Two Years to Save North Sea Oil Industry, Say Experts
Published in Oil Industry News on Sunday, 20 November 2016
The North Sea oil industry has two years to fix a series of “fundamental” problems and save itself from a “rapid and premature decline”, experts have warned.
The sector has reached a “fork in the road” and the “window of opportunity for change is getting smaller”, according to a new report from PricewaterhouseCoopers (PwC).
Significant progress has been made on cutting costs, analysts said, but a lack of leadership, innovation, and pervasive red tape threatens the future of the industry.
A recent rise in the price of oil should not be seen as the solution to the long-term problems facing the North Sea, PwC cautioned.
About 120,000 oil and gas jobs are expected to be lost across the UK by the end of the year.
PwC reported: “As oil prices begin to recover, there is a sense that we are finally seeing light at the end of a very dark and long tunnel.
“However, while there may be a temptation to see a price recovery as the panacea to all ills, the reality is the North Sea still has to address a number of fundamental challenges.
“These range from a fragmented ownership base to endemic cost inefficiencies.
PwC said the government establishing clear support for decommissioning could make a “huge difference” to smaller operators, describing it as “the elephant in the room”.
A 25,000sq ft decommissioning yard is due to open in Dundee next year and plans are in place for a similar development at Nigg in Aberdeen.
PwC warned a lack of clarity over who is responsible for retiring North Sea assets – the larger oil firms which own them or the smaller companies which benefit from them – has stalled progress on decommissioning.
Despite these challenges, PwC concluded the North Sea is an “exciting prospect” with up to 30 billion barrels of oil potentially waiting to be extracted.
Responding to PwC’s report, which was published on Monday, Oil and Gas UK chief executive Deirdre Michie said: “Despite facing unprecedented challenges over the past few years the UK oil & gas industry has demonstrated drive and determination.
“Its efforts to make operations more efficient achieved the first increase in production in 15 years and a 45% drop in the cost of doing business this year.
“However, there is still much work to be done and this will require the joint efforts of industry, governments, the Treasury and the Oil and Gas Authority.”
We recently carried out a survey of our offshore members. Nearly 90% supported the Scottish or UK Governments taking a public stake in offshore companies to protect jobs and to secure investment.
Unite is to ask every MSP to support a motion by North East Scotland Labour MSP Lewis Macdonald to take that message direct to Holyrood. It’s already got cross-party support.
Here’s how you can help – write to your MSPs!
2. Once you’re on the Write to Them website, enter your postcode and click ‘Go’.
2. On the next page – click ‘Write to all your Regional MSPs’ on the right hand side of the page.
3. Ask your MSPs to support Motion S5M-02310. If you work offshore, tell them about any problems or difficulties that you’re experiencing in the industry. Tell them that the industry needs public investment for the future. Use your own words – but keep it short.
4. Fill in your contact details and then click ‘Preview and Send’ at the bottom.