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Sunset on the North Sea? Lessons from History
- 1. Sunset on the North Sea? Joe Chapman, ‘Capturing the Energy’ Hall of Mirrors local history conference Aberdeen, 04 March 2017 Image © Shell UK
- 2. Capturing the Energy www.capturing-the-energy.org.uk Who am I? Development Officer, Capturing the Energy Based at the University but industry-facing Background in information management Previously worked in oil & gas industry Also currently IRMS Communications Officer Born and bred in NE Scotland; oil in the family
- 3. Reports of North Sea oil’s death greatly exaggerated? Overview • Conventional wisdom • Current crisis in figures • Aberdeen before oil • Understated estimates • 1980s downturn • Aberdeen after oil? • ‘Time for reflection’ Capturing the Energy www.capturing-the-energy.org.uk
- 4. An aside… ‘That’ Mark Twain quote – but how true is it? Ironically – reports of the quote also exaggerated! “It is my belief that nearly any invented quotation, played with confidence, has a good chance to deceive.” Capturing the Energy www.capturing-the-energy.org.uk “If you don’t read the newspaper you are ill-informed; if you do read the newspaper, you are misinformed.”
- 5. UK oil and gas – the current downturn Well over 100,000 jobs lost; 360,000 more hit by 15-20% pay cut Unemployment up by a third in 1 year; food bank usage doubled Companies shedding 15% of workforce on average – nearly 1 in 6 Oil price slump – revenue down 30% Capturing the Energy www.capturing-the-energy.org.uk
- 6. Impact on Aberdeen A shock for previously recession-proof city Before: house prices rocketing; hotels full; shops & restaurants buzzing Now: a very different mood… but not bad news for everyone Capturing the Energy www.capturing-the-energy.org.uk “We got a bit obsessed by oil.”
- 7. Aberdeen before oil (Yes, such a time did exist!) 1960s: traditional industries on decline; a city far removed from the rest of the country Gaskin report, 1969: ‘ignored’ North Sea potential 1970: Rubislaw closed; Ekofisk announced Capturing the Energy www.capturing-the-energy.org.uk
- 8. Capturing the Energy www.capturing-the-energy.org.ukImage © Shell UK Image courtesy of Aberdeen City and Aberdeenshire Archives
- 9. Understated estimates Arrival of oil not an overnight phenomenon Who were the pessimists-in-chief? What were their motivations? Business & government in high-stakes poker --> uncertainty --> caution --> lack of planning Capturing the Energy www.capturing-the-energy.org.uk
- 10. Lessons to be learnt Not first instance of slow response to economic change Innovation stifled; dearth of major oil entrepreneurs Parallels – political significance; need for decisive action Indyref: oil industry high on the political agenda Capturing the Energy www.capturing-the-energy.org.uk Now: Wood Review --> Oil & Gas Authority ‘Maximising Economic Recovery’ agenda
- 11. 1980s downturn 1986: oil price shock “Virtual panic” hit Aberdeen - Job cuts and unemployment - Housing market slump - Exodus from the city Industry response: familiar? Capturing the Energy www.capturing-the-energy.org.uk
- 12. 1980s: comparing then and now Today’s ‘culture change’ rhetoric is not new 1990s CRINE agenda – fizzled out Now (again) processes under scrutiny Also differences – structural factors No longer just about cost-cutting Oil price unlikely to bounce again Capturing the Energy www.capturing-the-energy.org.uk
- 13. Aberdeen after oil? Wood: “back to really busy” by 2020 Estimates shaped by events and prices How will historians see this decade? - Dawn of decommissioning - Investment and innovation From offshore oil to offshore wind… not yet Capturing the Energy www.capturing-the-energy.org.uk
- 14. Oil 2.0 Oil can survive but this depends on: - Turning talk about action - Developing new technology - Creating a stable tax regime Another referendum? Who can we trust? Transformation then, evolution now Challenge conventional wisdom Capturing the Energy www.capturing-the-energy.org.uk
- 15. Capturing the Energy www.capturing-the-energy.org.uk Capturing the Energy Learn from the past to inform the future - Documenting the industry’s achievements - Increasing awareness of its importance - Assessing its economic and social impact Oil & Gas UK support; Steering Group oversight 2017: Murchison collection; OGA IM Forum; Offshore Europe; Age of Oil exhibition
- 16. Thank you. Questions? Email: joe.chapman@abdn.ac.uk Phone: 01224 272545 Find me on LinkedIn and Twitter (@joechapman30) Image © Shell UK
Editor's Notes
- Intro to myself – Capturing the Energy; before that, records management for a local authority; previously project planning and cost reporting for a large oil & gas company
- We all know the story… 1986 narrative. Been here before. Lessons. Failure to exploit vs transformation Cash cow; indyref; volatile commodity Beginning of the end vs watershed ‘Hall of mirrors’ illusion; perspective
- Twain quote – exaggerated What he actually said; misquote origins Quotes on truth – still relevant References and image credits available
- Facts and figures Late 2014 to summer 2016: over 100,000 jobs lost; 360,000 15-20% pay cuts Families, mostly in this area – substantial income; prosperous lifestyle Claimant count – up by a third, Dec 2015 to Dec 201; food banks doubled AGCC survey: operators 15% (1 in 6) workforce reduction, further 5% to come 2015: revenue down 30%, oil prices halved; 40% of fields unprofitable
- Decline in population Shock for recession-proof city House prices and millionaires Stories: cars; restaurants; taxis, hotels On the other hand… tourism “Obsessed by oil”
- Impossible for me to imagine Aberdeen pre-oil 1960s, traditional industries declining Isolated and insular; exodus; travel Development area; Gaskin report North Sea ignored; Shell & BP and harbour 1970 – Rubislaw quarry and Ekofisk Transformation unthinkable – like today
- Illustration of transformation from unremarkable to extraordinary
- Oil didn’t arrive overnight; pessimism Conventional wisdom – taxes Projections: 30-40 billion barrels vs 10 billion BP and Shell downplaying until Forties Government – avoiding ‘magic bullet’, pressure Relationships, competing interests, ‘poker’ Uncertainty and paralysis – cautious approach
- Not the first time: shipbuilding – ownership, management, investment, planning Lack of planning, economic consequences; few entrepreneurs Vested interests today also? Industry politically significant - indyref arguments Now: City Region Deal, Scot Gov funding and fanfare – ‘step change’ Lessons learnt – Maximising Economic Recovery; OGA
- 1986: “great cleansing operation”; “therapeutic” (not at the time) Crisis short-lived – oil price shock; “battened down the hatches” 1 in 4 offshore jobs lost; property market – oversupply “Virtual panic”, abandon homes: Lee Crescent North Industry response: changes needed to produce more cheaply
- Familiar; also similar to CRINE, 1990s – collaborate for efficiency; viability Striking parallels – long, hard look; costs; procedures; innovation; planning Differences – fall in global demand more structural – cleaner energy CRINE lacked authority; prices up – old ways; same cycle again
- Will Aberdeen emerge unscathed or need another transformation? Ian Wood ‘”by 2020…”; 15-16 billion barrels left; positive outlook Fallacy of predictions – oil prices vs countering misconceptions Dawn of decommissioning – UKCS ‘late life’ phase Historians in future – watershed: strategy, regulation, investment Property – city more resilient; infrastructure investment All sectors working harder – like rUK since 2008 recession SMEs’ knack for innovation in demand; Dundee an exemplar Knowledge transfer; wind energy, EOWDC (Trump) Renewables not yet a replacement for fossil fuels
- Oil and gas in Aberdeen still has a future; OGUK Economic Report Whether trend continues and delivers depends on – turning talk into action technology to assist stable political environment Another referendum? Shock results; ‘experts’ What if similar in early days? Experts vs govt and public Nevertheless: big economic benefit to Aberdeen Reflect on city pre-oil – realise scale of transformation Evolution not revolution now required Oil brings bust as well as boom ‘Conventional wisdom’ is not to be trusted
- One of the ways we can help to protect the future of the oil and gas industry in the UK is to preserve its past – and that’s what the Capturing the Energy project aims to achieve. Based at the University of Aberdeen but with financial support from Oil & Gas UK, our purpose is to document the industry’s achievements, increase awareness of its importance and assess its economic and social impact. A significant development this year will be the addition of a brand new collection relating to the Murchison field - well-known because of the platform model at the Aberdeen Maritime Museum overlooking the harbour. The field itself has been operated by 4 different companies in its near-40 year lifespan and is now being decommissioned by its present owner, CNR. As well as overseeing the transfer of historical records to the University’s archive, though, the project also seeks to engage with the industry on a range of information management and public relations initiatives. The Oil & Gas Authority recently published a Strategy and Delivery Programme for IM, and Capturing the Energy will be represented on its new IM Forum to be set up this year. Other exciting plans for 2017 include an interactive showcase of photos and stories to be launched at the Offshore Europe conference, and an exhibition called 'Age of Oil' by renowned visual artist Sue Jane Taylor at the National Museum of Scotland in Edinburgh from July; aspects of which will then be on display at the University of Aberdeen's Sir Duncan Rice Library this time next year.