Get out of the way of digital Chris

A friend of mine runs operations for one of the larger players in the North Sea. He has a chap who works for him. For the purposes of anonymity, I’ll call him Digital Chris.

Digital Chris is a very valuable person. He’s what’s referred to as a “Barrel Chaser” he’s the trouble shooter, the ideas man, the guy that gets things done. Digital Chris adds thousands of barrels of production each year. Production that would otherwise be locked up due to process constraints, lost through shut-in’s and trips or lost through delays getting things back on-line. Digital Chris probably contributes a few million pounds of cash that drops straight to the bottom line.

It’s odd then that not everyone is like Digital Chris and that people like him are so rare. I remember there was a chap I met who worked at Elf in the 1990’s who I’ll now refer to as “Digital Martyn”. I hope he won’t mind me name checking him – Martyn Beardsell – https://www.linkedin.com/in/martyn-beardsell-5639aa1/

Digital Martyn worked as a reservoir engineer and seemed to be able to use software tools he had available to construct answers to geological modelling and reservoir production questions in ways that others couldn’t. He could take information from many different disciplines, combine them and use it to solve sub-surface puzzles in new and imaginative ways.

Digital Martyn and Digital Chris are digital pioneers, a different type of digital twin if you will. They may not think of themselves this way but they are. The problem-solving results they achieve are not only orders of magnitude faster & better than whole departments of people, but I’d go as far as to say that they spot and solve problems to unlock opportunities that would otherwise be lost forever in the fog of bureaucracy.

What’s interesting now is that if you walk into a G&G department they are no longer divided by discipline as they were once: Geology, Petrophysics, Geophysics, Reservoir (with geochemists and bathymetry not knowing where to report); instead they are organised as “Subsurface” and divided by business objective Exploration, Development and Production.  Computing power and data was the underpinning of this change. All companies now organise their G&G departments and behave in the way that Digital Martyn pioneered 25 years ago. I suspect 25 years from now all operations groups will organise and behave in ways that Digital Chris, and those like him, are pioneering today.

The BBC reported that there will be a requirement for 10,000 digital workers in Oil and Gas in the next 20 years. http://www.bbc.co.uk/news/uk-scotland-north-east-orkney-shetland-44067949 On average that means each of the 50 or so operators need to find 10 Digital Chris clones each year. My friend has only found one in the last 15 years.

If Martyn and Chris are twins separated by 25 years and, if Digital Chris is a pioneer, there are three things the wise oil company executive should do: Learn to spot more digital pioneers; develop and grow them; and help them be successful in their roles.

To help you spot them, here are the traits of a digital pioneer:

  1. Is technically advanced in area of specialty
  2. Is a creative problem-solver
  3. Maintains broad overview of situation
  4. Prioritises attention to areas that maximise value
  5. Digs into extreme detail when required
  6. Tests Hypotheses with data, discarding ideas when necessary
  7. Develops networks and creates social and political capital
  8. Naturally works across organisational boundaries
  9. Can’t stand bureaucracy and form filling

 

Once you’ve found them here’s a few suggestions to help them develop and grow

  1. Develop tools to gauge the business impact of decisions
  2. Create common language to enable discussions on relative value
  3. Share strategic vision and what will be considered “good”
  4. Reward the identification and quantification of problems
  5. Provide unfiltered access to whatever information is needed, even if only needed for curiosity
  6. Encourage diversity of approach and non-conforming ideas
  7. Ensure that safety is not compromised by new ideas without killing the idea-generation process itself

As they develop, it’s your responsibility to help them be successful in their roles

  1. Prevent nay-sayers from using trivial detail to thwart progress
  2. Align interests by addressing the gap between process-driven functions like finance, procurement and IT and those working in the white-heat of operational time-frames
  3. Deploy technology that reduces information-friction and promotes transparency
  4. Try to work with the minimum of forms, reports, emails or meetings

 

It’s going to be a long process to re-equip the whole workforce with digital skills, some of that will happen naturally as new workers enter the industry. There will be a need for conversion to new ways of working to be established within existing workers as well.  The challenge is going to be attracting new people with digital skills, embracing those new skills and associated ways of working (letting them flourish and keeping work meaningful and not frustrating) then combining them with the know-how from established practices in the industry.

In the short run we’re going to need to work in teams – and teams with diversity of thought and approach. Not the sort of team I’ve seen (and experienced) where all new digital methods are pooh-poohed. Not the type of “team” where the old guard try to reprogramme the progressive new digital guys to adopt the way it’s done here – and the digital guys opt out and are replaced with IT people (who haver IT skills but are not Digital, see traits above). The IT guys end up going off on IT projects for their own sake and impose so many restrictions on technology adoption by the operations teams that the whole thing falls flat and fails.

Be Digital!

 

 

 

 

 

 

 

 

Industrial strategy revisited

Today, May 21st 2018, the UK Prime Minister, Theresa May is scheduled to give a speech regarding AI and the use of health data. This is the start of the revelation of the UK government’s new industrial strategy. From my vantage point, I see this political response to be part of the Fourth Industrial Revolution. My post was written (and published) before this speech and is a naughty attempt by me to see how well her speech writers know their political history. I have framed this in the terms of the Oil and Gas industry, Mrs. May’s speech will address Health Tech, but maybe some of the broader themes will resonate.

Industrial strategy is a something that the government hasn’t really majored on since the days of Anthony Wedgewood Benn.  They do say that history doesn’t repeat – but it does echo. This post draws on the “White Heat of Technology Revolution” speech given by Harold Wilson in October 1963.

To provide some context, Mr. Wilson’s speech was given during the early days of the 3rd industrial revolution. At this point we were seeing the start of computerisation and automation. Within a few short years we would see: the end of the typing pool; the death of the statistical time-and-motion studies; ledgers would be replaced with spreadsheets; and punch cards with magnetic tape with hard disk drives.

Unlike Mr. Wilson, who basically suggested that we better get on board with computerisation or we are all doomed; it appears that Mrs. May’s speech is going to suggest that AI can help cure cancer. Maybe it’s true that you can catch more wasps with honey than with vinegar. Mr Wilson’s political approach led, eventually, to the “Winter of Discontent” and the inevitable computerisation/automation led to the mass unemployment and the industrial upheaval of the 1970’s. Perhaps there are “interesting times” ahead?

I’ve taken some liberties by extracting parts of the 55 year old speech and reframed them. Perhaps you, too, will hear the echoes of history and see the implication of the change that we now face. For a transcript of the full speech have a look at this link

White Heat of Technology in Oil and Gas

(with apologies to Harold Wilson)

Now, this morning, I present this blog post to the world, the oil industry and the 4th Industrial Revolution, because the strength, the solvency and influence of the oil and gas industry which some still think depends upon nostalgic illusions or upon sub-sea posturing – these things are going to depend in the remainder of this century to a unique extent on the speed with which we come to terms with the world of change.

There is no more dangerous illusion than the comfortable doctrine that the world owes us a living […..] From now on The Oil Industry will have just as much influence on energy supply as we can deserve. We have no accumulated reserves on which to live.

It is, of course, a cliché that we are living in a time of such rapid scientific change that our children are accepting as part of their everyday life things which would have been dismissed as science fiction a few years ago. We are living perhaps in a more rapid revolution than some of us realise. The period from 2018 until the mid 2020’s will embrace a period of technical change particularly in production methods, greater than the whole industrial revolution and period of computerisation that went before.

It is only a few years since we first talked about digitalisation […..] Let us be frank about one thing. It is no good trying to comfort ourselves with the thought that digitalisation need not happen here; that it is going to create so many problems that we should perhaps put our heads in the sand and let it pass us by. Because there is no room for Luddites in our industry. If we try to abstract from the digitalisation age, the only result will be that the Oil Industry will become a stagnant backwater, pitied and condemned by the rest of commerce.

[….]

Because we have to recognize that digitalisation is not just one more process in the history of computerisation, if by computerisation we mean the application of technology to eliminate the need for data gathering and analysis by middle-management. The essence of modern digitalisation is that it replaces hitherto unique human functions of: risk assessment; judgement, decision making in the face of uncertainty; and ultimately action taking. Now digitalisation has reached the point where it commands facilities of memory and of judgement far beyond the capacity of any human being or group of human beings who have ever lived.

[….]

Or listen to the problem in another way. We can now set a machine learning system so that, without the intervention of any human agency, it can produce a new set of algorithms smarter than itself. And when these tools have acquired, as they have now, the faculty of unassisted reproduction, you have reached a point of no return where if man is not going to assert his control over machines, the machines are going to assert their control over man.

[….]

The problem is this. Since technological progress left to the mechanism of private property can lead only to high profits for a few, a high rate of employment for a few and to mass redundancies for the many.

[…]

Now I come to what we must do, and there are four things:

  1. We must produce more digitally trained engineers
  2. Once produced we must be more successful in keeping them in the industry
  3. We must make intelligent use of them
  4. We must organize the oil Industry so that it applies the results of their insights to the efficient production of hydrocarbons

[…..]

Relevant, also, to these problems are our plans for on-demand cyber training and MOOC’s (Massive Online Open Courses). These are designed to provide an opportunity to those who have not been trained in digital methods to do so with all that the internet and mobile technologies can offer.

[…..]

I have talked in other companies to ex oil-and-gas digital-workers who have left the industry. It is not so much a question salary; it is the poor valuation put on their work by our industries; the lack of interest in their work; and the inadequate provision of digital infrastructure and equipment. It is because in many cases in the Oil industry today, promotion of those versed in technological methods and their new ideas for ways-of-working are thwarted by middle management.

One message I hope this conference can send out, not only to those who are wondering whether to leave the industry or not, but to those who have already left is this: we want you to stay here. We want those of you who have left the industry to think about coming back, because the industry is going to need you.

[….]

The oil industry that is going to be forged in the white heat of this revolution will be no place for restrictive practices or for outdated methods on either side of IT or the Business. We shall need a totally new attitude to the problems of educating for changing working practices. If there is one thing where the traditional philosophy of capitalism breaks down it is in the training for digitalization, because quite frankly it does not pay any individual operator, unless it is very altruistic, quixotic or farsighted, to train the digital workers if it knows at the end they will be snapped up by some unscrupulous firm that makes no contribution to the training. That is what economists mean when they talk about the difference between marginal private cost and net social cost.

I’ll leave you to read the original and draw your own conclusions, I don’t agree with all the cut-and-thrust and pro-soviet views expressed but there are echoes from history that we ignore now at our peril.

Image Credit is from MI5. Oh, and if you like a good conspiracy theory have a look at the denials on MI5’s website about the alleged plot to bring down the Wilson government of 1974-76, and – interestingly – that George W Bush was head of the CIA (who knew? He kept that quiet). https://www.mi5.gov.uk/the-wilson-plot

 

 

Oil Companies Can’t Innovate?

I have just returned from two digital-operations conferences in Aberdeen. There was a common complaint among technology providers. They complained constantly that oil companies are slow to make decisions and don’t innovate (or specifically – buy their products). Some vendors even suggested that oil companies were 20 years behind the curve – that there are proven technologies available and in use in other industries that are yet to be deployed.

Of course, this is demonstrably wrong. Other than space and defence, I cannot name many other industries that can do something comparable to placing a drill bit 3KM into the earth in a water depth of 1KM with an accuracy of a few tens of meters. Engineers do this with real-time information from the drill-bit being beamed across the globe to operations centres thousands of miles away. That’s pretty amazing.

In truth – much engineering innovation comes from service companies rather than oil companies. Lots of technology and information processing is applied to exploration and drilling, a lot less in production-operations. The split in innovation from oil company to service company can be traced to decisions in the 1970’s and 80’s, the efficiencies and breakthroughs arose from companies such as Schlumberger, Gearheart and Atlas. However, the super majors such as Shell, BP and NOC’s (National Oil Companies)  like Aramco still undertake loads of research and have come up with solutions – such as polymers, de-ionised water for injection and their own seismic interpretation algorithms.

Still the point is valid – the 4th industrial revolution will mainly affect industrial operations. There is a distinction between operations within the business of oil-field services, and operations within the production of hydrocarbons. Both have the opportunity to become more efficient. Despite the opportunity, I’ve witnessed the complexity of buying and lack of progress in technology adoption within oil company operations, and it’s very frustrating.

I had a conversation with a senior exec at one of the new independents. I asked him why new ways of working were not being adopted.  His answer was very interesting. He told me that his team had just completed a new well on an old field. The well cost about £20m, took about 8 weeks from spud to completion, and was flowing at 3-5K BBl/day. It was simple, quick, contained, could be purchased as a work-package and was very much business as usual. No disruption to the organisation. That’s a return of more than 100% pa, a payback period of less than a year, and simple.

New technology implementation (the types of activity I was proposing) couldn’t promise that sort of percentage (or absolute) return, sounded complex and would – inevitably – require significant change to implement within the organisation. He had a point.

But that’s not an excuse. One day, and it may be soon, the sort of margins available on wells will disappear. There will be fields where the lifting cost exceeds the sale price for crude – but where there are still significant hydrocarbons left in the reservoir. In these situations, the impetus to reduce the cost of operations will be provided by the opportunities for profit. Somebody will be interested.

Look at what happened with shale in the USA. Fracking is not a new idea. The innovation of shale came from the combination of planning drainage patterns, drilling accurately, hooking up without interruption and – crucially – increasing the rate of development while dramatically reducing the per-well cost. Once this approach to development was established, it was game on.

When the big boys bought in – I was at BG we bought into Exco [link] – they didn’t come to the low-cost shale drillers and tell them to adopt the big-oil processes. The ponderous decision making and bureaucratic approvals required for $100m HTHP that takes 6 months to plan and drill, would have been impossible to handle the programme needed for a campaign of sub 100K 4-day wells required for shale.

It’s going to be the same again. With the late-life fields and new players, someone is going to figure a way to get the operating costs per barrel in a late-life field down below $10/Bbl and the big-boys are going take notice and learn.

The innovation required is going to come from low-cost technologies combined with an efficient operating model. Clay Christiansen in his book The Innovators Dilemma [Link  ]examined the disk drive industry and how the “big-oil” of storage were out competed by start-ups with sub-performance (but cheap) technology. Once a foot hold was established in the market – the performance of the new technology rapidly improved to the point where the big buyers switched. This left the previous big providers to decay into obscurity.

The North Sea oil industry was a pioneer in offshore development and much of the current techniques for long-reach directional drilling, FPSO and sub-sea originated there. With the business opportunity afforded to entrepreneurs by late-life field extensions, now is the time for innovation in how to operate cheaply. On-shore Middle East can produce oil sub $10 / Bbl the Offshore North Sea is $45. It’s time to innovate that gap away. (link):

(OK, I know the figures aren’t that simple due to capex and taxes but the principle stands!).

Image credit: https://jillwallace.com/vignettes/2017/11/8/pimple-on-the-ass-of-elephant

 

 

 

Digital disruption landscape for upstream oil and gas

I was recently asked by a client for assistance in examining how their business strategy might be affected by Digitalisation. This company is a mid-tier upstream operator with a mix of assets mostly non-operated but does have some where it is the duty-holder.

So I’ve propose the following five point map to classify where the disruption could occur in the upstream business. This helps to define not how, or when,  but where disruption is possible. This framework helped us examine what threats and opportunities are likely to emerge in each area and I thought I’d share.

Please feel free to comment and I will keep this updated  for the network.

Demand for Oil and Gas

  1. Digitalisation in the wider economy may affect the demand for energy through different transport usage, renewable control, demand management and micro-grids.

Access to Resources

  1. Access to operate resources may change as national owners find different partners to help them monetize geological wealth
  2. Opportunities to become a non-op partner may change as operators get more certain about their outcomes and require less diversification in their portfolios
  3. Competition for resources increases as development and production services become purchasable/tradeable activities
  4. Transparency of operation and methods to extract changes what is required to retain a license to operate
  5. Better techniques for collecting and interpreting data leads to more resources being found and better development pre-planning (westwood puts the commercial success rate at between 30% and 50% https://www.fircroft.com/blogs/less-drilling-more-success-the-state-of-exploration-drilling-so-far-in-71921114313 )

Development and Operation of Resources

  1. Digital planning and modelling combined with better logistics and manufacturing/construction techniques reduces the capital requirements for fields meaning lower barriers to entry
  2. High frequency low-cost drilling reduces the sunk-cost nature of investment, reduces cyclical volatility of supply/demand imbalances and hence expected return on capital
  3. Better information leads to increased recovery factors and ultimate value of assets. (Currently this is estimated to be below 40% http://www.spe.org/industry/increasing-hydrocarbon-recovery-factors.php )
  4. Better information, co-ordination and reduced waste leads to lower operating costs per hour of activity (for some bench marks check here https://knoema.com/rqaebad/cost-of-producing-a-barrel-of-crude-oil-by-country )
  5. Better prediction of failure and real-time optimization of fields leads to higher efficiency and hence accelerated cash-flow (currently 73% in North Sea https://www.ogauthority.co.uk/news-publications/news/2017/uk-oil-and-gas-production-efficiency-rises-to-73/)

Sale and transport of product

  1. Better information about the crude quality and refinery / other consumer plant configuration leads to higher yield / lower cost processing
  2. Information about the location of supply and demand enables better optimized transportation and reduced costs
  3. Better prediction of both future production and future demand enables balancing of both. This leads to changes in the premium available from trading and who captures it

Human elements

  1. Automation leads to different models for distribution of wealth among the middle classes (no longer based on work)
  2. Automation leads to people choosing to add creativity and seek challenges in different environments and under different conditions
  3. Changes to the working motivation scheme means modernization is required for operating model for Oil and Gas industry to attract talent

 

 

Image credit: https://www.pmfias.com/natural-gas-distribution-world-india-petroleum-gas-value-chain-upstream-midstream-downstream-sector

 

 

4th Wave Value – Upstream Oil and Gas

I’ve been engaged in several discussions recently on the benefits (or otherwise) of the 4th Industrial revolution [link] applied to oil and gas. I’ve decided to write a couple of pieces on this topic so I can refer to them with clients.

Technologies driving the revolution

I accept the WEF identification of the following general technologies that underpin the revolution:

  1. Wide-spread sensing of information
  2. Increased computing power, predictive models leading to increased understanding
  3. Artificial Intelligence leading to:
    1. Automation of actions
    2. Optimisation of whole systems
  4. Distributed, additive manufacturing

Benefits from the revolution

What will be the outcome of the 4th Industrial Revolution for upstream if we are successful?  Well there can only be three fundamental differences that can be made – I think we’ll get a combination of these:

  1. Per unit cost reduction in produced barrels
  2. Increased safety for the people involved in operations
  3. Decreased impact on the environment from activities

Items 2 & 3 tend to be driven on a compliance basis and form the requirements for permission to operate granted to companies by society using various methods of regulation, consumer pressure and protest. For my purposes I’ll assume that these are utilities [link] and that we always want more when there is no increase in cost, and that we’re unlikely to cut spending or trade down. Therefore, any cost-neutral improvement will be adopted and spending will only increase when it is mandated.

Driving down production costs

I am going to concentrate on the cost per unit production. This comes from the cost of capital used to find and develop a field, the cost to operate facilities, and provisions for decommissioning at end of life. As the owner-operator of an oil field there are distinct supply chains for each of four phases of life:

  1. Exploring, Finding and Appraising deposits of oil;
  2. Planning, Designing, Building and commissioning facilities to extract and transport it to market;
  3. Operating the facilities; and
  4. End of life decommissioning, facility disposal and restoration of the environment

Benefits for exploration

In the initial phase of oil field life I would say that we’ve already captured many of the benefits. Wide spread sensing and large computing power would be a great description of what happens with Seismic data, Geoscience earth-modelling and directional drilling.  I am sure that if I looked at the number of people employed and unit-cost of discovery of a deposit I would see a much more efficient scenario than we did in 1980. The figures are somewhat distorted on a cost-per-barrel basis as we have been finding smaller deposits (a feature of geology rather than our abilities).

Benefits for Development and Projects

In the field development phase, we have seen some ingress of new technologies – ROV, Subsea completions, dynamic positioning of FPSO’s and such has led to economically possible concepts for some small or hard-to-reach fields that we’ve found. Field and facility performance is more accurately understood through simulations and we’ve seen some benefits to designers from the use of CAD systems. There is still scope for development to reduce the cost and errors associated with Engineering, Procurement, Construction and Commissioning. There are few real-time feed-back loops here, or analysis of project simulations. The management of large capital projects is still a mine-field of risk, change orders, document control, cost-overruns and schedule blow-out. These are caused by fluctuations in the real-world vs. plan with late in-flight adjustments. More accurate planning, contingency, dependency management, construction order, logistics, pre-commissioning maintenance, start-up etc. would provide benefits.

Benefits for Operations

The revolution should be able to affect operational optimisation the most, this is an area almost untouched by the revolution so far. An OIM on a field from 1980 would recognise a lot of the technology (if not the work-practices) used today. The exception to this is the wide-scale adoption of communication meaning that the split between on-shore and off-shore is far less.

It is possible to argue that the 4th wave has enabled the shale revolution and that the operating practices from this type of development are fundamentally different to conventional offshore and on-shore fields. The operating margins are smaller, decline curves more dramatic and the constant drill-complete-operate cycle has forced change.

I may be controversial but I’d say a lot of the operational work-practice changes seen in the North Sea have majored on reducing manning offshore and increasing the safety of operations. I believe that, despite the vast increases in potential data, the fundamental way that information is gathered and acted upon has not changed much.

When I walk into a remote operations centre I see a lot of people collaborating with each other, lots of excel spreadsheets, cameras and discussion. Integrated planning and turn around planning are still being done off-line and I don’t see visibility of supply, logistics or automatic optimisation of these functions.

There is a conundrum here of course. The facilities that are in operation (and those still being commissioned) are not designed to harness 4th wave opportunities so we have (at least) two problems. Firstly we must retro-fit new concepts into facilities that will be with us for the next 30 years, and secondly we need to influence design and development so that this retro-fitting is no longer needed in the future.

Benefits for de-commissioning

It’s early days on the decommissioning front. I suspect that for operators the benefits will show up through normal procurement cycles. The smart profits are likely to accrue to those that can operate quickly and safely. Examples of clever automated technology are emerging – such as the self-levelling rams that lift whole top-sides fitted to the Pioneering Spirit [Link]

Next steps

With the current climate in Oil and Gas we’re seeing an increased interest in how to transform the operational environment and supply chain to drive out OPEX cost (development and exploration are of course now sunk [link)

Now I’ve set the context I’ll start to explore how an operator, or service company, can start to participate in these changes – what an operations business case will look like, what skills and approaches will be needed, what approaches are stopping innovation and what the risks are.

(Image source : http://ohioline.osu.edu/factsheet/cdfs-sed-2 )

You heard it here first folks…

I’m not normally known for left-leaning political judgement but – just in case you missed it the Scottish Government is being asked to consider a motion to fund public investment in the infrastructure of the North Sea.

“UK OIL would work with the Oil and Gas Authority to identify strategic assets that are potentially profitable. That would help to prevent platforms and pipelines being lost earlier than planned, and potentially help fund new ones for the future.

“We urgently need imaginative thinking like this now – otherwise the oil and gas sector could continue to decline due to lack of investment.”

Here’s the [link]

13 month’s ago this blog published an article which, amongst other points said:

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.

Here’s that [link]

 

 

Subsidy on the agenda?

Last year I suggested that there were strategic reasons to maintain North Sea production. The system of interconnected assets and their cross-reliance on each other means that it will be in the common good for “UK PLC” to maintain key infrastructure despite it being a poor proposition for individual operators.

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. [Link]

So I was heartened to see that David Cameron is in Aberdeen with what the FT called an emergency investment package. I was less pleased to see what the promised £250m investment was to be spent on:

The prime minister will promise a new “oil and gas technology centre” in Aberdeen to fund future research, including into innovative ways to extract oil and gas.

The package will also help expand the harbour and support the city’s pharmaceutical and agri-food industries to try to help Aberdeen diversify from its reliance on oil and gas. [Link]

Well that’s not exactly the response I was thinking about – seems to be a rather poor investment case for UK PLC. Luckily we’ve formed another task force.

His visit coincides with the first meeting of a new task force of senior ministers set up to deal with the issue, chaired by Amber Rudd, energy secretary. The group will include Anna Soubry, business minister, and David Mundell, the Scotland secretary.

Together with the OGA there seems to be plenty of civil servants looking at the issue.

True to form – the FT actually got to the nub of the issue with its parting shot:

Many in the industry are also urging George Osborne, the chancellor, to relax the rules around who pays to decommission oil platforms when they reach the end of their lifespan. Many argue that the strict laws making anybody who has ever owned a particular platform potentially liable for its eventual dismantling are discouraging companies from buying up ageing assets and investing in them.

One energy banker said: “One of the things that could really help is if we see more takeover activity, with companies buying either struggling rivals or older rigs.”But the main thing stopping that right now is that nobody wants to take on potentially massive decommissioning liabilities.”

The BBC covers his visit here [Link]

Despite the decline in oil prices there is risk capital available but to take this opportunity irequires a few critical pivots. They are:

  1. Decommissioning liabilities stopping the trade in assets to lower-cost operators
  2. Un-certainty surrounding enabling infrastructure operated by others
  3. Mis-alignment of interests between partners meaning operating committees stopping development plans

Perhaps rather than expanding Aberdeen Harbour we could change the rules and use this £250m to help sort these out? At least it would be a start.

What do you think, is the proposed disbursement the best use of the money?