UK paid Shell to keep North Sea oil flowing

In an unprecedented set of circumstances, The Times has reported that the UK government paid Royal Dutch Shell £86 million in a single year to keep their historic Brent fields – which are earmarked for decommissioning – pumping through the lull in the price of oil.  This isn’t exactly breaking news but such a devastating addition to the national debt should be much more widely reported in mainstream press, and certainly deserves analysis.

You see, what the UK government has somehow managed to achieve by introducing rebates for ageing oilfields is a situation whereby a global corporation, in a calendar year, has amassed $123 million dollars in rebates from the UK whilst making a profit from oil sold on the marketplace from those same fields, and in the same calender year announced the stepped decommissioning of the same fields.  Royal Dutch Shell, come forward and take a bow, because that is stunning.

On the other hand, such gross mismanagement of UK resources puts the UK government at the laughing stock end of the fiscal competence scale, as they brokered tax breaks to corporations to keep pumping oil, but NOT to guarantee reinvestment in exploration drilling should this exact situation arise.

Ponder this situation: The Brents continue to pump oil for the next 5 to 10 years, each year accumulating a very similar rebate.  By the point of decommissioning Shell will have potentially amassed $1 billion in rebates without lifting a drill-bit to have another look in the area.  Pockets of new oil abound in the North Sea, as Enquest’s late-life extension campaign, Maersk’s new Culzean project, Apache’s revitalisation of the Forties, and Nexen’s Scott, Buzzard, and Golden Eagle campaigns prove.  Even the good old Montrose is having a new bridge linked platform installed with a subsequent drilling campaign to follow.  The real problem is lack of impetus and considered government intervention.

The Montrose bridge-linked topsides leaving the fabrication yard.

And that puts into perspective the ills of what has been allowed to pan out with this Shell debacle.  One of the biggest corporations in the world just pocketed an awful lot of money, all above board, but has no obligation to re-invest in much needed exploration drilling when rig rates are low.

If the UK government would learn to treat the industry with the respect such a strategic asset deserves, and spent more time considering the long game rather than pretending that North Sea oil is a triviality and a burden on the people, then maybe 65,000 people would still be beavering away on all those rigs idled and stacked forlornly in the Cromarty Firth.

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Other connected articles:

North Sea Oil. The UK’s biggest blunder?

North Sea equilibrium, and the hidden winners.

Uk government makes an actual loss from North Sea oil. Wow.

So how DO you get a job offshore? It’s all in the contacts.


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