Is big oil yearning for re-nationalisation of the North Sea?

Capitalism can be a fantastic ideology to drive investment when business is booming, but when the dark clouds of a market downturn roll menacingly into town that same ideology can inflict damage to businesses and communities with lightning pace.

Look no further than recent headlines of an accumulation of 120,000 people being potentially affected come the end of 2016 by the trickle-down economics of offshore oil and gas production.  At the first sniff of an oil price storm brewing the operators of the UK’s oil and gas platforms such as BP, Shell, and Centrica, almost immediately stopped exploration for new fields by cancelling speculative projects.  Cue a monumental collapse of drilling and well completion activity, and a subsequent collapse of business activity for oil service companies that supply the complex equipment the operators would normally require to keep new oil reserve inventories topped up.

And don’t be fooled or misled into thinking that this collapse will be easily resolved, even if Brent crude miraculously returned to $100 per barrel tomorrow morning.  An awful lot of companies have been so badly bruised by this downturn that they are seriously understaffed, and many high-tech specialist product lines and their associated highly skilled workforces have been cut to the bone.

So now, if you will, put yourself in the expensive brogues of a UK North Sea oil company executive.  You’ve had a very bad year, and the forthcoming year is likely to involve more job cuts and attempts to cut your employee’s salaries.  But… you can’t really do that, because you’ve cut so fast and deep that all existing terms and conditions are at the bare minimum and flight of your best employees to other more stable industries or regions is a real concern.  In fact, you’ve also roughed up the oil service companies so badly that they are at the point that one more jab could leave you in a position whereby the very services and equipment you need – but don’t have – in an upturn won’t be available, manageable, or operable by experienced and skilled engineers and technicians.

That, ladies and gentlemen, is what extreme unregulated capitalism can do to itself, and the oil companies know it.

I’m not cheerleading for the BBC, but this article on the self flagellation of North Sea oil chiefs who have woken up to the ills of their pursuits and have realised the benefits that a nationalised oil overlord such as Statoil, Saudi Aramco, Qatar Petroleum, or Gazprom can offer is stupendously surprising.

The UK continental shelf offshore operations have effectively been left to rot in the hands of capitalism.  The enormous British Petroleum was foolishly privatised in the 1980’s, and the devolution of key infrastructure ownership to numerous private companies has led to this situation where companies are yearning for government direction and leadership to force themselves to co-operate and to be guided.

Indulge me again, and put yourself back in the softly polished brown Italian leathers of a CEO for another moment.  Is this yearning for direction, leadership, and consolidation of infrastructure – even re-nationalisation – arising because of a desire for better organisation, or is it because executives are smart enough to know that pure extreme capitalism left unchecked will always balance itself inversely?

Either way, good should be taken from their gesture to be slapped down and brought into line, because the reality is that oil companies don’t really want to leave the stability of the North Sea.  They just yearn for a big brother to keep them drilling during a downturn and for a father figure to blame for their rebellious affray.

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Related articles:

North Sea equilibrium, and the hidden winners.

North Sea Oil. The UK’s biggest blunder?

Offshore oil and gas installations: an introduction.

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