The UK Government must adjust its strategy on North Sea oil or run the risk of losing out on over $400 billion of economic activity, tycoon Sir Ian Wood has warned.
Speaking to Holyrood magazine, he explained that the Government had to understand that it must not just be thinking what can be taken to the Exchequer next year, but instead how to set investment policy to maximise oil recovery over the coming decades.
Wood said that he thought the Treasury and the Department for Business, Enterprise and Regulatory Reform were now starting to understand this, but added: “it’s not an issue that we’ve had a lot of discussion with the Scottish Government about”.
According to Wood, Scotland is looking at a ‘Tale of Two Futures’. “The scenario is that we’ve taken about 35 billion barrels so far [from the North Sea], we could take another 16 at the low end or we could take another 24 at the high end. Now if you take the eight billion barrels’ difference at $50 a barrel, which is half the current price, that’s $400 billion of economic activity for the UK.
“We may have to consider taking less in the next three or four years to take a lot more. And what we must not do is leave eight billion barrels in the ground unrecovered because we couldn’t get the economics and the investment right.”
Wood explained that the North Sea is now at a mature stage, and that more money, therefore, had to be spent on getting oil to flow.
“Mature doesn’t mean old age and it doesn’t mean close to passing away. Most major areas around the world have got a mature phase and you spend a lot more money in maturity than you do in the early days. The early days had a huge capital expenditure, then oil flows pretty freely and then you’ve got to work to make it flow. And we have to start working to make it flow, we’re into that phase.
“There are still some new fields coming on stream but I think if we get it right, there’s another thirty to forty years of good strong oil activity and good strong business for people in the north-east of Scotland and for the whole of Scotland.”
He stressed that the continuing importance of oil and gas should not be overlooked. “Just because we have a huge carbon emissions problem and a problem with fossil fuels, we mustn’t make the mistake of somehow disregarding just how incredibly important an industrial opportunity [oil and gas] is, and the opportunity could maybe now extend itself into carbon capture and sequestration.
“I worry in some of the presentations I hear on energy, that it’s almost like we must forget about oil and gas and not talk about it. On any projection I have read from anyone, fossil fuels will still continue to be, and this is forty to fifty years ahead, 70 per cent of the world’s energy demands. So it’s huge.”
Wood also told Holyrood that he was disappointed at how party political the Scottish Parliament had turned out to be.
“I had a hope that with a Scottish Parliament that one thing that would happen was that with 129 elected people, sitting around a Parliament in Edinburgh, they would have a fresh look at the agenda for the good of Scotland, and there would be less [party] politics. This has not happened, there have actually been more politics. That has been my biggest negative about the Scottish Parliament… frankly, Scotland needs all the positive and constructive thinking we can get from the best people we have.”
He added: “It’s the same symptom of parochial Scotland. In the old days, the clans fought each other, and even in modern times, when I talk to business colleagues outside of Wood Group, people tend to think about competition within Scotland. We’ve got to find a way to beat this. That’s not competition – there’s a huge world out there!
“The competition in many things that we do right now is coming from around the world and the Scottish Parliament has got to get more in the frame of mind of looking at Scotland’s place in the world not Aberdeen’s place in Scotland or Edinburgh’s place in Scotland.”
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