Tuesday, 5 January 2016

Crisis? What Crisis? The SNP and Oil

Often there is manufactured outrage in politics, usually over some slip of the tongue or a policy U-turn.  Rarely though as a MSP made such a greater fool of himself that today, when SNP's Dennis Robertson stood up in parliament and said:

"The member just mentioned a crisis in the jobs in the North Sea and oil.
"There is no crisis. We have just actually extracted more oil than ever before in the North Sea.
"We have the most skilled workforce in the North Sea and it is booming."

Let's remain calm and see what Robertson was referring to.  It has been announced that North Sea oil production is due to rise for the first time since the late 1990s, as new field production came online in 2015.  Fair enough but this is after falls of about seventy percent in production figures in both oil and gas over the same time period.  So while any rise is welcome, it is hardly a boom as Mr Robertson describes.  http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/12016129/North-Sea-oil-and-gas-production-to-reverse-15-years-of-decline.html

As the Telegraph article goes to state and everybody in the industry already knows, the price per barrel of oil has crashed.

From a peak of $115.00 in 2014, the price at close yesterday was $36.29.  It will be news to Mr Dennis and perhaps other members of the SNP, but the recent Saudi domestic budget was based upon a projected price of $29.00 a barrel.  That may be pessimistic as the futures market are betting upon higher prices.  Even so, the current market is not expecting to see a return to $50.00 a barrel until December 2018.  http://www.barchart.com/commodityfutures/Crude_Oil_WTI_Futures/CL

Remember, the SNP were saying ahead of the referendum that Scotland would be fine on prices of $110.00.  Before the referendum, oil was the SNP's solution to every economic woe: its 'get-out-of-jail-free' card.  Now, apparently, oil is "just a bonus".   Oil is one card that the SNP can no longer play.

What does this all mean?  The price of oil has direct effect on whether a given field remains viable.  If the cost of further development exceeds the return made on the oil produced, that does not mean that the field will instantly close but rather oil will be continue to be extracted until the break-even point is reached, which includes the cost of decommissioning.  After that, the field will shut down and the infrastructure removed.
In September 2015, it was reported (http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11853279/Clock-ticking-for-North-Sea-oil-as-low-prices-threaten-closure-of-140-fields.html) that up to 140 fields in the North Sea are facing decommissioning over then next five years.  The article states that, according to analysts Wood MacKenzie, even if the price was to return to $85.00 a barrel that fifty existing fields would be shut down.  As we have seen already, oil prices are not expected to break $50.00 before 2019.  It must be therefore presumed that the bulk of the threatened oil fields in the North Sea will shut down over the next five years.

There will be jobs in decommissioning for sure.  What of now though?  Since 2014, the figure cited for job losses in the UK's oil and gas sector is 65,000.  I read a Telegraph report from October that gave a figure of 74,000 UK jobs.  More cuts to the industry are expected in 2016.
Traditionally oil people are a flexible bunch.  If there is no jobs at home, the answer is to go abroad.  Not this time.  For example, my speciality is seismic exploration.  In November 2015 I checked out the job sites of the of the world's largest companies in oil-field services: Schlumberger and Halliburton, putting in my speciality as key words and for countries, I put in all.  Between these two huge employers and in my area of expertise, there was one single job being advertised, globally.  This downturn is not about Scotland, it is worldwide but it is affecting us all.  Since 2014 I have been made redundant twice and currently I am not looking to regain employment in the oil sector.  Many tens of thousands of workers in this country are in the same position and goodness knows how many hundreds of thousands are affected globally.

Despite Mr Robertson's claim that the North Sea is "booming", it is clear that the entire industry is cutting back and will continue to do so for some time in the future, certainly over the next two to three years.

When challenged in Holyrood over this state of affairs, Nicola Sturgeon often refers to a government task force set up to tackle the situation.  I have often wondered what form this task force would take and how it would roll back the tsunami that is engulfing the industry.  I found it, finally, and of course in the face of massive challenges facing the industry, it is negligible: some tax breaks and £5000 for employers to take on new apprentices.  Welcome of course, but Sturgeon should be challenged on this in parliament rather than just referring to it as a side-swipe to avoid the question. http://angussnp.org/wp/snp-mps-will-make-support-for-oil-and-gas-sector-an-election-priority/  No practical help is being offered by the SNP government to people in my position.  No fuss is being made either: of course one can feel sorry for the several thousand steel workers who have lost their jobs in 2015 but when tens of thousands of jobs go in the oil industry, not a murmur from either the Tories or the SNP.

That is what makes Dennis Robertson MSP's comments so insulting, so out-of-touch.

We are not waving Nicola.  We're drowning.

No comments: