Net zero carbon in the North Sea

Older readers who can remember the 1970's (I just about can't, so making the most of this to annoy Mr. Drew) would be forgivne for laughing until their sides split at the idea of the region becoming a net-zero carbon emmissions zone. The whole sea was swathed in a fleet of oil and gas rigs sucking up liquid cash for around 20 good years for the UK. 

Now though the Government has decided to help the area become a net zero area, with huge further investments in offshore wind. This comes of course with a reduction in oil extraction. It has long been the case that the oil Major's have been selling down their assets - aware that many have become liabilities with a cash payment upfront rather than long term  assets. The decommissioning costs a huge for offshore infrastructure. 

The Government is being bold, but given there are only 10 points in its white paper it is also being very thin. Additionally, the National Infrastructure whie paper is almost more important than the overall energy white paper - without the capacity in the Grid to cope with the vagueries of wind and solar power, there can't really be a big charge toward net zero except with Nuclear power, which is only foreseen as a supporting element from here on. 

Shame the fields in the North Sea could not last a bit longer, the Government could really have done with the cash now too. 

Some Actual Good Sense on North Sea Oil & Gas

Here's an article on an aspect of the UK's offshore oil & gas industries - from the Grauiad, no less -  that actually makes some sense.  Probably because the writer is from Shell. 

UK can become a world-class hub for decommissioning oil platforms: Decommissioning Brent oil and gas platform in the North Sea gives British companies a unique opportunity to develop specialist skills and expertise in safe removal and recycling of oil platforms and pipelines ... Over the next 30 years, almost all the 470 offshore installations in the North Sea’s UK Continental Shelf, such as platforms, will need to be decommissioned ... That means expenditure of between £35bn and £50bn, at least as much as the UK government plans to spend on our railway network over the next five years. 

Brent - ah, I remember the Brent complex, there are old oilman's Brent stories as interesting as for North West Hutton (and I may swing the red lamp & tell them some day).   The beauty of this decommissioning binge, is that it is mostly pre-financed: companies are obliged to make provisions for decommissioning.  So - a big wave of industrial expenditure, much of it to be given to UK yards (we are quite good at this type of thing, although so are the Dutch), coming at just the time when spending on new platforms is significantly under the cosh from the low oil price.

I say 'pre-financed':  liquidating a reserve can of course be a challenge for the corporate treasury, but that's just a treasury challenge, and the banks are up for that sort of thing.

An upbeat note for the weekend.  Good luck to the Red Rose boys in Cardiff !

ND

Most of their reservoir is depleted now

So who said this and about what? Well it was  Abdalla Salem El-Badri the Head of OPEC discussing the UK's oil reserves in October of last year.

On a quick facts basis here are some rather key ones too:

- UK production is expected to drop to 800,000 barrels a day this year, down from a production peak of 2.92 million in 1999. That is, umm, a 75% drop in production in just 15 years.

- With huge investment needed into getting North Sea production back on-line, it is unlikely this will go over one million barrels per day ever again.

- The decline is North Sea production is the fastest of any large system in the World over the past decade.

- The UK became a net importer of oil again in 2007.

- Newer North Sea companies, such as Xcite Energy (tipped here many a moon ago, but struggling still) are really struggling to find finance. This is because their cost of to pump the oil is at $80 barrels plus and the oil is much heavier than Brent - so less valuable. Taking this into account is huge as it means the margin available to tax is far slimmer. Even if these companies are successful and we have more successful drilling in the likes of the Bressay field and others, the tax revenues potential is far less than was the case with the Forties field.

So basically, Salmond and Cameron can discuss all they like in Aberdeen about UK offshore oil reserves, but this is yesterday's story in many ways. The future will be Fracked gas onshore in the UK - sadly for Scotland much of this is in England.