North Sea Oil On The Rocks - The Kingdom Of Fife
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North Sea Oil On The Rocks
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Sea Oil On The RocksIn
my youth during the 1960s, the professions associated with household fitted
carpeting, cavity wall insulation; double-glazing, central heating and a lot
more lay in the future. At school, educators reliably informed students that
the Solar System had nine planets. Not so, say the scientists of today. These
days, the popular evaluation lists eight large planets with a few dwarf models
thrown in. Predictions of safe and cheap nuclear energy abounded and described
how each community might have one power station fitted into the same space as
an average tennis court. We were reliably informed by our educators that about
one third of all crude oil resources in the World had already been consumed. By
the millennium, the most sought after resources on the planet would be
exhausted. Luckily, these prognostications have been wildly inaccurate! In
modern times, the converse is closer to reality and due to the applications of
new technology.
Politics And Hydraulic Fracking
Fifty
years ago, the bulk of the Global Oil supply originated in the Oil Producing
Export Countries) (OPEC) and this provided each state with a vote as regards
fixing the price of oil and the amount of supply. Progressively though, other
nations invested as the prices rose and made such investment worthwhile. In the
United Kingdom, North Sea Oil came ashore for the first time in 1978 and where
it had the marked effect of strengthening the pound sterling. By the millenium
year of 2000, the best years of North Sea output had peaked and begun to
decline. A similar plight befell the Oil Production industries of the United
States during a similar period of time. By 1998, US oil demand was rising at 7%
per annum while local production was falling at 3% per annum. On a visit to
Texas, this author saw several examples of 'played out' oil wells in the state
and where there might be hope of revival in the shape of a controversial
technology called 'hydraulic fracturing' but better known in common parlance as
'fracking'.
Fracking
isn't new! It was first proposed by Floyd Farris of the Stanolind Oil and Gas
Coproration in 1947 and where a commercially viable oil rig using this
technique was employed.
The
difference in modern times is the widespread degree to which it is being
accepted despite predictions of ground water contamination and even
earthquakes. Despite this, a few countries have extensively used this practice
to renew their own local oil production capabilities.
As
of 2013, the United States leads the way having started 'fracking' on
commercial scales since 1949 and where around two million oil sites have been
subjected to this technology. About 43% of local oil production and 67% of
local natural gas supplies are generated by this means. There are more than a
million US workers employed in the industry and it is believed that the US need
for oil importation is minimal as a consequence. Problems began to emerge in
the 1980s but this hasn't stopped wider application of the technique. In 2012,
the USA had 1919 operational oil rigs.
British
onshore and offshore oil rigs have been using 'fraking' since the 1970s with
few incidents of environmental damage being reported. Despite this, the
European Community Government has suggested careful regulation of the industry
and it's probable that many more sites in the UK will be granted licenses in
the wake of this advice.
In
Canada, fracking in Alberta began in 1950 and has been steadily spreading ever
since. Many of the Canadian oil wells would not be commercially viable without
use of fracking. In 2012, Canada had 356 operational oil rigs. New
Zealand's Taranki region has had oil wells using the technique since 1993 and
where fears about the environmental effects have been carefully monitored
without any sign of dangers or contamination. South Africa is the latest
country to adopt the technology as of 2012.
Fifty
years ago, the main oil exporting countries were largely based in the Middle
East but not exclusively so. Libya in North Africa and Venezuela were the principal
exceptions. In the past fifty years, the USA has become virtually self
sufficent in oil and the United Kingdom and Norway have invested heavily in
offshore oil rig technology. Nigeria in Africa has become an expanding entrant
and exporter while a substantial part of the Russian economy relies on oil and
gas exports.
Overall,
this has led to a glut of crude oil in the global marketplace and where prices
have been falling to dangerously low levels. Hooray for the motorists and the
manufacturers of the five thousand basic products made from crude oil but the
flip side for North Sea Oil and the British economy is alarming.
The OPEC And North Sea Challenges
It
remains true that many OPEC nations rely heavily on their oil production
activities and exports and the continuing decline of this revenue in recent
decades has prompted them to consider and enact a plan with the intent of
regaining the control of oil prices that they have progressively had less
influence over in recent years. In this, they are greatly aided by the fact
that most OPEC installations carry far less operational costs than many of its
competitors. This allows exporters like Saudi Arabia, by example, to undercut
the prices quoted by their competitors and to a point where the competitors
cannot match these prices and to a point where operating viability becomes
threatened. The objective is to put such companies out of business, reduce the
competition and reintroduce scarcity of supply. OPEC would then be in an ideal
position to influence supply and prices again. In short, they're willing to
accept low prices in the short to medium term while others cannot survive in
the marketplace.
This
is bad news for the North Sea Oil Producers. Whilst crude oil has
different values according to quality and largely dependent upon refinery
distillations, Brent crude, extracted from the North Sea, is typically regarded
as one of the finest. Just a few years ago, Brent crude regularly fetched
$110/barrel and at the higher end of the scale, In recent times, the price has
tumbled to about $40/barrel or even lower and causing profit margins to
virtually disappear. Shell recently cancelled a three year order from the North
Sea despite a hefty multi-million clause in the contract. The exploration of
the 'Clair' field has been cancelled and many North Sea Operators have
introduced new work practices to reduce costs and staff numbers. Oil rig
workers have even suggested to this author that the quality and quantity of
food given to the workforce has declined markedly with many of them already
informed of major lay-offs occuring between now and April 2015. Much of the
workforce has already begun to seek employment elsewhere and it's been
suggested to me that several oil rigs are being made ready for moth-balling and
exodus in advance of the UK General Election in May. Coincidence?
Whilst
the mass redundancy listed in four figures across the board continues, the
knock-on effects are incalculable. What will be the effects on Grangemouth and
Aberdeen? The hope is that the price will rise gradually later in the year with
prices of around $60/barrel yet still making it a tight squeeze on profits from
North Sea Oil. In Scotland, and where the recent 'independence vote' favoured
'no', we might just have dodged a bullet by the narrowest of margins! All of
this might yet severely impact upon the Scottish economy more than other
regions of the United Kingdom.
Of
course, such dire circumstances are never fully recognised at the fuel pump on
the forecourt on account of the high levels of taxation applied to petrol and
diesel. A visit to the PetrolPrices web site (www.petrolprices.com) illustrates
just how little the garage forecourt owner gets in exchange to run his or her
business. These days, they get more selling sweets, coffee and newspapers!
Motoring
fuel costs are currently around par with that of 2010 but the rebound is
coming. Investment clubs are already forecasting a slow yet certain return to
former levels.Enjoy the cheaper fuel while you can but be wise and get ready
for the new additional costs that must be applied in the future,
Drink
Drive Levels Were Reduced from December 5th 2014 in Scotland