At last there has been some good news for the Scottish oil and gas industry, with the announcement a Scottish Government-backed initiative to encourage new measures in North Sea exploration is, well, in the pipeline.
It’s no secret this jobs sector has been subject to its share of setbacks of late. Oil & Gas UK says its annual activity survey paints a dismal picture after discovering the sector as a whole lost £5.3bn last year, the worst figure since the Seventies.
However, the new plans, which have been outlined by First Minister Nicola Sturgeon, now look set to stimulate much needed growth.
As well as promoting new field developments, which are expected to account for an estimated 40% production by 2018, the proposed new measures aim to catalyse much needed fiscal change in the sector.
This includes the introduction of an exploration tax credit and an investment allowance, as well as a reduction in the headline rate of tax in the North Sea.
The Scottish Government, in conjunction with key Scottish oil and gas industry leaders, has pinpointed the current fiscal policy as the number one reason for the stagnating exploration activity.
What’s agreed by all parties, political and commercial, is the North Sea remains a rich and plentiful source of oil – as well as employment.
According to the government, this means there is ample room for development and innovation – and it’s anticipated the proposed changes to policy will allow for a significant increase in exploration, particularly through the boost to emerging and smaller or medium-sized companies, who cannot presently enjoy the benefits of tax relief.
Norway is cited often as an exemplary model of how fiscal change can lead to prosperity in the oil and gas sector (incidentally, it’s also cited as the best place to see the Aurora Borealis but my Aunty B spent a week there: nothing! Not so much as a flickering bulb!)
Here the provision of an exploration tax credit has shown to have significantly increased exploration activity by existing companies, as well as emerging companies.
The Scottish government says it is optimistic we can emulate the successful model, which has seen exploration wells increase fourfold in just three years.
As always, the proof of the pudding will be in the scoffing; meanwhile, if this is all getting a bit too political, let’s get back to the fun stuff with a rundown of how all of this oil exploration will actually work!
Getting to the good stuff will need exploration, investment and new jobs.
Davey knows the drill!
When it comes to finding the good stuff, shock waves don’t always cut it (that’s sonic charges, not your hair gel).
So at some point we’re going to have to drill to know if we’ll have oil on our hands.
A mobile platform will perform this exploratory work – some of these facilities are ship-based, others have to be helped into place by a tow vessel.
Geologists – these people are easy to spot: they keep a pet rock in their top pocket and make jokes using the words gneiss and cleavage – drill to obtain a core sample for signs of petroleum, which they call a show (if you do move into this sector, you might want to make sure you get out more!).
Once a show has occurred, drilling stops and the geologists get together around a bunsen burner to perform tests to make sure oil quality and quantity are sufficient to justify further action. They may also make some more jokes about “slaty cleavage”.
They may also drill more wells to substantiate their, often ‘astonishing’, findings.
The final analysis is done on calculators: geologists usually have these embedded in their old school rulers.
Having established the worth of a deposit, it’s time to drill a production well and begin harvesting vast and untold riches.