The paradigm that the UK media has adopted with regards to the UK North Sea as a viable and long-term hydrocarbon province typically ranges from a general impending doom all the way through to “the oil has run dry” joke journalism.
As a mature hydrocarbon province it’s easy for journalists to latch on to lazy and uninformative fear mongering and form that simplistic view, particularly if you’re reporting on the industry from an outside perspective with no working idea of the complexities of even the smallest projects being ground out offshore. After all, we’re talking about a nation with a media in tow that has self-proclaimed that they are perpetually running out of oil in ten years time since the 1970’s all to achieve internal political goals, not realising – or perhaps not caring about – the external own goals they are conceding as a consequence. This self conflict was laid bare in the aftermath of the Scottish independence referendum in 2014 when the UK government invested in an offshore seismic data acquisition study. The study itself is full of good intention, but when international industry executives and geo-scientists are fed negative media about the ‘diminishing resources’ of the North Sea over the course of a high profile event reported worldwide, scepticism over the worth of having a look at the data would be widespread.
Relinquishing all but a tiny part of a percent of offshore operations and infrastructure to the free market brought hard and fast investment, but the privatisation of British Petroleum in stages between 1979 and 1987 saw the UK incredibly relinquish control of a profitable state-run company that is now one of the world’s seven supermajors. Short term gain brings long-term pain as the saying goes, and that pain is what is now playing out right across the UK continental shelf.
The UK government has distanced itself so vehemently from the idea of becoming involved in speculative project and infrastructure buy-in, lest they be seen to upset those same companies such as BP, that even the mention of funding a few wildcat wells in unproven waters such as the enormous unexplored UK Atlantic Basin would be met with derision and mock from a media unprepared for what is destined to play out to save the industry from collapse. Had BP been retained as a 50/50 venture, arms could have been twisted and shoulders could have been tapped to get things mutely marching on through the downturn of 2016.
But the UK doesn’t have a Statoil or a Gazprom to dictate terms to by requesting exploration drilling in a brutal downturn at a time when rig rates are at their least expensive. No, the UK has to wait for the oil price to normalise and for the free market to regain investor confidence before large scale projects such as the Nexen Golden Eagle Project revisit British waters. The lag between ‘green lighting’ such a project and physical implementation can be years, so what the UK has inadvertently nurtured over a quarter of a century is a market that is salivating at the prospect of permanently decommissioning offshore platforms and infrastructure rather than a state / private sector partnership capable of long-game symbiosis.
As somebody who relies on the oil and gas industry to pay the household bills, it’s unnerving to see the government sitting on its collective hands to avoid any semblance of state ownership when clearly the best interests of the country are served from state / private sector partnership. To suggest otherwise is to deny common sense and deny the multiple examples of state stakes making countries very cash rich. The UK would have been vastly better off with BP’s annual £25 billion profit over 30 years than a steady tax take of a percentage of their earnings. I don’t have to justify that statement as the mathematics justify it undeniably, and mathematics are pure and untainted until politicized.
Three quarters of a trillion comes in very handy when you’re £1.5 trillion in debt.
So does North Sea Oil have a future? Of course it does. The BP Clair Ridge, Golden Eagle, Culzean, Buzzard, Forties, Claymore, Piper, Thistle, Auk, ETAP, Tiffany, Braes, Dunbar, Alwyn, and plenty more will pump away for many years to come. Couple that with global population expansion – the main driver of economic growth – and the oil price will rebalance for a time just before the cycle comes full circle, bringing new investment through need.
In a divergent timeline where the UK held on to it’s best assets and invested and guided them with a sprinkling of self-interested foresight, it could have been truly ready to capitalise on the next upturn rather than doing what the UK is reduced to: hoping its baseline strategic asset, the asset that drives everything, doesn’t collapse.