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Saturday, 13 May 2017

If Scotland had it's time back...

If you've ever had a conversation with someone who's political mind wasn't quite made up, you might have had a conversation, like I do most days, where Scotland's present & future prospects are often viewed through the prism of missed opportunities.

"look at the state of the UK's debt. £4.8 trillion! How did we ever manage to get diddled this badly?"

"Aye, I know, it's a scandal."

"How can a country that has had Oil & Gas to sell for the last 40 years be in debt!?"

"Squandered it, Obviously."

"Look at Norway, £500bn in the bank and rising! Why couldn't we have done that?"

"60 million people in the UK is a lot more than 5 million in Norway though"

"True, but 98% of the oil is in Scotland, isn't it? That's 5 million, no? Practically the same"

"Aye, I suppose it is. Och, buts it's too late now, if Scotland was going to be independent, it should have done it 30 years ago. There's no point now, it's almost all gone" 

Let me tell you, as someone who's worked offshore for the last 20 years, that's not a conversation I had just last week or even last year. That conversation, or  analogues of it have been repeated many, many times over the last 20 years or so, back when I first started my career in the late 90's.

It's hard to convince someone who doesn't understand the dynamic of oil & gas of the nature of oil reserves depleting, but simultaneously being found. They usually hear "Oil production / Revenue decline" and assume, wrongly, that it's running out. For a long time, I waited for the dreaded announcement, that the end had come, the oil rigs were going to get decommissioned & that was going to be that for North Sea oil. But it never came. It's still not came. Sure, the Brent Delta made the headlines as the Pioneering Spirit effortlessly hauled it away to Hartlepool, but by and large, the doors are still open (platforms still producing) & the customers are still coming.(Pipelines still pumping)

I would eventually realise that like any business, oil companies wait for the right time to produce reserves they haven't yet tapped. Sometimes it involves the Government offering a Tax incentive, other times it involves carried-wells, farm-ins or joint licenses. And every so often, it occurs because new infrastructure is built to make it cost-effective.

The UK's Oil & Gas sector is at its busiest nearest to the existing pipeline networks, Forties, Flotta, Sullum Voe, SAGE, CATS, Norpipe, this list isn't exhaustive & to labour my point, I'll provide a map showing UKCS oil & Gas infrastructure.

That there are lots of fields in close proximity to the existing pipeline infrastructure isn't a coincidence, Oil & Gas reservoirs found closer to existing pipeline facilities cost less to develop & get to market. Those further afield requiring larger investment are riskier propositions and sometimes need even bigger proven reserves to justify building the infrastructure.

This complex network of platforms, risers & pipelines has taken over 4 decades and billions of pounds to build and at the present moment, still produces significant volumes of oil & gas. If left to their own devices, these platforms would and indeed eventually will be decommissioned but its in no-ones interest, neither the Companies that operate them, nor the government of the day to see that happen sooner than it needs to.

I started this post with the intention of addressing an oft repeated anecdote about Scotland missing the boat when it came to Oil & Gas. Yes, Norway has done well, Yes, we SHOULD have done the same, we didn't and it's a source of bitter disappointment to many, even those who voted no in 2014.

We can surely all agree, however, that in the 1970's, Scotland & Norway were in almost identical positions. Skilled & educated populations of some 5m people, vast mineral wealth waiting to be tapped, it's hard to argue that wasn't the case & I doubt many would.

If you were however to argue that none of that matters now, that Scotland had it's chance in 1979 & blew it, that the halcyon days of the North Sea are gone or going, I would have to sadly, agree with you.

But what if Scotland was given a Second chance? What if Scotland had it's time back?

I'm not talking about travelling back in time to un-rig the 1979 referendum, I'm talking about the Atlantic basin,

Over the last year, a remarkably large reservoir of oil was found West of Shetland by the company Hurricane Oil. This in itself is great news for the oil industry, but what it means for Scotland is a genuine second chance at putting the wealth of our country to better use than it has for the last 40 years. 

Hurricanes finds can be likened to the Forties find by BP in 1970. It was the building and establishment of the pipeline infrastructure in 1975 that subsequently allowed other companies such as Philips, Conoco, Chevron, Shell, HESS, Amoco, BG & lots more to explore & develop the other licensed oil & gas fields in the North Sea. The rest as they say is history - record volumes of oil & gas flowed ashore, producing billions upon billions of pounds in not just oil revenue, but ancillary revenue such as income tax, VAT & everything else that a booming economy brings.

As a mature Oil & Gas province, the advent of building a brand new oil & gas network will be a trite challenge. We have the skills, the people, the know how and the benefit of hindsight whereas 40 years ago we had to rely on  American skill & labour to get much of it underway. Its widely acknowledged that many oil & gas majors are viewing Hurricane with great interest, given how transformational to the North Sea Industry their finds appear to be. As history as shown with BP's success with the Forties, establishing infrastructure early nets you a usage tariff that you benefit from for the life of the pipeline.

In reality though, it won't be the Oil Industry asked to reflect on what they've learned looking back at the last 40 years. That question is better off being asked of Scotland itself.

Tuesday, 28 February 2017

My response to THAT Guardian Article

By right of reply to @claireshrugged 's article in the Guardian here

I've addressed my issues with it and offered my own thoughts in red.

Sadiq Khan was not wrong to compare Scottish nationalism to racism or religious intolerance (didn’t compare – he said there was NO DIFFERENCE) – at least, not entirely. Someone has to say it: the parallels are clear. There is an obvious overlap between nationalism and racism (Not a single person is arguing there isn’t – but that constitutes “A DIFFERENCE”): both mentalities are defined by a politics of us and them (Not true in the case of Civic Nationalism, but carry on…). Equating racism with Scottish nationalism is a massive false equivalence (Understatement), yet both perspectives are reliant on a clear distinction being made between those who belong and those who are rejected on the basis of difference. (Who doesn’t belong? How is this illustrated? Examples, please)

In the Daily Record, Khan claimed that nationalism is effectively the same (Said they were exactly the same, no room for error) as “trying to divide us on the basis of background, race or religion”. Predictably, SNP politicians and supporters alike (Many people who voted Yes in 2014 were not SNP voters, many people who disputed his claim came from more parties than the SNP) were outraged. How dare anyone question their vision of a progressive Scotland? (Nobody was outraged at him questioning a vision, they were enraged that their political beliefs were being directly equated to racism) But in their rush to condemn a Londoner (No one condemned him on the basis of him being from London, only in being absolutely wrong) – the mayor of all Londoners, no less (This is relevant, how?) – for his, in Nicola Sturgeon’s words, “spectacularly ill-judged” comments, nationalists missed an opportunity to recognise a degree of truth in Khan’s comments. (There’s a degree of truth that anyone who supports independence is no different to a racist? Those were his comments)

The SNP (You’ve mentioned the SNP twice now) is fond of talking about “a fairer Scotland(many Yes supporting groups not affiliate with the SNP share this ideal), playing on the popular notion that Scotland is by nature more egalitarian than England (Not everyone who wants independence says it IS – But everyone who does want independence says they want it to be). But this raises one unavoidable question: fairer than what?  England, of course. (Scots who voted yes in 2014 didn’t live in England. I think you mean fairer than the Scotland that exists as part of the UK)

In order to valourise Scotland, to present it as some sort of progressive utopia, nationalists must emphasise the difference between Scotland and our southern neighbour. (No, they need to demonstrate that outside of the UK we can have the freedom to effect meaningful change that we can’t do at present) The mythos of Scotland as a friendly, compassionate country is maintained with fervour – like any other fairytale, it needs heroes and villains. And Scottish exceptionalism – the idea of Scotland as a land of tolerance – is a fairytale. It is what allows Scotland to hold England accountable for all the wrongs of imperial expansion while denying this country’s own colonial legacy.(OK. What has this got to do with Supporting Independence being the same as racism?)

Before hosting the Commonwealth Games in 2014, “people make Glasgow” was announced as the city’s new slogan – a celebration of Glasgow’s reputation for friendliness. Yet there is a rift between Glasgow’s public image and history that remains unaddressed: the people who made Glasgow were 18th-century merchants who grew rich on the back of the slave trade. The wealth that built Glasgow came from the enslavement of black people. These atrocities are buried so that the legend of “a fairer Scotland” can survive. (OK. What has this got to do with Sadiq Khans speech?)

The 2014 independence referendumwas a time of unprecedented political engagement, but also extreme social tension (Define extreme tension– Northern Ireland Troubles tension or X-factor final tension?). Friendships cracked under the strain of differing opinions, and the inevitability of the referendum being brought up at family gatherings created a special sort of dread. Some remember this as a time of optimism. For me, in the lead-up to the vote, as discourse soured, it was a time of worry provoked by national discord. The relentlessness of nationalists’ need to distance Scotland from the rest of the UK (Not England? You said England earlier…) on the grounds that we were not like them filled me with anything but hope. The message of difference, that it must lead to separation, forced me to question how people of colour and migrants fitted into their idea of Scottish society at a time when purism governed understanding of Scottish identity and belonging. (And your insight is both commendable & welcome. But what has this got to do with Sadiq’s Speech equating Racists with Independence Supporters?)

Scottish nationalism in its present state rests on a fundamental contradiction: seeking separation from the United Kingdom, and unity within the European Union. (Technically, Scotlands sovereignty is ultimately tied to Englands voting record. Look at Trident. The EU wouldn’t force the UK to house nukes against its will, important distinctions on the unity you discuss)  If the first minister is to call a second referendum, as Theresa May reportedly fears, she must address why Scotland aims to build new political ties while actively dismantling our longest and most stable relationship (That is 300 years old & hasn’t changed its shape or form in that time – lot has happened since then, you know.) with another country. There is a hermetic streak to Scottish nationalism, small and inward-looking despite the SNP’s talk of a global Scotland, that persists beyond reason. (Hermetic yet small... that sounds like "room for error" and not independence supporters being no different from racists - as Khan said.)

This showed this weekend: a disproportionate amount of nationalist outrage towards Khan came from white SNP supporters. There was a lot of “How dare you call us racist?” and very little reflection on the possibility that Scottish nationalism could actually contain racism. (OK, but that’s not what Khan said. He never said “could contain” – he said NO DIFFERENCE) As is often the case, talking about racism became more controversial than racism in itself. Indeed, many nationalists are so deeply invested in the narrative of Scottish exceptionalism that they are unwilling to have a frank conversation about racism in Scottish society. (Not true. We confront it as best we can. It exists in all walks of political life, too – not least in parties most affiliated with British Unionism – UKIP, BNP, EDL, SDL, Pegida etc – but again – this is NOT what Khan said in his speech)

And Scottish exceptionalism is buoyed by white progressives even when they are not Scottish nationalists. Trade unionist Clare Hepworth tweeted that: “I have MANY SNP followers & friends. I have NEVER heard or read a racist comment from any of them!”

Hepworth’s approach brings to mind the old “tree falling in a deserted forest” puzzle – if racism occurs and another white person isn’t around to hear it, has racism still happened? (Yes, but this isn’t what Khan was saying in his speech) Comments such as Hepworth’s only make it harder for people of colour to come forward about the discrimination we face, increasing the risk of us being disbelieved when we do speak out. (I think this article has done more to increase that risk) Making racism invisible does not help those of us who experience it. (Nobody is trying to make racism invisible or deny it exists. This was also NOT WHAT KHAN SAID) If you argue there is no racism at all (Nobody has), it shuts down the need to talk about it. (So does accusing people of whitesplaining when they respond to accusations that they are no different from racists)  But if we don’t talk about racism then the status quo – in which white graduates are more than twice as likely to be hired as black, Asian and minority ethnic graduates in Britain – goes unchallenged. (OK, what has this to do with Khan’s speech?)

White SNP supporters and allies have never been subject to racism. (An outright untruth. Andy Murray received dogs abuse from English people for tweeting he supported independence - he gets it when he wins SPOTY awards too, bizarrely) Khan, a second-generation Pakistani immigrant, has. And so there is a certain irony to white people with progressive politics rubbishing what an Asian man has to say about racism. (Being PoC makes you the only true authority on what racism is? That seems… racist.) Khan knows first-hand how racism works. In the run-up to the mayoral election, his opponent Zac Goldsmith and then-prime minister David Cameron both suggested that London would be unsafe in his hands, playing on Islamophobia in an effort to discredit him. (OK, what has this got to do with…)

With this knowledge, Khan judged it appropriate to draw a comparison between nationalism and prejudice (Wasn’t a comparison – it was a direct equivalence with none of the “room for error” your piece has relied so heavily on) in order to highlight the risk carried by the politics of division. For that I will not condemn him, just as I will not condemn those people of colour who criticise him. Yet, as a black Scottish woman, I, too, fear the politics of division. Zeal for national identity invariably raises questions of who belongs and who is an outsider – even “civic-minded” Scottish nationalism needs a “them” to create a cohesive idea of “us”. (The “them” is us – it’s the people (of all colours) who live their lives in the current political settlement in Scotland. The "us" is an aspiration to what we could be if we were given the chance - glad I could clear that up for you)

Sunday, 3 July 2016

Will Project Fear II work again?

In trying to make sense of where Scotland stands with the #Brexit issue I've found myself revisiting a lot of the old arguments from 2 years ago. It seems to me, that the premise of #indyref has now been utterly flipped on its head & a lot of the central pillars of the #BetterTogether campaign simply don't exist anymore. Lets take a look at them;

1. Scotland will be out of the EU if it votes to leave the UK

This is self-explanatory, we now face the prospect of being taken out of Europe by the majority of people in England voting to leave. If staying in the EU was a strong reason for people to vote no in 2014 - it's now an even bigger reason for people to vote yes in any future referendum.

2. There will need to be a border between England and Scotland.

Already we have Westminster  & Irish politicians dismissing the very notion that #Brexit will require construction of a hard-border between Northern Ireland and The Republic. If they see no reason for a border in that instance, it becomes highly hypocritical to insist that Scotland leaving the UK to remain in the EU would require a similar type of Border. The practicalities of preventing migration into England is the lookout of the very people who WANT to implement a hard border (namely racists and UKIP politicians) & they risk ridicule & scorn if they don't apply their logic equally across home nations.

3. AAA credit rating

The UK has lost its much vaunted "credit rating" after making the disastrous decision to leave the EU. This has now become an embarrasing irony & won't make a feature in any future referendum.

There are of course NEW arguments against Scotland leaving the UK to stay in the EU some of these are below;

4. What will Scotland's Currency be

Forgetting the fact that Mervyn King, the former Governer of the Bank of England said a currency union was "perfectly feasible" and it was just the childish machinations of the Unionists that poo-poo'd it

The ERM2 mechanism that formally enrolls a candidate nation for adoption of the Euro is entirely voluntary, indeed Sweden has avoided using the Euro by simply not choosing to enroll in ERM2. It has been confirmed that Scotland can do the same. Therefore, the Euro will not be forced on Scotland, neither will we be rejected because we don't adopt a voluntary exchange mechanism. Instead I see a Scottish pound being used, much like the Norwegian, Danish & Swedish Crown.

5. Scotland will lose 60% of trade with England if it leaves the EU.

Now this is interesting and the first proper "scare tactic" of what I assume will be the new "better together" campaign. Lets consider that for a moment. The rUK have promised that they will negotiate access to the EU single market during the 2 year intevention triggered by article 50. If Scotland votes to remain/stay/join the EU - then how can it possibly "not trade" with England? The only way England & Scotland couldn't trade in that instance would be if England CHOSE not to trade, i.e. enforced an embargo. They'd embargo an EU member country. Yes, I can see that trade relationship lasting.

6. Scotland won't get into Europe

Now this is where it gets laughable. Activists and politicians who were Pro-EU and warned of the calamity Brexit would bring will be FORCED to argue that Scotland won't get EU membership. They would rather completely about-face on their "Love" for the EU and insist that the EU wouldn't want us, that we're too wee, too poor, too stupid to be any use to the EU. Except we are. We already are in the EU & we more than pay our own way in terms of economic, social & cultural contributions. How many world class universities host EU students in Scotland? How many talented researchers in the field of biotechnology & medicine does Scotland host on a permanant basis? How much employment & wealth has the burgeoning North Sea oil & gas industry provided the European Community in the last 40 years? How many livelihoods of European fishermen have depended on unhindered access to the best fishing grounds in Europe which are located in Scotlands geographical waters? Yes, we pay our way and then some, We know it & the EU know it - continued membership upon a Yes is practically guaranteed.

So thats pretty much how I see the new #BetterTogether campaign going, but shouldn't we also be asking them some questions of our own? How about;

1. Brexit will cause the last 40 years of international treaties & trade agreements we've accrued within the EU to cease to exist - how do you plan on negotiating new treaties with every nation & trading bloc in the world within 2 years when you were already warned that it would take you 10 years to get an audience with the largest economies in the world?

2. Where do you plan on cutting spending / increasing taxes to shore up the £280bn per year that #Brexit is estimated take out of our economy.

3. How is it possible, that before Brexit you (Pro-EU Unionists of whichever political hue) said that the UK leaving the EU would be disastrous for our economy & a monumental mistake, yet NOW you insist that Scotland following the rUK out of the door is our best option?

If the answer to question 3 is that there has a been a fundamental change to the material circumstances of the UK - it's only polite to point out that the Scottish government were elected with a mandate to hold a 2nd independence referendum precisely on the criteria they have specified.

They therefore have NO reason to oppose a second referendum, but they are not off the hook.

They STILL need to explain why Scotland would be better off facing a £280bn black hole in its economy, a drop of 6% in GDP over the next 10 years, immediate restrictions in living, travelling & studying for its citizens & 40 years worth of complex trade & international legislation with the whole world to negotiate & re-draft.

I care about the good people of England & Wales - I truly do. I wish the majority of them had never voted for #Brexit & as a soft lefty, I believe in the concept of solidarity, but let me finish with this.

Solidarity with economic incompetence is not solidarity, it is financial suicide. By staying with the UK on the path it has chosen, we give up any pretense of being a country & consign ourselves to live with the decisions England makes forever.

Sunday, 26 June 2016

Follow the Money

My first blog since the end of the #indyref campaign where I wrote in support of a #Yes vote – recent events have encouraged my return to the fold of Scottish politics and in this piece I hope to shed light on why a low oil price doesn’t automatically make Scotland an economic basket case.

When someone discusses “Oil Revenues” what is the first thing that enters your head? Is it;

1.       The Tax levied per barrel of oil produced?
2.       The Tax levied on the profit an oil company makes?
3.       The corporation tax of an oil company?

This isn’t a trick question, but in order for you to understand, “Oil Revenue” we need to make something abundantly clear – there is a complex system of taxation that masks both the true value of oil & gas and the extent of its influence on our economy.

This is essentially the closest you will get to option 1. It is a levy on the profit of oil and gas extraction charged at between 30 - 20% and is usually lumped in with corporation tax.

Petroleum Revenue Tax
Petroleum revenue tax is option 2. It another additional Levy  on the profit specifically arising from the extraction of hydrocarbons on the United Kingdom Continental Shelf (UKCS) It only applies to fields that were licensed & approved prior to March 1993 – meaning that newer developments are NOT subject to this charge. With this in mind, it is unsurprising then that “PRT” revenues are falling, as the fields developed prior to 1993 are all very near their end of field life. (The rate of pre-1993 PRT was reduced from 75% at inception to 50% after 1993) PRT was re-introduced on a case-by case basis, after tax-allowances at a rate of 35%

This is a special form of taxation that prevents oil companies from offsetting losses elsewhere in their business against an over performing asset.  It applies only to Oil & Gas companies. Corporation tax is universal across the UK at 20%.

Now in anyones mind, that is a LOT of tax for oil companies to burden, but it is the price of doing business & many companies do still generate profit, when the oil they sell is priced high enough. It is conversely true that only when oil companies are making big profits, that the UK exchequer does too – this is important, because this what the media mean when they say “oil and gas revenues” are down, declining, diminished, waning, etc etc – BUT – it is not the whole story.

There are many companies, who support the oil & gas industry in myriad ways - but are not included in the figures for “Oil & Gas” because they are not directly profiting from the extraction of Oil & Gas nor are they subject to the taxes I’ve outlined. Does that make the income generated by these companies any less dependent on the Oil & Gas Industry? NO! Are their profits subject to the price of oil? Partially, but so long as the industry continues to operate, these companies still turn-over vast sums of money which contribute significantly to the economy of the UK.

 Let me give you some examples. Emerson, Siemens, Honywell, ABB,  Schlumberger, Halliburton, Baker Hughes, Weatherford, Oceaneering, Wood Group PSN, Enermech, Scotoil, Asco,  Petrofac, Aramark, ESS, Stork, Amec Foster Wheeler, SubSea7, Bibby offshore, Siepem, Sodexo, Capita, Bond, Bristows, CHC Scotia, Odjfell Drilling, Dolphin Drilling, Diamond Drilling, Noble Drilling, Intertek, SGS, IKM, Tyco, Falck Nutec, Survivex, Sikorsky, AirBus Helicopters,  Hilton Hotels, Marriot Hotels, Travelodge, Best Western, Holiday Inn, British Airways, Eastern Airways, Easyjet, Scotrail

The list is literally endless & the point I’m trying to make is that the vast sums of income tax, national insurance, VAT, Fuel Duty etc generated in support of the oil & gas industry, despite being generated in Scotland – is deemed “British” revenue by virtue that nearly 95% of companies that actively support oil & gas are tax-registered in England. At the moment, revenue from income tax & NI is based on “sampling” across the UK & by population share, which is a ludicrously simplistic & inaccurate method given the disparity of the wealth generated in Scotland and the tax ultimately attributed here.

If you work in Scotland, but your payroll department issues your payslip from a tax-registered office outside of Scotland, the tax you pay is not deemed Scottish, but British. In the instance where Scotland took complete control of its economy, there is a colossal slice of British Tax Revenue that would become exclusively Scottish & over the last 4 years the British establishment & media has worked hard to ignore / disguise that very fact.

What I’ve outlined above doesn’t just apply to the Oil & Gas industry; it applies right-across the UK in every town and city. The ramifications of correctly-allocating the tax revenues of companies that primarily do business in Scotland or within Scotland’s waters is profound & can’t be ignored when considering if Scotland should stay in the EU as an independent country.

Sunday, 25 May 2014

Is Scotlands oil running out? Depends who you ask.

Regardless of how you perceive the relevance of oil & gas as energy sources in a world where carbon emissions NEED to be reduced, sulfur & nitrogen oxides NEED to be avoided or lead and mercury particulate NEED to be eradicated - you will, at the end of this blog accept that oil & gas will NEED to be exploited virulently over the next 50 to 100 years if human civilization is to conduct its affairs peacefully. The insatiable hunger for human expansion & growth demands it.

Oil & Gas aren't just burned to produce heat in our boilers or to generate steam to drive electrical prime movers, they are used unavoidably in the production of plastics & polymers, circuitry, electronics, computer hardware, packaging and a lot more in between. Hydrocarbons are indispensable to our way of life & the sooner this is accepted, the better.

Now, before you get up off your high horse and shout me down, understand one thing - I abhor any form of waste - energy used is energy saved and in terms efficacy equals morality, I'm prepared to be judged on how my take on Scotland's energy future pans out. For you to get the best out of this blog entry, I've divided it into categories as so:

1. How much UK Oil & Gas is left? (In established, Proven Reserves)
2. How much of Scotland's Share of the North Sea has been explored? (In geographic terms as per 2014)
3. What is an R/P Ratio and how does it affect Scotland becoming independent?
4. How much value is Scotland's share of proven reserves to the UK?
5. Will Scotland have a surplus of energy and if so, what can it do with it?

Section 1

Proven Reserves

The UKCS (United Kingdom Continental Shelf) First existed when Norway, BRITAIN, Denmark, Germany & The Netherlands agreed to what is now known as the MEDIAN LINE. The Median line was agreed by these 5 European member states long before Scotland was given any voice in discussions over the fishing, oil or mineral rights in the north sea. It is important that you recognise this fact as it will also allow you to understand how this median line was changed in 1999 by the UK without the consent of either Scotland or the other 5 countries who initially agreed it. This raises questions over whether the rUK can ever lay claim to the marine area it annexed under the 1999 Scotland Act.

The median line - or Exclusive Economic Zones (EEZs) agreed by North Sea Constituents

On the Subject of PROVEN reserves, as of 2009, the UK was home to some 0.2% of the worlds reserves of crude oil (400,000,000 tonnes) - This figure however, only remains true if no further exploration or drilling activity takes place (which from 2009, it already has - at an ACCELERATED rate)

In addition to this, it should be noted, that the portion of the North Sea exploitable by the UKCS has only seen marginal investment - and usually to the extremities of the EEZ and for reasons once explanation, will be remarkably obvious.

North Sea Oil & Gas Fields Developed around Median line

There are only two reasons for the oil and gas in the North Sea to be primarily exploited from adjacent-to or near the median line in all instances across all 5 "member states". The first one relates to cost sharing where a field can be established in both member countries interests (production cost splitting or tax revenue sharing). And the Second is the fear that the Median Line might one day be revised. If you exploit the border area of your neighboring country prior to any treaty amendment, you are not required to "reimburse" any profits you may have made while exploiting said area. Through the prism of any country that existed only 20 years after the outbreak of WW2, its easy to understand how such a protectionist mentality took hold - and as such, the government of 40 years ago established what we now know as the UKCS Oil & Gas network of the UK.

Maps of the UKCS Oil & Gas Network

2. How much of Scotland's Share of the North Sea has been explored?

This is a relatively straightforward matter of establishing which blocks the UK Govt has allowed drilling and production activity to take place. This is made so much easier when you consider that the UK has done all the work for us via the DECC - for expediences sake, LESS THAN 2% OF SCOTLANDS SHARE OF THE UKCS HAS BEEN EXPLORED OR LICENSED FOR PRODUCTION

Map showing the exploited areas of the Scottish Area UKCS Oil & Gas Map

Now, one might ask WHY the UK feel they need to exploit Oil reserves in Scotland over any in say, England? The answer is two-fold. Firstly, England has very little Oil, Secondly, remember the point about the Median line exploitation? Scotland was never guaranteed to remain a mainstay of the UKCS - so exploiting its mineral reserves ASAP makes a huge amount of sense - even if it's highly likely that you're imminently going to lose control of it.

The fact that only approximately 2% has been explored is significant - there may yet be trillions more barrels in the north sea, or west of Shetland which is technically the Atlantic. Aggressive expansion is ongoing but the time in which this can be achieved is very short. It's estimated that at the rate the UK consumes our geographical resources, the point of no return is 5 years. in response to this, the UK established project pathfinder - a weak attempt to stoke interest in using the existing infrastructure to exploit new fields and developments before the fiscal viability of it disappears entirely.

3. What is an R/P Ratio and how does it affect Scotland becoming independent?

An R/P Ratio is a term used by economists to "loosely" estimate the rate of a countries stored reserves of a given material against how aggressively that material is used or "produced" - I should note this does not mean "exhausted" but in either sense, I will demonstrate how Scotland fares better without the rest of the UK.

Datatable of World Production Figures (BP, 2009)

Crude oil reserves in the UK is estimated to be 400,000,000 tonnes versus a production ratio of 68,000,000 tonnes, This means that IN THE UK - OIL WILL RUN OUT IN 6 YEARS. (The source of many scare stories, I'm sure)

Taking Scotland's share of UKCS oil into account, the following is true (Via population share)

394,400,000 tonnes (98.6% of UKCS)
5,712,000 tonnes (8.4 % of UK Population)


None of this takes into consideration that Scotland already generates nearly 50% of its current energy requirements from renewable sources or that by 2030 80% of our total demand will be met solely by renewable energy. As I said before, I abhor waste and in an independent Scotland you can be sure that further steps such as adoption of CHP & AD systems would be forcefully encouraged.

4. How much value is Scotland's share of proven reserves to the UK?

This isn't hard to answer, but what is, is the term "value". Speaking with the current infrastructure with the current tax regime, 400,000,000 barrels for the next 6 years would be worth nearly nothing to the UK, because the UK imports more energy in the form of hydrocarbons than they produce as a whole and only derive value on the taxation applied to the oil exploited by private companies - this rounds to anaverage of a palty £7bn a year - given that tax deals are struck on a case-by-case basis and have recently endured some of the most regressive taxation on record at the behest of George Osbourne

Scotland, on the other hand could look to where the real value in oil & gas lies, within it's supply chain and the ancillary economy. Making it a requirement for all north sea firms to register thier companies in Scotland would be a start, but what if you went further and outlawed the off-shoring of NI contributions from the Isle of Man and Guernsey? What if you closed the loop-holes allowing companies to readily shift capital around foreign subsidiary companies or even made it mandatory for PAYE to be applied to all directors? These small but perfectly acceptable changes would more than triple what the UK currently says it values North Sea oil - and without even having to invoke the word "tax".

5. Will Scotland have a surplus of energy and if so, what can it do with it?

From the above, it's quite patently obvious that Scotland will have a surplus of energy - but what we can do with it holds the most intriguing possibility. We could sell it and create a sovereign wealth fund akin to the $400,000,000,000 fund that Norway has.

We could use our own oil and gas domestically to drive down the cost of living and bolster the quality of life of our citizenry - also known a energy security, in which we don't even feature in the World Economic Forum's 2014 report due to how appallingly the UK performs.

Or, we could trade our energy within the EU, adopt energy efficient programs and provide less energy-wealthy nations with resources in the spirit of community & camaraderie that perhaps the EU was originally designed to? Who's to say? The only thing that can be said with any certainty that none of these choices occur from the status quo & that nothing changes with a No vote.

Monday, 3 February 2014

What will happen to the Oil & Gas in the event of a YES vote?

Well well well! I was as surprised as anyone to read the article in todays Financial Times, so surprised that I almost forgot that I was well aware of the facts and assertions they were espousing. Scotland would become the 8th richest country by GDP and the 35th biggest exporter of manufactured goods and services & has all the ingredients required to prosper from the get-go.

The only caveat that the FT attaches to its research is that they are dependent on Scotland inheriting a geographical share of existing oil & gas reserves. To some people, that might be construed as a problem - but for a man who's spent much of the last 15 years traipsing all over the north sea as a measurement specialist - I can assure you it's no problem at all. Now, anyone with an iota of common sense or rudimentary geographical knowledge would be able to tell you the lions share of oil &gas resides in Scotland but in order to validate this statement, I'll oblige with some factual graphics - provided no less by the DECC - The regulatory body of the oil and gas industry in the UK.

You might notice that something is missing from the latest version of the map - the English / Scottish maritime border. It might surprise you to know that it was only this year that the DECC decided to remove the median line entirely - at the behest of the UK Government (I can't imagine why!) - luckily for me AND you, I have a copy of the 2012 Map that shows the median line very clearly.

From the legend, you will note that Red is crude oil, Green is Gas & Yellow is Gas Condensate (Or LPG/NGL in layman's terms)

Above you will see that the English Sector of the North Sea has a multitude of green, indicating that natural gas is extremely abundant. However - on oil, there is very, very little. So little in fact, you'll note that NE England's only Oil Terminal at Tees port is actually fed from the Norwegian (Ekofisk) Sector of the North Sea - adjacent to the Scottish J-Block - so known because of the names of the neighboring fields, Jade, Joanne, Judy.

Off the coast of Eastern England is a long established & mature extraction zone that has excellent reserves of natural gas which are not only used to power the many CCGT Gas Turbines that produce electricity, but heat the homes of millions of gas customers. These fields bring in fairly good tax receipts for the UK exchequer - but as gas is a use-now energy resource when you preclude adequate liquifaction facilities (Something the coalition has completely neglected) it is more often sold through the Zebrugge pipeline to Liquefaction companies in Germany & The Netherlands.

The UK, with it's chronic short-term (usually 5 years - imagine that) attitude towards energy infrastructure is extremely ill-equipped to capitalise on the natural gas England produces. The Germans however - have developed massive underground storage facilities for storing liquefied natural gas. As things stand, the energy companies in the UK that produce gas end up selling it to the Germans in the summer, who then liquefy * store it, before selling it sell it back to us at 3 times the price in the winter. It might surprise you to learn that Germany produces very little Natural Gas domestically, but nonetheless makes exceptional returns on the gas that the UK sells to it.

But I digress, this isn't about how poorly the UK administers England's plentiful natural resources - no, this is about how much of the UKCS Oil and Gas is in Scotland & with the aid of the illustration below, I'll demonstrate just how much there is.

Above, north of the median line, you will see the long established and extensive oil and gas networks within the Scottish Sector of the North Sea. Note the 3 main oil pipelines. Sullom Voe Terminal on Shetland being fed from the Ninian & Brent Pipelines. Flotta Terminal on Orkney being supplied oil from the Tartan / Claymore pipelines. The famous Forties pipeline making landfall at Cruden Bay before being piped overland through Scotland to Kinneal. Note too the 10 year-old BP Clair Platform West of Shetland alongside the Schiehallion field - which has been producing very strongly and was the main focus of attention of David Cameron's visit to Aberdeen in October to see Bob Dudley (here). Those of you with sharp eyes may also notice the St Fergus Gas terminal near Peterhead - which houses 3 large Gas & Condensate plants run by Total, ApacheCorp & Shell. These various terminals are often neglected when we talk about Scotland in terms of oil and gas - but prove by their very existence that Scotland is certainly in no short supply of gas.

In the unlikely event that UK decided it was going to hold on to Scotland's rightful share of oil & gas assets - the vast majority of fields & pipelines make landfall inside Scotland itself. This makes it very difficult to attempt to cut Scotland out of the game & in all likelihood - threatening to do so would be so damaging to the industry & by extension the economy it's inconceivable as an option. Its far more likely that energy agreements will be drawn up post independence between rUK & Scotland - the politics of necessity.

Wednesday, 23 November 2011

Oil's fair in love & war

In recent history - there have been few things that have incited enough excitement for me to jump up from my seat and scream at the television until I'm hoarse (OK, maybe the Luis Suarez handball during the last world cup) - but that's exactly what I was doing last month when David Cameron met Bob Dudley.

The revelation that North Sea oil will continue to flow from Scottish Waters to Westminster coffers for the next 40 years may have came as a bit of a shock to many of you - after all, you've each been spoon fed the lie that oil was running out and probably accepted it as a bone-fide reason that Scottish independence "might have been a good idea 30 years ago, but it's too late now"

I for one wasn't surprised, although in truth I owe that more to my profession of 13 years than any political insight I may have had. In trawling around the north sea maintaining, calibrating and upgrading oil and gas metering systems, you pick up on nuances and trends between asset-holders that form a very different picture to that portrayed by the union parties and their supporters. Oil & Gas, far from running out - is laying dormant  - waiting for the right conditions to be brought on stream.

It shouldn't surprise you to learn that a government's dependency on oil and gas tax revenues is the raison d'etre for both "dwindling north sea production" and the mothballing of oil and gas reserves that would otherwise bolster that decline. Now imagine - you're the operator of a marginal field in the North Sea - with an estimated daily production of 30,000 bbls per day and about to develop a sub-sea field that will double your hydrocarbon production - suddenly and without warning - Gordon Brown hits you and your competitors with a 10% increase in windfall tax. Do you;

a) Develop that multi-million pound sub-sea development which will be taxed to hell and cripple your profit margins?

b) Catalogue the development as a part of your portfolio - making you more attractive to a potential buyer and allow your current production to decline.

Now tie the above in with the slow but sure divestment of oil and gas assets from "oil giants" Shell, BP, Exxon  etc. On the face of it - it may just seem like business as usual - unless you knew that for every million pounds invested in the North Sea, these 3 companies could expect to make £10,000,000 back from it - whereas investing £1,000,000 in West Africa or South America yields £100,000,000 - all on account of the tax regime enacted by the host government. The result? Bigger operators reluctant to develop - but the introduction of smaller, fleeter operators with lower margins able to operate & develop old assets with significant resources and still make healthy profits.

So what does this say about the UK government and it's relationship with oil? Well, the Treasury love being paid - but they're reticent to saying exactly how much it does get paid in oil and gas revenue. It's a closely guarded secret apparently - but a slip up by a treasury official a few years ago lends those with eager ears a hint. In 2008 - industrial action by the Ineos Refinery workers resulted in the shutting down of the fabled Forties Pipeline. The strike action itself revealed the sensitivity of allowing private companies disputes to endanger the energy security of the nation (something I'll get into later in this blog) but it also revealed something else - the amount of tax the treasury was losing while the pipeline remained shutdown - a whopping £25 million per day, more than £1,000,000 per hour.

Consider that Forties accounts for roughly 1/3 of UK oil and gas throughput (700,000 barrels per day) with Flotta on Orkney (500,000 per day) and Sullom Voe on Shetland (600,000) accounting for the rest -  that figure rises to over £75million a day in oil and gas tax receipts ALONE. Some quick math suggests that in 2008 - with an oil price of $120 per BBL - Tax receipts would have been in excess of £20Billion - and that doesn't include the Gas production through terminals like Shell's St Fergus gas terminal, ExxonMobils' Scottish Area Gas Excavation terminal (S.A.G.E.) and Total's own Gas and Condensate plants.

It doesn't take a genius to work out how much Scotland is being short-changed when you consider further how an independent Scotland would operate. Would income tax for the multitude of oil and gas professionals be paid to Whitehall? Not a chance. National Insurance Contributions? Not likely. What about the VAT, fuel duty, corporation tax? NO WAY. Add all these up and you get the impression that maybe £30 billion a year is a steal for what our natural resources generate for the UK economy.

The more you look at how the UK is managed - the more you have to wonder what Scotland's place in it really is. To white-city folk - we're scrounging, dole-hungry dossers who they fork out millions if not billions of pounds to keep in exclusive cancer drugs and free education. Well, the myth has been well and truly busted - Scotland - far from being a sponge on the UK, has paid it's way many times over since oil and gas started to flow to these shores - maybe it's time someone else held the purse-strings.