Blowout week 61

Roger and I are both otherwise engaged this weekend and so no time for the regular blowout. Instead I bring a single story from the Canadian Globe and Mail. Reporter Eric Reguly was in Aberdeen last week. I helped arrange a few meetings for him and we met for dinner. Eric is the European correspondent based in Rome and the article gives a fairly gloomy view of the outlook for the North Sea oil industry.

Globe and mail:  Pivotal moment for North Sea as oil industry fights to reinvent itself

“The North Sea was struggling even at $100 [U.S.] oil,” EnQuest chief executive officer Amjad Bseisu says from his London office. “I think we’re in a defining moment for the North Sea. We could either see precipitous decline or the industry will have to reinvent itself.”

“Jo Mcgregor, director of McGregor Consultants, an agency that finds drilling and engineering professionals for oil projects worldwide, says Aberdeen has battled its way through several downturns, but that “this one feels different” because the price was rude enough to fall in the absence of a recession and OPEC, by not cutting output, is no longer following its once-predictable script. “People here are really scared,” she says.”

“Jake Molloy, regional organizer in Aberdeen for the National Union of Rail, Maritime and Transport Workers (RMT), says employment levels will plunge as projects are curtailed or cancelled and cost-cutting becomes the industry mantra. The cover of its February union bulletin features an the image of a man holding a bloody straight razor with the title “Death by 1000 cuts.”

“Of the 30,000 or so offshore workers in the British North Sea, he expects as many as 6,000 to disappear by the summer and fully third to be gone by the end of the year.”

Please use this post as an open thread to post links to and discuss the latest energy and climate stories. I am to be travelling from Thursday for one week and so posts may become a little less frequent.

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20 Responses to Blowout week 61

  1. A C Osborn says:

    How about something on the Broken Records for cold Temperatures in the USA, Canada and Cuba?
    Some of which have been broken by as much as 28 degrees F, now you do have something “Unprecedented Climate” to talk about.

  2. “We could either see precipitous decline or the industry will have to reinvent itself.”

    I’m intrigued by this comment, Euan. Exactly how might North Sea Oil “reinvent itself”?

    • Euan Mearns says:

      Well Roger, you are clearly lacking the adventurous entrepreneurial spirit. Must have been in Mexico too long. There is converting rusting steel jacket platforms to host switching equipment for off shore wind turbines. There is using platforms to inject CO2. And there is decommissioning platforms. And there are cruise ship opportunities to take people on tours of the North Sea and the bad old days when we had oil. This is the brave new world where surplus wind power is used to forge the cruise ship steel and the surplus that is left after that charges the batteries on the cruise ships. Sorry can’t be bothered going on with this.

      Eric’s article was much blacker than even I imagined. Brent – WTI spread is now massive.

      • The platforms are in international waters, so how about casinos? (Powered by wind energy, of course).

        The Brent/WTI spread has been higher in the past:

        • Euan Mearns says:

          WTI = $49.34, Brent = $62.2. That’s a 26% spread on WTI price. Maybe it has been that high before? But the problem remains of glut of LTO in USA and growing scarcity everywhere else.

      • Sam Taylor says:

        I recall seeing a piece a while ago saying not to worry, that Aberdeen will reinvent itself as a decomissioning hub and continue the prosperity of the last few decades. Because, of course, tearing down rusting hulks in the middle of an ocean is just as lucrative as extracting the most valuable commodity the planet has ever known.

  3. Sean Rush says:

    There is still a lot of oil in the UK North Sea but the competitive nature of its extraction is perhaps what needs to be ‘re-invented’. The “Wood Report” issued last year recommends changes to the regulator so that it acts to ensure maximum economic extraction. Getting there will need a much higher level of collaboration and, if necessary, regulatory control to ensure costs in extracting around regional hubs are not duplicated or infrastructure decommissioned prematurely. The new regulator, the Oil and Gas Agency, is under development (ex BG Andy Samuels has been appointed CEO) and although the current commodity prices are causing significant pain to operators, it might be a catalyst for the new regulator to take bold, if unprecedented, steps to maximise recovery on behalf of the tax payer.

    • The UK government may be commissioning reports and setting up agencies to Save the North Sea but one has to wonder whether it isn’t just lip service. This a couple of weeks ago from the Guardian:

      The fossil fuel industry was deeply “unsettled” by comments from energy secretary Ed Davey raising the prospect that their assets could be rendered worthless by global action on climate change, according to a letter of protest sent to the secretary of state.

      Malcolm Webb, chief executive of Oil and Gas UK, which represents the industry, wrote to Davey saying he was “perplexed” by the “conflicting and confusing messages” and accused him of making investment in the North Sea less attractive. Webb wrote to Davey a few days later: “[Newspaper] articles reported you backing moves that would encourage investors to think about moving their money out of ‘risky’ fossil fuel assets, suggesting global emissions limits could make hydrocarbon reserves unburnable, therefore stranding assets and rendering them worthless.”

      Webb said: “I must confess I find these statements unsettling. They come, after all, at a time when you and the Treasury are putting great effort into delivering the much-needed regulatory and fiscal reforms that will make the UK North Sea more attractive to investors in oil and gas, not less. I am intrigued to understand how such opposing viewpoints can be reconciled.”

      Davey said in a reply: “My recent comments were about highlighting that moving to a low-carbon economy is a ‘business smart’ choice, both in terms of risks and returns. I simply reflected what a number of other organisations have been promoting about sounding a note of caution internationally on the need to carefully consider fossil fuel investment in the light of their life-cycle carbon emissions.”

      • Sean Rush says:

        Ed Davey is, of course, acting the politician. On the one hand he is making the ‘right’ noises about global warming above 2 degrees C arising from fossil fuel generated CO2, as predicted by the IPCC’s models, and on the other acknowledging that in the real world the UK oil & gas industry employs ~440,000 people and brought in GBP24.4 billion of production revenues – those numbers aren’t ‘modelled’ and the ‘science is settled’ on whether a Government gets re-elected based on jobs today or preventing a modelled global catastrophe at some point in the future. He also noted that his comments were directed more at coal than oil & gas.

        In a really confusing message, he said:

        “The North Sea is still vital for boosting our energy security. It’s a simple choice of utilising homegrown oil and gas, or relying more and more on gas from Russia and oil from the Middle East.

        This report shows there is still great potential remaining in the North Sea. I’ve already kicked off closer working with industry through the Wood Review and by working with them and the OGA, we can put the industry in a position to ride these tough times and emerge stronger when firmer oil prices return.”

        Buying gas from Russia is an interesting proposition given his department’s stance on RWE selling to Russian investors.

  4. Had there been a Blowout this week Rajendra Pachauri’s resignation as IPCC chairman would certainly have been in it:

    From Pachauri’s letter of resignation:

    “For me the protection of planet Earth, the survival of all species and sustainability of our ecosystems is more than my mission, it is my religion.”

  5. Hugh Sharman says:


    Your doom-laden message needs to be leavened by an historical perspective and a return to old fashioned commonsense.

    Please get your panic-stricken contacts in Aberdeen and thereabouts invite Steven Kopits to visit them.


    Kind regards,


    • Euan Mearns says:

      Not sure if this is tongue in cheek hugh? I was surprised how black Eric’s piece was. But he interviewed a fair number senior industry figures.

      My own analysis of the future is not too different to Steve’s. The main difference is timing. He has a 5 Mbpd supply demand swing in there this summer. US production will take a while to die. And we have Russia, OPEC and the whole of Mediterranean Europe stuck in depression. I think we may have to wait until Summer 2016.

    • Sam Taylor says:

      Kopits is quite bearish on Aberdeen’s future:

      Bear in mind that the above was written when brent was about $95 brent.

  6. Luís says:

    If I am allowed some blog whoring in this curtailed blowout, here is a link to a re-run of the Loglet Analysis on petroleum:


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