The gloom in the oil industry will eventually pass given future decommissioning work and an eventual rise in prices.
(Taken from the Orion Chairman's monthly column in the Press & Journal
So there is an estimated 16billion barrels of oil left in the UK continental shelf? Could be more? Either way at $60 a barrel that’s $960,000,000,000 worth or just short of a trillion dollars. Now if the price of a barrel went up to $100 then there could be $2trillion worth!
Then there’s the gas... oil and gas are finite commodities so based on fundamental economics the more that is extracted from the earth’s crust what’s left has to go up in price.
So taking the long-term pragmatic view things aren’t that bad. Recent history tells us that major fluctuations in the price of energy are commonplace through factors not directly connected to the products themselves, things like the seven days war for example.
However there are over 400,000 UK jobs related to the UK energy basin so its health has to be a major concern for the UK economy.
What we do know is that the oil and gas are difficult to extract from a complex geology and a hostile environment. The government has to act swiftly and decisively to lower the tax burdens.
“The offshore oil and gas industry is the most highly taxed business in the country. Fields developed since March 1993 are taxed at 62%, being liable for both corporation tax at 30% and a supplementary charge at 32% (before March 2011’s Budget, these three rates were 50%, 30% and 20% respectively)” - UKCS Fiscal Regime - Oil & Gas UK.
There is room to manoeuvre and I hope Mr Alexander can put as much pressure on Mr Osbourne as possible, after all he’s much bigger than him.
I know oil companies are having to drive costs down and this is meaning losses of jobs. I think most operators are deferring investment rather than abandonment.
There are still lots of jobs that need protecting and the UK Government has to stand up and be counted right now.
On a brighter note there is a huge decommissioning programme to be delivered which will create lots of jobs.
In a recent survey 74% of senior oil and gas figures prefer working with Scottish suppliers and a similar number believe Scotland is a training ground for the industry. 90% of respondents from the US endorsed the experience and expertise of Scottish employees and contractors – so what Orion has been doing for the last 28 years or so has finally been recognised by others!
Orion continues to sing the virtues of Scottish contractors and we are actively placing them on contracts throughout the world. Moreover we are networking with Scottish engineers and managers in senior positions throughout the world who are encouraging and assisting us to place the top-class engineers and managers that are being released from the UKCS.
Let’s not forget that there is a lot of growth in the rest of the UK economy and there will be migration into sectors like nuclear and pharmaceuticals.
For the record I am dead against the companies who are trying to bring everything “in-house”. The main protagonist (and he knows who he is) is stifling young entrepreneurs who now have little chance of creating businesses that could one day become an Orion.
Saving money in the short term must be balanced against the stimulation of a healthy and competitive supply chain. Some fat cats want all the cream and it’s bad for Scotland.
On a darker note my attempt at a triple Salchow whilst aquaplaning across a wet floor in Dubai in free hotel-issue flip flops met a sticky end. I broke my ankle. Hobbling for two days (it can’t be broke, you couldn’t hobble on it!) until I got back to Raigmore hospital where a more learned person, namely a doctor, decided I had fractured my fibula and wondered how I had managed to hobble all the way back.
What a fantastic team they are at Raigmore A&E. I was in, X-rayed and plastered within two hours, I can’t thank them enough. So now it’s crutches (and a wheelchair for the bigger jobs) for me for another month.