shortcomings in his department’s renewable energy strategy, according to newspaper reports.

The Daily Telegraph claims that Defra sources have revealed an internal battle of wills between Liberal Democrat Mr Davey and Conservative Environment Secretary Owen Paterson, who is known to be a wind-farm sceptic, regarding publication of the report.

The report states: “It is claimed that figures in the Decc (Department of Energy and Climate Change) are concerned that the report, which has not been completed, could include negative conclusions about how renewable energy affects the rural economy.”

Yesterday a government spokesman said: “We need to ensure that energy is generated in a way that is sustainable and understand the effects that different technologies have on the environment and on communities across the country.

“Decc and Defra are working together on this report, which is not yet complete, to ensure that it meets the usual standards and quality assurances that you would expect from any government publication.”

Shadow energy and climate change secretary Caroline Flint said of the row: “Government splits are undermining this key growth industry and putting Britain’s energy security at risk.”