Author: Gareth Davies

Innovation Expert with 30+ years of experience living and working across the world. I apply an engineering approach to helping companies innovate and achieve commercial success.

Want to be a consultant?

Introduction

A bit of a topic departure today, rather than write about the Oil and Gas industry I thought I would share some more insights about how I work and why I do it this way – I intend to expand on this topic in future articles. This is quite a long article but there are a lot of points to introduce, so please stick with me. Please let me know what you think either by commenting here or emailing me directly.

So you want to be a consultant, do you?

I have been an independent consultant and an entrepreneur for around 7 years on-and-off and I find that, while  It’s not perfect it works for me.

Many people are curious about what I do, and often will tell me that they are considering becoming an independent consultant. The next question is normally “what’s it like” or “why do you do it?” Most of the people who ask me are disappointed with the position they find themselves in. Many are employees who feel frustrated with their role, some are disillusioned senior staff or partners in consulting firms. Increasingly I get the question from friends in the Oil and Gas industry who feel that their jobs are at risk, or are already seeking new opportunities.

Well the short answer is that a career as an independent consultant is not for everyone. There are some questions that I recommend exploring to see if it’s for you:

  • What’s motivating your research?
  • Is the world of work changing?
  • What is a consultant, really?
  • What skills are needed to be make a living?
  • What will it be like?
  • What does success look like for you?

What’s motivating your research?

If your questions are only from curiosity that’s great – but if you don’t want to become a consultant (or a client) please consider that time is my product. If you are considering becoming one then here is something to consider:

I don’t have a wage, I essentially sell my time. There are 8500 hours in a year. I’ll be asleep for 3000 of them and I’ll spend 1,500, eating, buying groceries, showering, driving places, doing laundry and generally faffing about. That gives me 4000 hours to do things that really matter to me (including work). Traditional consulting firms expect you to account for 2000 billable hours. (They do this because that’s what they have bought this from you in return for a wage).

So if it’s just curiosity that makes you ask about consulting then perhaps we’re wasting time that we could do something more interesting together with instead – like go for a cycle, cook dinner or swap stories.

If, however, you’re seriously interested in this and we enjoy each other’s company then I am delighted spend time with you.

My first advice is – that if you are considering independent consulting as a “stop-gap” until something else comes along – you’d be better looking for a contract position (see later) and spend time tracking down what you really want instead. Consulting is hard and time consuming. It is a profession and requires dedication and a willingness to hone your craft. Don’t start unless you really want to make it work.

Is the world of work changing?

Well of course it is. It always changes. When was the last time you saw a typing pool or an elevator operator. Perhaps this time it really is fundamentally different. I don’t know.

There’s this phenomenon called confirmation bias. This refers to our tendency to instinctively seek out information that supports our view of the world rather than challenge it. You will have experienced comments like “It’s not only me that thinks this – look so does [fill in name of authority figure here]”. So while risking confirmation bias, here are number of articles that I’ve read, most recently in the Economist, exploring how the world of work and how the idea of a company may be changing. Lynda Gratton writes a lot about this and so does Charles Handy and Rob Goffee. My favourite book of the last couple of years “The Second Machine Age” has some views on this too.

But there is a counter argument – if you are building and operating large capital assets then a freelance model is unlikely to work. For some people the psychological strain (not to mention the difficulty in getting a mortgage these days) means they’d rather be an employee. Some people really want someone else to order their day for them. Too much choice in what to do in a day can be overwhelming just as too much choice in a super market can be. Joining a company can (if it is a well-run one) be a way to minimise the decisions needed. Limiting them to just the ones that matter for a role adds clarity. Often an employee can go home at 5 O’Clock. Top that off with an argument around public participation in stock markets that really require a joint enterprise to function, then I think we’re seeing a rise of alternatives not a wholesale destruction of the traditional company and place of work.

In short then – there will be plenty of “jobs” available if you want one, and you can convince someone to choose you to do it. You don’t have to be independent – but, if you choose to be – things have never been better. I am also often approached by organisations claiming that they are “Disrupting the consulting model” and would like me to be part of their new model, in a networked mode I have nothing against this but I don’t go exclusive and certainly am not willing to sell my time as an employee of one.

What is a consultant really?

In my simple view of the world (short of winning the lottery) there are only three ways to make an income. I don’t know about you, but I need an income, so here are the methods I know of.

  1. Own shares in a business or other income producing asset
  2. Lend money to someone who then pays you back with interest
  3. Sell your endeavours by becoming:
    1. an employee;
    2. a contractor;
    3. a freelancer; or
    4. a consultant

I’m only going to deal with 3.

Employees’ time is sold by contract by their employer. Employees do as they are told and the fruits of their labour are owned by their employer. Often banned from working for other people, they can be expected to be loyal to their employer. They may have security of tenure for the length of their notice period and there are laws that stipulate fairness in their treatment.

Contractors are more convenient employees. Hired on a fixed-period basis, usually to fill a temporary gap or provide additional short-term labour. Staffing agencies help broker deals and some consulting companies will hire in temporary contract workers as a way to deliver projects that require additional resources. Tend to work for only one customer at a time. Responsible for making own arrangements and sorting out the interface with the government. Contractors normally assigned specific work to undertake and will have some relationship to line management.

Freelancers undertake specialist work in which they are experts. Tend to deliver a specific piece of work and under their own direction, often building on their prior work. Ownership of output is negotiable, tend to work for more than one client at any one time. Tend not to work under the management control from their clients.

An independent consultant never takes a line-role, and does not perform tasks that should be taken care of within the line. Work is more complex and consists of being paid for opinions, advice and influence. Results through influence (internal and external) and not control. Success comes from coaching an organisation to perform better by itself after you are gone. Work is transitory and comes to a natural conclusion once you are successful –don’t get too attached to a client or expect to stay. It’s worth noting that an independent consultant is not an employee of a firm – in this case income of the firm may be generated from consulting-like activities but he “consultant’s” income won’ be.

What skills are needed to make a living?

Consultants need to achieve results through influence. That means you need to build opportunities and develop the skills to add value for your client.

Creating opportunity relies on building a powerful network, the ability to identify opportunities to help and the wherewithal to generate an invitation to help on a commercial basis.

Influencing relies on persuasion, establishing trust and the ability to work outside normal line management constraints.

In addition to client-facings skills there is an important set of internally focussed skills which relate to structuring your work, maintaining motivation, developing new skills and coping with the psychological pressure of the independent consultant life-style.

I find that the most important action for me is to spend my time with people who make a positive difference. People who create time for me, and people who energise me. This relies on a skill of knowing who these people are and the inner strength to maintain discipline in who I choose to spend time with.

What will it be like?

In short it will be a roller-coaster. The greatest highs and the greatest lows of your working life can be found in this approach. What successful consultants find is that – though they cannot control many of the circumstances in which they operate – they can influence them and they can control their reaction to them. It’s a subtle distinction bear it in mind and it will continue to make more and more sense as your consulting career develops.

What does success look like for you?

This is the most complex of all. Knowing what success is for you – is it to spend more time with your family, to do more cycling (a favourite of mine at the moment), to think deep thoughts, to live in a location you select, choose how much you travel and to where. In short will money make you happy, or will being happy make you money [Link]?

This is complex because as an employee it is a question rarely asked, so you may have little experience answering it. Employees tend to be told what good looks like and rewarded with money, perks or praise when they achieve it (I realise that often the goal-reward structure is misaligned in some companies, but that’s how it should work). As an employee you are, by definition, not meant to consider what time you commit to activities. You are expected to apply your time effectively to the goals of your employer. If you are senior you are expected to spend your time thinking of goals that your employer should consider and then direct others to achieve those that were selected. In none of the normal employee situations is your working identity explicitly tied to your own personal goals.

One exercise I undertake with people who are considering a change is to point them to the definition of wealth proffered by Buckminster Fuller, and then ask them what they would do if money were not a constraint. Start from there and define your own definition of success – until you have it you can’t value anything and therefore you can’t price your work in a meaningful way.

Private Equity Buying O&G Assets

With the INEOS deal completing I cast my mind back to 2014. It was rumoured then that over 75% of North Sea assets were for sale, but questions around ability to shoulder decommissioning liabilities and inability to agree on an oil price stifled deal making. Prices are depressed but major operators wish to raise cash and stifle outflows the interest for private equity investment is increasing. Managers such as Bluewater Energy [Link], Riverstone[Link] and many others are said to be considering deals.

The Financial times reports that this month’s redetermination of reserves in relation to asset-based lending is unlikely to cause havoc [Link] but it may accelerate deal making.

I recently asked a senior partner at a well-known advisory firm what he thought would be different with private equity arriving. He pointed out that the PE players backed management teams – such as Siccar Point, Fairfield and others. He thought that these management teams might be surprised about the amount of data and “proof-points” that the PE backers would require, he also reflected that some management teams would be used to working within large corporates with in-house teams they can mobilise. They will now have to find providers they can trust and who are credible in-front of investors.

The known model of exploration and farm-down during development is now giving way to a new world where valuations are determined using a DCF model and a decommissioning cost. There are no proven rules-of-thumb here now. This means that investors are more cautious doing deals in this context than before. It does appear odd that in a business known for taking investment risk on exploration there is almost no appetite for assuming risk or unknown in this investment stage.

Another advisor at a large accountancy firm noted that very few companies operating in the North Sea were likely to make a profit any time soon (not only because of tough trading conditions, but also because they have various offsets and other tax-shields). This means that decommissioning offsets and other tax-carry forwards are of little interest to them – this might suggest that either a change in the rules is required or that sale to a profitable entity could provide differential value and hence facilitate win-win deals.

Shell recently announced its opinion that oil prices may spike upwards soon [Link], that may be music to the ears of financial buyers. If this is the start of deal-making season it will be interesting to see who the players looking at acquiring assets are. Will it be PE backed new Co’s, will it be established late-life operators like Enquest, or will assets be acquired into existing profitable entities to enable tax optimisation.

INEOS, Small Fields, Politics and Tie-backs

Political intervention can swing both ways.  Political intervention in the L1 acquisition of DEA assets has enabled the INEOS deal announced today [Link]. This sees Jim Ratcliffe enter into the Upstream business with an opportunistic deal to buy assets reluctantly removed from the DEA portfolio [Link]. INEOS previously looked to be moving into shale developments in Scotland [Link] – the logic of vertical integration to supply his other assets is compelling. The shale move was stalled by the Scottish Government [Link]. Plus Ca Change, Plus C’est la meme chose as they say in the French Speaking regions around Lake Geneva where Jim’s HQ is located.

Perhaps Jim may consider lending his political influence to influence the debate over offshore developments – an area which is controlled by the UK goverment not the whims of the Scottish Parliament.

Perhaps he will point out the difficulty faced by new developments of  a small offshore oil-field which must find a way to process and transport the fluids to where they can be used. One way is to hook up to old platforms – many of which are now operating below their design capacity. As fields age production rates decline and this means platforms and pipelines built to support them become underutilised.

However, oil price declines means pressure has mounted to decommission the infrastructure that supports some of this production in the North Sea. For example Alex Mitchel [Link] says that he believes that the current fundamentals will lead to significant growth in decommissioning activity on the UKCS. He adds that operators are under increasing pressure to reduce exposure to high-cost regions, and remove decommissioning liabilities from balance sheets. Without traditional sale routes, operators will increasingly make strategic decisions to push forward with asset decommissioning. Advantages for first movers are evident, with the opportunity to avoid constraints in the supply chain, and take advantage of suppressed rig rates for P&A.

I asked a member of the Bestem Network who negotiated the commercial terms of some of the recent marginal developments what he thought. He told me that an FPSO option is often chosen not because it’s best, but because it increases control and reduces uncertainty. Tie-backs would be better but the modest initial tariffs can quickly change to become uncontrollable cost-sharing agreements.

FPSO’s require a certain volume to work effectively so they will inevitably not drain fields as fully as other options. Other fields will never produce enough to make an FPSO a viable option.

Once key infrastructure is gone, it is gone for ever. It will never be replaced. We have to act now if we are going to save this national asset.

Tax relief is not the answer – subsidy might be

As I was driving to Aberdeen last week I wondered what would happen if I considered the export and processing infrastructure in the North Sea was a road network on land.

Why would anyone build a factory in a remote area if they did not have access to roads? The same could be said of remote field developments that hook back into export and distribution systems.

Taking the analogy further, what if there was a road outside your proposed factory but it only led to the M6 Toll Motorway. What if that toll booth could raise its prices whenever it liked and there’s nothing you could do? What if sometimes when you turned up at the toll-booth it was broken, and no-one knew how long it would take to fix. What if, one day, you received a letter to say that they were digging up the motorway and restoring the land back to farming?

As a business man, I would find that unacceptable. I’d be a fool to build my factory at that location. And that, friends, is the situation we have currently have in the UK North Sea.

Not only is that the situation but – because oil prices are down – the probability of bad things happening has increased. Despite this Oil voice reports that MPs do not favour support of the oil and gas industry [Link] their report says that:

‘Tax reliefs and allowances can never fully offset the operational challenges posed by the falling oil price […] Whilst the majority of Government MPs appear to have made up their mind about their position, the latest developments could prompt a rethink. There is a potential opportunity for the industry to engage with undecided Labour MPs to make the case for additional support at this challenging time.’

I agree with the position that this is not about Tax relief. To address this will require restructuring the way that the industry operates. If not outright nationalisation of parts of the network, this – at least – requires more control and probably limited subsidies. For goodness sake – we subsidise the tracks that our trains run on, I can’t see any argument for the creation of economic value there that does not apply to our North Sea processing and export network.

When I talked about this at a networking event, an experienced member of the Bestem Network informed me that decommissioning must be sanctioned by the government. So, in a sense, because you need to apply for permission the assets are indirectly controlled by the government. But, as he then said, there are really no sanctions if you fail to operate assets productively or if they’re closed for maintenance. And, apparently, declaring a safety critical event before shutting in is something no-one has the balls to question. Apparently there is a voluntary “infrastructure code of conduct” [Link] that defines principles for access to other companies infrastructure but how effective this is in practice is something some members of the Bestem Network question.

The oil industry is in a down cycle – now is the time to be investing as a nation to maintain the capability to produce.

I am sure there are macro-economic arguments regarding the value of extracting assets under our control for any price (including opportunity costs for displaced workers and spending within the economy) vs. the export of national treasure in exchange for the import of similar from overseas. I am not qualified to make those arguments – if you are, please comment.

Cross-company integrated planning

A while back I was talking to the CEO of a North Sea operator. He was telling me a tale of one of his assets – it had been off-line for a large proportion of the last year. He was beyond annoyed and had become “resigned” to the situation.

At first the he was off-line because the gas it imported from a nearby platform to power his water injectors was not available due to that operator’s maintenance schedule. Almost as soon as this came on-line his export route into CATS was suspended – again due to maintenance. (Here’s another example of an operator affected by CATS maintenance [Link]). Well blow-me if – when that came on-line – he didn’t face a gas-turbine maintenance problem on his own platform.

This interlinking of assets and reliance on others’ actions is becoming more common – for example here is what Enquest say about the Heather installation: “The Heather installation is designed to accept production fluids from Heather field and Broom field via subsea tieback. The production fluids are processed and separated into oil, gas and water. The processed oil is exported to the Sullom Voe Terminal via Ninian Central platform, while the gas is routed through compression trains for lift gas purpose.” [Link]

For years operators have battled to schedule maintenance on their own platforms so that work can be conducted in the most economic sequence. They aim to maximise capacity, up-time and utilisation. In this new interconnected world of small fields and infrastructure operating beyond its design life, companies must take into account the maintenance schedules of others.

One way is to be ready to work when the unexpected windows occur – that’s true even when you are a lone operator – but planned maintenance is a different matter.

Bob Spence, founder of Capital Project Partners, and member of the Bestem Network says that among the things he would consider are to: establish a common vocabulary across the supply chains of all operators; develop common definitions of how plans are communicated and progress measured and reported; find ways to deliver real-time reporting; and use predictive analytics to generate insight.

Lars Sandbakk, a leading light at Safran Software Solutions and expert in project planning tells me that from a technology perspective the issue boils down to: different software and their embedded methods; different project management philosophies; different terminology; and the lack of sensible data that can be easily exchanged without exposing more about your operation than you want.

He tells me that there is a cross-company initiative called ILAP (Integrated Lifecycle Asset Planning Standard) is being worked on and has been submitted as an ISO Standard.

Of course, while information and technology may be part of the solution, to make this work will require changes to commercial agreements and changes in the ways people actually work. These things are difficult to achieve and, without properly aligned incentives or new regulation and enforcement they are unlikely to take hold.

Learn to share nicely!

I had a number of responses to my comments about the main export pipelines from the North Sea – such as CATS – and the tariffs that are charged. A member of the network (senior SPE member who would rather not be named) pointed out that the “arteries” such as CATS are not such an issue as the “capillaries” – smaller interconnections – used in the gathering networks. Things like pooling of processing capacity (to remove water), compression (to build gas pressure up to enable it to be injected into the export pipes) and power (needed to run equipment) require a series of bi-lateral agreements. Smaller operators are heavily dependent on the reliability of big-players’ infrastructure. Sometimes alignment of incentives to operate effectively are missing and are, apart from oil price forecasts, the biggest economic blockers for marginal development.

The chairman of a large service company, and member of the Bestem Network, pointed me to a story by Robin Pagnamenta of The Times newspaper [Link] (Sept 9th 2015) explaining how the “great and the good” were meeting to discuss a proposal to pool infrastructure including, warehouses, subsea equipment, support vessels and other facilities. What I found interesting was, that while there was agreement that cost could be saved by pooling (non-core) operations, there was no talk about how to share the offshore installations and associated processing capacity.

Sharing bases and logistics will make things more efficient but won’t address the issues surrounding reliance on infrastructure operated by others. I can see how this will delay the inevitable slow down but not how it will facilitate drainage of marginal areas. It will not tackle the thorny area of non-common interest involved in sharing primary core assets nor maintaining shared operational schedules.

Further I can see that implementing shared arrangements for support logistics will take time to sort out, give the impression of progress but ultimately fail to unlock the opportunities that are present. Of course, go ahead and do it, but don’t think that this is all (or even the best) that can be done. Fundamental changes to the operator processes and license management in the UK sector is required, pretending that there is no problem with operator behaviour and narrow commercial interests as the JOA level cannot be avoided if we are to save this opportunity for the nation.

What do you think?

Interview with Short Allerton

Introduction

On the 10th of Sept 2015 I caught up with one of my earliest mentors, Short Allerton. Short is well known in the Oil and Gas industry. For those who have not met him yet I highly recommend you find a way to. Among Short’s many achievements he was BP Exploration’s Planning Manager and their Chief Geophysicist in the 1980’s, he was a co-founder of Dragon Oil and has been an independent advisor to service companies and the boards of various VC backed ventures. He is one of the most inventive people I have had the pleasure to know and he has no fear of telling it like he sees it. I sought out his opinion on what we can do to fix the North Sea basin and below are some of his thoughts.

Gareth: So Short, you’ve forgotten more about the North Sea than most people have ever known. What do you think about my stance that draining the North Sea should be a priority for the nation?

Short: Your article caused me to recall when I first went to work in Russia in the mid-90s for Schlumberger. The oil companies I met had no word for ‘profit’. They only talked about ‘revenue’. After all, who needs to be concerned that producing 100 barrels of fluid to extract 1 barrel of oil was ‘unprofitable’ if the barrel of oil could generate ‘revenue’, and that was what the oil men were measured on, while the means of production (pumps, electricity, separation) was just a ‘cost’ to the centralised ‘command-and-control’ system. You must remember that, to achieve your aim, commercial realities must be met.

Gareth: OK, I understand that we need to be commercial about it. Although we must be careful to consider a national, rather than company, accounting point of view. What do you think is necessary to do this?

Short: I think both perspectives need to be respected. If your vision is to find ‘smart’ ways to extract more hydrocarbons at these low oil prices, it will require more than new technologies. To be commercial will mean more than squeezing the profits of service companies. You seem to imply in your article that the biggest gains (both in production and thus in revenue, even profit) will come from savings made by owners of assets working in a different way to take advantage of each other’s infrastructure. I think you are probably right.

If you are trying to generate momentum behind interested oil companies working together to come up with win-win schemes through cooperation, then I can admire your initiative.

Gareth: OK, thank you for your support. What do you think the keys to success will be?

Short: To do this will need someone with a near total ‘overview’ of what those assets are and how they might work together.

In my experience, most oil company personnel are focused on their own assets, and it’s rare to come across anyone with the wider perspective. It was true back in 1985 and I’m pretty sure it is now. Perhaps the best people to be in that position are the O&G experts or the industry advisers to the Government. Perhaps this is the role of DECC or even the OGA? I know they publish some data on their website about the infrastructure installed, but I am not sure how useful this information is.

Gareth: So, what you are suggesting is what I’ve been taught to call an information gap. You’ve been in this industry for longer than most, do you have any experience in a situation where an overview of information was valuable?

Short: 30 years ago, I happened to be in a position to grasp a reasonably complete picture of the North Sea oil business. I was able to use that grasp to ‘map out’ a future timing of when the various gas discoveries industry-wide would come on stream, based on an analysis of the gas demand growth in the UK, the impact of Norwegian sales to the UK, the decline rate of existing producers, the price per therm to bring on new discoveries etc, etc, etc. This analysis shaped our exploration and production strategy in the North Sea for the next several years.

I was able to do this because I was in charge at the time of the subsurface exploitation of 25 BP fields spread throughout the Southern, Central and Northern North Sea and Western Margins and I had a great team working with me. I’m sure our analysis did not work out as I predicted – that isn’t my point. However, it gave us a ‘direction’ – when and how to invest, and where (and why). I had an overview of the data and could see the connections. I am sure that with all the small discoveries and interdependent satellite sub-sea developments it’s much more complicated now.

Gareth: So what do you think it will take to “make it happen”?

Short: I have the feeling that to get this off the ground, someone has to come up with a ‘killer app’ – a scheme that brings the assets of two companies together in a win-win solution. Once it’s been shown that it can work, hopefully more of the rest will be tempted to follow – or at least to talk, listen and think – and see the potential.

Infrastructure sharing in troubled times

I didn’t go to OE this year. I don’t think I was alone. From the reports I’ve heard things were quite subdued, except there were many people looking for work, apparently we are approaching 70,000 lay-offs in the UK Oil and Gas industry since 2014. Reports in yesterday’s guardian suggest that there is still more job cuts to come. This report in CITY AM – shows how the perception in London is being shaped and the urgency of the situation is being lost. CITY AM quoted job losses of only 5,500, and for many of the casual money men down here, that is all they will read.

The oil price is low. I remember when it was less than 25% of the current price– this report from the independent reminds us of $9 oil. In 1998 we also had the Asian currency crisis which started in 1997, what could a 75% drop in price do? With the recent wobbles in the China market, and talk of the commodity super cycle that wasn’t in the FT, is market perception changing, and perhaps there is further to fall?

I was pleased to see that Andy Samuel was quoted welcoming the efficiency task force – but I fear that these cross-company committees will be slow and ponderous. I also fear that operators will see this as a way to try to squeeze supplier prices and hurt the value chain. In my opinion, urgent structural change will be required to enable us to extract the resources that lie under the North Sea. Urgent because we need to maintain the infrastructure that will enable the extraction. This is a national opportunity and one that requires a national regulated response.

Andy was quoted as saying “The ETF is taking a three pronged approach to drive greater efficiency under the themes: Business Process; Standardisation; and Cooperation, Culture and Behaviours.” – Well frankly I don’t think this will be enough. I think the OGA must act, and use the powers it has (or obtain the ones it needs) to enable this. Of course, action like this is for the brave. Look at the trouble the control of access tariffs had in Norway, with investors suing the state. There must be questions about this with the recent private equity stakes being taken in CATS , FUKA and SIRGE – in one way this simplifies the access rights and can serve the needs of the customer better, but in another it centralises power in a way that only quick regulatory intervention can balance.

Resource nationalism

A colleague whose opinion I respect, had an interesting reaction to my recent article “Can we get the last drop“. He said that perhaps I was being rather nationalistic, perhaps you agree?

Unlike the points made in this Forbes magazine article, when I say that I don’t want to enrich other countries I don’t mean we should act like Venezuela and nationalise assets. I mean that I want any wealth created by the extraction of the resource to be available in this country (as private, taxable profit). I prefer not to see national treasure being exported to other countries in return for a product that we already have. Further, I think if we don’t act soon we won’t be able to act at all.

When I reflected further I realised that every country where I had worked except the UK and main land Europe, there was a general acceptance that energy and resource policy was of national interest. Even the USA has trade policies that govern the export and import of crude oil and refined fuels. Of course, countries like Saudi Arabia and Kuwait have export policies that not only move the commodity price but also are used to generate political power by choosing which countries can receive exports and where downstream investments will be made.

I am no politician nor would I claim to be a student of history. I am not an economist. I am an engineer and a business advisor. To me it is obvious that now we have an opportunity to extract resources from our reservoirs. There is a small time-window before the necessary supporting infrastructure is removed. As a country and an industry we are fiddling while Rome burns. If we do not act quickly then narrowly defined considerations will result in our opportunity being forever lost. I don’t think this is right.

We need to find a way to extract the last drops. Do it in a way that respects commercial reality while protecting the environment. If we don’t then we’ll end up exporting more of our treasure than we need to and all the people who rely on (or contribute to) our state treasury will be poorer.

It’s a challenge but I am sure we’re up to it. What do you think?

(Diagram from slideshare.net with thanks to AngloAmerican reference: http://www.slideshare.net/angloamerican/anglo-american-resource-nationalism )

Can we get the last drop?

North Sea Oil and Gas is the property of the people from the countries that surround it – UK, Norway, Denmark, Holland, Germany. As a citizen of the UK I don’t want any more of my country’s wealth to be transferred to the citizens of other countries than is necessary. I think that this means extracting every last drop from this resource that we economically can.

There seems to be a number of issues that will stop this from happening. I hear many reasons that might account for it including:

  • High cost of production in the basin;
  • Inability for companies to co-operate on problem solving;
  • Individual companies optimising for their goals;
  • Lack of access to shared infrastructure;
  • Environmental impact; and
  • Decommissioning liabilities

I sense that if action is not taken soon, access will be lost to critical shared infrastructure. Should we get the last drops out of the North Sea? What do we need to do to make this happen?