Aberdeen Shadows

Following the global collapse in oil prices, North Sea oil revenues have been in freefall. In the first three months of this year they fell by 75%, continuing the downward spiral from the middle of last year. The downturn seemed to have justified the fears expressed by No campaigners in the referendum on Scottish independence. Indeed, tax receipts from oil accruing to Scotland between January and March this year were £168m, down from the £742m gathered in the final quarter of 2014. And nowhere is the economic wind-chill factor being more sharply felt than in Aberdeen.

Amid job layoffs in a region long regarded as Scotland’s Klondike, the big oil operators are putting an end to the longstanding “two weeks on, three weeks off” working model for oil-rig workers. Crews are being pressured into signing up to a “three weeks on, three weeks off” equal-time rota. This is a tougher regime than in Norway, but is comparable with working practices in regions such as the Gulf of Mexico.

Aberdeen international airport show that passenger numbers in May took a hit of 8.1% against the same month last year. The occupancy rate for city hotels, meanwhile, was 68.9% in April, down from 77.9% in April 2014. More than 1,200 oil workers have been laid off in the region since the downturn began last year, while local businesses – minicab firms, hotels and restaurants – are reporting fewer customers. The property market, once seen as the most buoyant outside London, has begun to retreat, with worse expected.

But it is not all gloom.

Eclectic Fizz is the city’s premier champagne bar, as its manager explains “There’s still a lot of money in this place. You might ask yourself where it’s coming from, but it’s still there and it’s still evident. Of course, the falling oil prices have had an adverse effect, but that’s happened all over the world. If this is what it’s like when money is supposed to be scarce, I’d love to see this place when the good times roll.”

Sales of Moët, the house champagne, remain healthy, he says, while prosecco and cava are still sold in high numbers for those who want as close an approximation of the high life as they can get.

It's Scotland's Oil

 Umm...not quite..

 China may soon get control of a large slice of UK North Sea oil supply, which is key to determining global oil prices, if bids by its state firms for assets of Canadian oil companies Nexen and Talisman are cleared by the regulators.

 The Chinese state-controlled energy giant CNOOC last Monday unveiled a $15.1bn (£9.7bn) bid for Canada’s Nexen, the second biggest oil producer in the North Sea. If successful, the takeover will be China’s largest ever foreign investment. If approved, the Chinese would take control of the UK's largest producing oil field - Buzzard - and the Golden Eagle development, which includes both the Golden Eagle and Peregrine reservoirs in the North Sea, about 43 miles off Aberdeen.

Oil from Buzzard, although only 0.2 percent of global supply, plays a crucial role in setting prices because it is the largest contributor to the Forties oil blend, one of four North Sea crude streams making up the Brent oil benchmark. Forties usually sets the value of dated Brent, a benchmark used for pricing more than half of the world's crude, including oil from Africa, Europe, Asia and the Middle East, giving a Chinese company for the first time unprecedented insight and access into this secretive, yet enormously influential market. Foreknowledge of North Sea supply dispositions will give CNOOC a leg up in its trading operations, not only in the North Sea, but worldwide, should the company choose to make use of what it will be learning. Of course, there is nothing illegal or suspicious here. This system has long benefited the established oil majors like Shell and BP who use their knowledge of North Sea production to trade both physical and financial products linked to the Dated Brent assessment, including Brent crude futures. Instead of being a pure price taker, China will have some insight into short-term fundamental shifts that affects either directly or indirectly the cost of the oil the country must import.

Chinese refiner Sinopec said it would pay $1.5bn for a 49pc stake in the UK unit of Canada’s Talisman Energy, also a top 10 oil and gas producer in the North Sea. Talisman has about 2,500 staff and contractors and is involved in 11 North Sea installations.

The two Chinese firms will directly own 8% according to BBC estimates but consultancy Wood Mackenzie claculates it as 13% of all UK oil production if both deals go through.

PLAYING RISK WITH THE WORLD

It all began like a good disaster film. The gas alarm sounded and the emergency evacuation started. Only a small contingent stayed behind, labouring to plug the leak. Having failed to do so after hours of trying, they turned off all the machinery and electricity and fled the platform too. When the last helicopter lifted off, it left the drilling rig alone on a swelling cloud of highly flammable gas from the deep. For almost an entire week flickering way up at the tip of the 490-foot stack was an open gas flare. a company spokesman thankfully noted, the wind had been blowing the gas vapors away from the platform. If it hadn't, and the cloud of gas had come into contact with the flame, there could have been a massive explosion threatening to trigger an environmental catastrophe. Total, the French energy company that owns Elgin, the stricken platform, had lost complete control. Nor was this accident without warning. Weeks earlier, engineers working on the Elgin had noted troubling pressure fluctuations in the capped line. They tried to stop it with so-called drilling mud -- but the gas was quicker.

Despite the massive expenses and technical challenges involved in "high pressure/high temperature" drilling, multinationals like Total are currently investing several billion euros in them. The reason for this is simple. As Hauge, the president of the Norwegian environmental group Bellona puts it: "The easily recoverable reservoirs in the North Sea will soon be empty." Indeed, there are not many deposits left that can be exploited using conventional means.

The combined output of all British drilling platforms now lies at only half of what it was in 1999. In the meantime, the fleet of several hundred British platforms is becoming superannuated, with accidents as well as minor oil and gas spills more common. Forty-four of these monsters even date back to the 1970s, and workers on them are forced to labor just as hard against rust as they do for oil. Jake Molloy, an organizer for the union representing oil workers, has said "ageing infrastructure, a lack of maintenance and installation integrity" are among the union's primary concerns and noted that oil-rig crews often work under life-threatening conditions.

The major oil companies are increasingly handing over their ancient equipment to smaller firms, which then go after every last drop of oil and liquid gas they can. Hauge, the Norwegian environmentalist, finds this worrisome. "Small companies have less capacity to manage big accidents, both financially and technologically," he says.

Given today's oil prices, it's now worth it for companies to go after deposits that would have once been considered uneconomical. BP recently obtained permission to drill for oil in waters more than 1,200 meters deep northwest of the Shetland Islands, off Scotland's northeastern coast. Despite obvious dangers, the region's rich deposits make it appealing. BP has acknowledged that, in the worst-case scenario, a blowout here could threaten the far northern regions with an oil spill that would far exceed even the 2010 Gulf of Mexico disaster in size. It calculates that twice as much oil would gush up and cause several times as much environmental damage. But the company also adds that this is, of course, "extremely unlikely."

That is also precisely what engineers thought when they were drilling for oil over 21 years ago off the Scottish coast under contract from the energy giant Mobil, which would later become today's ExxonMobil. Their huge drill was penetrating at a depth of some 500 meters when it inadvertently punctured a methane bubble under high pressure. In an instant, the sea surrounding the drilling platform was transformed into something resembling a whirlpool. As has happened with the Elgin, the entire crew made it safely off the platform. But methane, which as a greenhouse gas is extremely harmful to the climate, continues to bubble up out of the sea floor even today. And nobody can stop it.

Russia's Oil War

Just in case you may not be aware but the present crisis in the Caucasus may have more to do with oil and gas than protecting ethnic Russians .

Baku-Tbilisi-Erzurum pipeline (BTE) carries some six billion cubic metres of gas a year (bcm/y) to Turkey, some of which is then forwarded to Greece. As Azerbaijani gas output grows, the line should reach its full 20 bcm/y capacity by about 2014.The European Union is also backing proposals for development of essentially parallel lines to carry as much as a further 30 bcm/y of gas from Turkmenistan, and perhaps Kazakhstan.The EU calls the route through Azerbaijan and Georgia its "Fourth Corridor" - matching existing supply systems from Russia, Norway and North Africa - with concept projects such as the planned Nabucco pipeline from the Georgian-Turkish border to Austria seen as ways of implementing it.

Because transit through such a corridor bypasses Russia, it offers advantages to both Caspian producers and European consumers.Producers gain direct access to end-consumers at market prices, whereas at present Russia buys gas from Central Asia at one price, and then sells gas to Europe at much higher prices, the difference being far more than pure transportation costs would merit.

Other major lines that currently transit Georgia.

The biggest is the 1.0 mb/d capacity Baku-Tbilisi-Ceyhan (BTC) pipeline, which carries crude oil from Azerbaijan to the Turkish Mediterranean terminal at Ceyhan, from whence it gets transported by tanker to both Europe and the United States.

The next major line is Baku-Supsa, a 150,000 b/d line that has just reopened after undergoing substantial renovation.It carries oil to the Black Sea, but the port of Supsa is just 25 kilometres from Poti, the port which handles most of Georgia's imports and which was bombed and shelled by Russian forces.

who owns the North Pole - part 11

The Socialist Copurier has been following the scramble for the Arctic and its resources for a while now.
The lasted development has been the research by the US Geological Survey revealing that the Arctic is estimated to hold 90 billion barrels of untapped oil and has three times as much untapped natural gas as oil.
The figures from the USGS are said to be the first estimate of the energy available north of the Arctic circle. According to the survey, the Arctic holds about 13% of the world's undiscovered oil, 30% of the undiscovered natural gas, and 20% of the undiscovered natural gas liquids. Exploration companies believe the recent rapid ice melt in the Arctic may make it easier to get reserves out of the region.
Hence the importance placed on the competition for territorial rights and sovereignty in the Arctic region .

Grangemouth Strike

Unions in dispute are often depicted as selfish workers striking out of self interest. These workers are striking to prevent their company’s pension scheme being undermined for future workers joining the scheme. They are standing up to protect the pensions of future generations of workers in their industry. Isn't that altruism ? Isn't that self-sacrifice ?

Jim Ratcliffe, 55, owner of the strike-torn Grangemouth refinery , reported to be 25th in this years Times Rich List with wealth of £2.3 billion will have no doubt secured the future of his future generations and progeny .

Ratcliffe has grown Ineos rapidly by making ever-bigger acquisitions funded mostly with debt, says Breakingviews.com. “How come, one might ask? Surely even in today’s markets where liquidity is sloshing around, one needs to fund at least 20% of a deal with equity?” Ratcliffe gets round that requirement by using Ineos as the equity – focusing single-mindedly on growing cash flow to increase the company’s debt capacity. “That way, Ineos is ready to be used as collateral for the next deal”, ensuring that “every few years, he can triple or quadruple in size”.

Nor is Ratcliffe averse to blackmailing .

Having acquired ICI’s Runcorn chlorine plant in 2000, “after one of the longest due diligence exercises in recent history”, Ineos decided it had been “sold a pup” and began petitioning the taxpayer to bail it out. Ratcliffe went for broke, asking the Government for £300m: the alternative, he said, was the closure of the plant with the loss of some 133,000 associated jobs.
The press consensus was that “Ratcliffe of Runcorn should be sent packing”, but he nevertheless still managed to extract £50 million.

BP and Shell will together make record profits of more than $68 billion this year if the oil price stays at current levels, according to City forecasters.

Your Lives , Their Profits

A "frightening" report by the Health and Safety Executive which said the North Sea oil industry was not doing enough to safeguard the 30,000 people who work offshore. The report follows a three-year investigation of almost 100 offshore installations which revealed that on nearly 60% the state of plant was below an acceptable level and 16% of them were failing to comply with legislation.
Lessons learned and highlighted at the inquiry into the Piper Alpha disaster in which 167 men died in 1988 have been forgotten . Speaking at the launch of the KP3 report, Health and Safety Commission Chair Judith Hackitt said "corporate memory" had been "lost" since the disaster.

Unite union said: "It is clear to me there are companies out there which are still risking the lives of our members and the offshore workforce for the sake of a barrel of oil and that is unacceptable."

Findings :-
On 58% of installations inspected the plant was considered "poor".
10 of the 20 deluge systems ,vital in fighting fires , tested failed to meet standard.
Concern over key issues identified at the time of Piper Alpha, including Temporary Refuges and air conditioning, heating and ventilation.
The performance of management systems showed wide variations across the industry and even within the same company.
Poor understanding of potential impact of degraded, non-safety-critical plant and utility systems on safety-critical elements in the event of a major accident.
Senior managers not making adequate use of integrity management data and not giving ongoing maintenance enough priority.

Who owns the Atlantic Ocean - Part 1

Britain is preparing territorial claims on tens of thousands of square miles of the Atlantic Ocean floor around the Falklands, Ascension Island and Rockall in the hope of annexing potentially lucrative gas, mineral and oil fields .

"The Russians may be claiming the Arctic but the UK is claiming a large chunk of the Atlantic. Some states might ask why a big power is entitled to huge stretches of the ocean's resources thousands of miles away from its land, but that's the way the law is." - Martin Pratt, director of research at Durham University's international boundaries research unit .

Britain is accelerating its process of submitting applications to the UN - which is fraught with diplomatic sensitivities, not least with Argentina - before an international deadline for registering interests. Relying on detailed geological and geophysical surveys by scientists and hydrographers, any state can delineate a new "continental shelf outer limit" that can extend up to 350 miles from its shoreline. According to the convention on the law of the sea, applicant states may register their rights by "establishing the foot of the continental slope, by meeting the requirements stated for the thickness of sedimentary rocks".
Once demarcated, the ocean floor may then be claimed up to 60 nautical miles from the bottom of the continental slope. When territorial rights have been obtained, states have the right to extract any minerals, natural gas or oil discovered in the annexed seabed.
There is a deadline of May 2009 for claims from the UK and other countries to be submitted, although states that ratified the treaty later have more time

Greenpeace has described the process as a "land grab".

The Falklands claim has the most potential for acrimonious political fallout. Britain and Argentina fought over the islands 25 years ago, and the value of the oil under the sea in the region is understood to be immense: seismic tests suggest there could be up to 60 million barrels under the ocean floor. Britain has been granted licences for exploratory drilling around the islands within the normal 200-mile exploration limit and any new claim to UN Commission on the Limits of the Continental Shelf would extend territorial rights further into the Atlantic.

Who Owns the North Pole , part 6

Further to our earlier post pointing out the Russian expansion into the Arctic Circle , we now offer an update on the Canadian competition .

Canada raised the stakes in the battle to claim ownership of the Arctic by sending Stephen Harper, prime minister, on a three-day trek to the region, just days after the Russians planted a flag on the seabed at the North Pole.

“Our government has an aggressive Arctic agenda,” Dimitri Soudas, Mr Harper’s spokesman, said on Wednesday.

“The Russians sent a submarine to drop a small flag at the bottom of the ocean. We’re sending our prime minister to reassert Canadian sovereignty,” said a senior government official, according to Canadian press.

The Northwest Passage, which is the main focus of the dispute, has become a sought-after territory thanks to global warming, which has begun to melt the ice in these waters, exposing a potentially vast haul of natural resources. Studies have estimated that the Arctic has as much as 25 per cent of the world’s undiscovered oil and gas. According to some estimates, the Arctic contains billions of tonnes of gas and oil deposits, which could become more accessible as the ice cap that cover them begins to melt. This is happening just as their exploitation becomes more economically viable because of high hydrocarbon prices.
The melting ice could also open up a route through the Arctic archipelago that could shave off as much as 6,500km on a journey between North American and Asia, instead of using the Panama Canal.

The US, Norway and Denmark are also competing alongside Russia and Canada to secure rights to the natural resources of the Arctic.

Iraq - It was always about the oil

Our comrade at Mailstrom has posted a short animated cartoon that succinctly summarises the new Iraq Oil Law that is in the process of being passed by the Iraqi Parliament .

More Oily Profits

Continuing the Socialist Courier saga of the riches to riches story of the fortunate few .

Executive directors at Edinburgh-based Cairn Energy reaped the rewards of the oil and gas industry and shared in a £25 million cash-and-shares boardroom bonanza .

The company's directors' pay bill more than doubled, with chief executive Sir Bill Gammell netting £5.5 million in pay, benefits and shares.

In 2006, Gammell's basic pay and benefits increased 37% to £986,716, including a bonus equivalent to 100% of his £480,000 salary, plus further benefits worth £26,716. His short-term earnings were dwarfed, however, by a gain of £4,496,549 from the vesting of shares awarded under a long-term incentive plan (LTIP).

Exploration director Mike Watts pocketed £4.3 million. Watts also had reason to celebrate Cairn's share-price success in a year when his basic pay package climbed 31% to £581,844. This included a £350,000 salary and £210,000 bonus. Watts chalked up a gain of £3,724,869 on vesting of LTIP shares.

Group general manager Malcolm Thoms netted an LTIP gain of £3,359,503 to add to a £504,435 pay package.

Jann Brown, who succeeded Kevin Hart as finance director, and Simon Thomson, legal and commercial director, joined Cairn's board last November. They each enjoyed an LTIP share gain of nearly £1.7 million , as did Phil Tracy, engineering director. Brown and Thomson also each pocketed a £200,000 bonus .

Hart, the previous finance director , meanwhile, was paid £660,430 in his final year as a director before stepping down on November 17. He made a further £3,359,503 under LTIP.

This followed a series of bumper discoveries in Rajasthan, India , which saw the share price, which stood at 370p in January 2004, reach £25 last May.

Not such a taxing year for some

My , isn't the State generous to certain capitalists .

The Aberdeen -based oil and gas company Venture Productions have had a boom-time in 2006 with a 50% increase in output helped by bringing fields onstream and strengthened by acquisitions. It averaged a net production for 2006 of 44,706 barrels oil equivalent daily and conducted a £153m takeover of CH4 Energy .

"2006 was a record year for Venture and we have continued to make great progress in increasing both production and reserves," said chief executive, Mike Wagstaff.

In September it announced a profit of £97.7million in the six months ended June 30 .

YET:-

Venture said it probably would not have to pay any tax on its 2006 profits after claiming 100% tax relief .