Another reality-check: Rayner approves data centre!

 ... against fierce local opposition - and in the teeth of, yes, housing as potentially being an alternative use for the site.  It's the controversial Brick Lane Data Centre which, in a delightfully pointed insult, offers 4 (four) units of social housing.

What makes it exquisitely amusing is that none other than Housing Secretary Angela 'Stamp-Duty' Rayner has been the one to put her name to the government order overriding lower-tier authorities that would have withheld approval.  One can just imagine the agonies she will have gone through; but, hey, that's the price you pay for the privilege of slipping back into the Cabinet room, eh?  Them's your orders, girl, and leave your scruples at the door.  Still, at least she was able to push a junior minister out in front to make the actual announcement (in her name).   Happily, Parliament is not sitting. 

What I find doubly amusing is the way puzzled progressives can't understand how a data centre can be needed simply to speed up City financial transactions by milliseconds (which is one of the justifications for a DC in the East End).  Surely, they, cry, this is some kind of capitalist joke?  - nobody needs to make even quicker financial transactions ... do they ..?   Well, I have a first-hand story about this for another occasion: bottom line, it's all a lot more real than the ignorant could ever imagine.

On the subject of Them's your orders, girl ... with the fatuous 'consultations' on the Jackdaw and Rosebank fields being about to close, we are all greatly looking forward to Miatta Fahnbulleh being forced to walk the same plank and approve one or perhaps both of them in the next few weeks (doubtless on one quiet Friday evening during the Recess, with another junior minister out in front).  It'll be fun to watch her squirm.

ND

Better policy needed for North Sea to stave of shutdown

The North Sea, the pot of Gold for Independent Scotland, is in the worst crisis since 2008/9. With Oil prices hovering around $50, the highest cost oil producing region in world in understandably in trouble.

Jobs are being lost and contracts are either not being renewed or cancelled. Several of the international oil majors are pulling out of the region and looking to sell their remaining fields.

Moreover, the Government Regulator is fixated on De-Commissioning costs, over and above the cost of production. Laughingly a couple of years ago Executives were wondering whether to buy older fields as they balanced the income against the decom cost to see whether there was any economic point in acquiring; it came up as a no surprisingly often.

However, this is still a significant chunk of UK industry and know-how. Yes, all those Scots can offski to Dubai and the Far East for lives of expat bliss, much as shipbuilders once did.

Is there a way though to actually keep the oil following for the next 10-15 years and make the most of what we have?

The answer must be yes, but will require more Government flexibility. One hit the Industry took was Osborne raising taxes in his first budget in 2010, when prices were still high. Now that prices are below cost, there needs to be a severe relaxation of the tax regime to encourage companies to stay in business. Gordon Brown had his much maligned fuel-price escalator....but there is a kernel of an idea there.

The world now moves much faster that it used to, business is connected and the markets are connected globally to a very highly-correlated extent. Government budgets and taxes are set on an annual basis - Companies don't like too much change because they want to plan expenditures.

For oil though, the biggest variable is the price of the product, over which the companies have no control - a bugger of a business. So why not get the Government to set moving tax thresholds set on a moveable price.  The difference to today, where the percentages are set (providing some market balance), would be that different tax thresholds would come into play over quarterly or bi-annual periods. When the price of oil was very low there would be negative taxes to ensure employment and the industry continued, made up for when prices were higher by higher bands. The next impact would be that cash flows for the North Sea companies would be more stable - but better than the huge breaks given to the fortunate few like Chevron and Maersk but not to the likes of Ithaca or Enquest.

Government needs to be more flexible in its approach, else a whole industry will be gone before we know it. Oil prices are going nowhere but down for the next few months and years maybe, so without action the North Atlantic shelf will not survive the competition from the US Shale boom - or indeed a growing potential UK shale boom.

Is the North Sea really a dead duck?

The papers are full of bandwagoning about the death of the North Sea. Do we think this is true though or just useful copy as the fall in oil price plays out.

Here are some thoughts on it:

1 - The oil price will bounce back, but in reality the days of $200 oil are a chimera. There is lots of shale oil, LNG is replacing oil demand rapidly across the world (rapid in terms of over this decade). Many countries full of oil have restricted access to market - Libya, Iran and Syria for example.

2 - So where will it hit, well the ceiling may well be governed by the Shale Oil sit around $69 in the US currently, maybe a tad more. So long-term this may well be the placeholder for oil to float around - touching a hundred in times of stress maybe, but no further. Certainly going lower at points such as we are now.

3 - Oil demand is rising more slowly than in the past as the world grows more slowly and Renewables and LNG take the strain- another long-term constraint is in play.

So, overall this is very bad news for the North Sea, where extraction costs are $60-70 per barrel - the same as Shale oil. So it won't die but it becomes a very marginal business with small fields at the end of their lives. Plus the increasing regulation around decommissioning is another negative factor.

I can't see a new North Sea rush without huge tax breaks (umm, by which I mean reduction of the huge taxes on production and distribution, not actual subsidies) which maybe what is needed. The greenies in the political parties may well put a stop to this.

Such a shame for the humour of the world that the Scots did not go independent though and then have to face this reality!