“..if they possessed as much science as their officers and men had of courage and bravery. They are lions led by donkeys.”1
Attributed to: Jim Rae, Principal, Scientia et Sagacitas Limited,
Aberdeen, UK (a totally independent consultancy practice)
A very famous quote emanating from the First World War, which for me, sums up the capabilities and actions of the regulators and industry body in which we invested so much hope back in April. Since then we have been largely greeted by silence and procrastination in our pursuit of a practical solution (or raft of solutions) that boosts job prospects in the oil and gas sector and ensures retention of core capabilities and resources upon which to develop a meaningful global hub in the UK. The “we”, is anybody working, or reliant on the sector for employment or a living.
To be perfectly honest, I feel we have been sold a pup. It is now clear to me that the Oil & Gas Authority (OGA); OPRED (Offshore Petroleum Regulator for Environment and Decommissioning); and, Oil & Gas UK (OGUK), have little idea about the way the sector and its supply chain works, nor how to represent it effectively. From major oil corporations to the most specialist of SMEs, we have been let down by their lack of practical working knowledge of our business and their detachment from the troubles of our times, as they sit in their well-appointed offices in their safe jobs and tinker with concepts they have little idea about, and are afraid to approach those who do and expose their shortcomings. Such is the arrogance and ignorance of many that are supposed to represent us in this current desperate, COVID-19 effected era, when stakes are enormously high and rewards very difficult to attain.
So, what has been happening and to whom should we turn?
In April, 2020, the representative industry membership body, Decom North Sea, under the new leadership of Interim Managing Director, Will Rowley, submitted an innovative proposal to OGA describing how well decommissioning (plug and abandonment – P&A) could be a focal point for stimulating the market and channelling much needed work to the struggling supply chain.
In May, DNS were invited to join the OGA-led “Decommissioning Taskforce” and OGA-led “Supply Chain & Exports Taskforce”, surely a positive step forward? OGA advised it had already assessed the economics of a well p+a campaign multiple times and agreed on its positive value, expressing tangible support for this and the small subsea decom programme, also submitted by DNS, and these are seen as two primary targets.
In June, OGA assured the “SC&E” Taskforce that progress was being made with HM Treasury (HMT) and “multiple solutions” were being considered “in depth”, though no details were made public. As a consequence of these encouraging signs, DNS gathered together a wider team of decom and finance specialists to explore innovative solutions to the plans and fed the results of this dialogue into OGA. The following month, the Scottish Government published its “Just Transition” report, confirming the immediate value that can be realised and delivered to jobs and supply chain activities from a well p+a initiative.
In the absence of any more consultation being forthcoming, in August, DNS requested an update on behalf of its members, due to the urgency of supply chain concerns and impending job losses. An informal brief from OGA indicated that it was requesting a £100m loan and that HMT had “rejected” DNS’s wells p+a scheme (designed around advanced payment of tax reliefs drawn from the £12.9 Billion credit amassed in HMT by overpaying of taxes by oil companies with decom liabilities). When asked to confirm this in writing, OGA retrenched and changed the formal response to reflect the submission was not “dead” but still awaiting HMT’s response, but with no indication of possible timing.
Being aware of this procrastination and the obstructive behaviours, your “correspondent” posted several articles on the internet (notably “LinkedIn”) speculating on the delay and processes underlying the lack of action and calling into question the capability and remuneration of OGA internal “decommissioning experts”. Very surprisingly, a message is received requesting “The Aberdeen Pensioner”, your writer, engages with OGA Chief Executive, Andy Samuel. Intrigued, I accepted the invitation and duly took a call at home from the “top dog”. Well he is concerned at my negative stance and sets about telling me all the wonderful things OGA has done lately (including forwarding a cluttered “infograph” on decommissioning). I am duly unimpressed and say so. Particularly, as I do not think his team is suitably qualified nor experienced in the practicalities of decom projects to understand the basic concepts underlying the DNS submission and surprised that they never asked for a detailed explanatory briefing on the topic. Even more strangely, this interaction is followed up by a letter, giving me details of an OGA tax expert and an instruction I should contact him. Why? As I have no standing in the industry and represent nobody, but myself! He had also stated during our call that it is “not the job of OGA to lobby HMT, other Government departments nor politicians, on behalf of the industry”. I was gobsmacked! So, what do they do, then? The Authority has cost well in excess of £700+million in running costs since being established. Does this represent any kind of value for money, or just a convenient staging post for oil company executives as they search for their next big pay day, whilst the supply chain faces rate cuts and extinction?
But Surely Oil & Gas UK will Take an Interest?
Well, apparently, not too much! Notable by their silence since April, OGUK, takes an interesting stance on job retention. During a recent virtual consultation with The Rt Hon Kwasi Kwarteng, Minister for Business, Energy and Clean Growth, Deirdre Michie, Chief Executive, OGUK, reportedly interrupted the ever-present Union Representative, Jake Molloy, RMT’s Reginal Organiser and Chairman of the Offshore Co-ordinating group, as he was explaining the importance of retaining jobs in the sector, to correct him, that it was her opinion that “we are only interested in protecting and retaining high-skilled jobs, not all jobs2”. At this outrage, another participant, Gabrielle Jeliazkov, of Platform, reprimanded Ms Michie and demanded that the Minister note that every job is important and the OGUK representative’s view, as stated, was wholly inappropriate. It should be remembered that the composition of every pyramid is reliant on the strength of its lowest, basement layer and the “view from the top” is only possible if the entire structure to that point is sound and has integrity!
Having disbanded its “SME Forum” over two years ago, to service the interests of its “big oil” subscribers, perhaps miraculously, the Forum has been revived within the last few weeks. Obviously, the media coverage opportunities are perceived as now being greatly enhanced for the desk-jockey “champions” within OGUK. However, their real underlying ambitions are masked in a cloak of false concern, as clearly illustrated by the unguarded comment above.
So Where Does This All Stand Now?
A Summary Simply, I don’t know!!
Back in April, OGA were approached with a novel concept for stimulating the market by advancing the return of tax reliefs. Along with other initiatives, the OGA made a big noise about evaluating the industry’s ideas and taking them to HM Treasury. In May, the OGA Decommissioning Taskforce was formed and two of the primary targets for support were “Wells P&A” and “Small subsea decom activity”. In August, nearly 4 months later, the industry body, Decom North Sea (DNS) requested an update on progress, to break the secrecy of OGA’s internal procrastination.
But it appears, for reasons best known to itself OGA decided not to really bother communicating its thoughts to the industry it is supposed to promote and regulate and went ahead making proposals to HMT in secret. This set of proposals is widely speculated to have excluded a DNS member’s proposal that represents zero cost to the industry, Treasury and the UK tax-payer. Instead OGA proposed a substantial “investment” or direct capital injection (£100m) of Treasury monies into an “undefined wells p+a programme”. Correctly, it was turned down, because Her Majesty’s Government’s (HMG’s) policy for over 40 years has been NOT to fund decommissioning – no brainer!. What were OGA’s motives and what were they thinking? They never even consulted with the sector in the interim.
One has to ask what expertise does OGA have in decommissioning? Well, the discipline is within the management portfolio of an ex-corporate HR strategist with a strong operator focus and mindset; reported to by a career civil servant with zero practical knowledge of project management and apparently a passing familiarity with decommissioning and environmental regulation; supported by an ex-geologist from a major operator with some experience of planning offshore decommissioning campaigns, but no obvious supply chain commercial experience nor practical hands-on offshore decommissioning or onshore demolition project management experience; managing a team of graduates with MSc’s in Decommissioning (might I suggest this is analogous to the difference between passing the “theory element” of the modern driving test, but never having been out driving in a vehicle). If this is the team “advising” the Chief Executive on decommissioning matters and evaluating submissions, might I proffer the view that no wonder they got it so wrong and proposed a solution contrary to longstanding Government policy on the funding of decommissioning. Thankfully, the OGA’s tax expert is a highly experienced and skilled professional, but I wonder what was presented to him and in what form, to evaluate and comment upon? Ask the wrong questions and you will get correct but inappropriate answers. Same goes for retained independent tax advisers.
In addition, in the background and setting a context, the much talked about ‘Sector Deal’ still hasn’t been submitted (due to be in September, OGA now claims) – some 9 months after the oil price collapsed. Urgency doesn’t appear to be in their vocabulary. So, we now have to wait to see what can be saved from this mess. Meantime, jobs, resources and capability are disappearing from the UK supply chain and the communities that rely on it.
One has to wonder whether the OGA really cares? Whether OGUK has any real interest in anybody but large Operators? Are the “puffs” we read in the media and hear in broadcast interviews really just “fake news” to build profiles and justify cushy jobs with big salaries? I draw the conclusion that if it weren’t for the efforts of DNS, Subsea UK, the offshore unions and individual politicians, our sector would be doomed, just at a time when international prospects have never been brighter.
1 – Steve Jobs, Apple Corporation at Stamford University, Ca. commencement speech, 2005
2 – OPRED – “Offshore Oil & Gas Decommissioning Guidance Notes, November 2018”
(Correct at time of going to press – 30 August 2020)
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