What happened to our oil wealth?

For 40 years Aberdeen has been the principal base for the North Sea oil and gas industry. Indeed, it is now one of the global centres of excellence and is recognised as an upstream oil centre that ranks second only to Houston in Texas.

But how long can we sustain that position?

There seems to be little enthusiasm for the oil and gas industry in the UK. Despite the widely recognised view that North Sea oil and gas saved the UK economy in the 1970s – as Andrew Marr pointed out – it seems almost as if there has been a long-running and extraordinary drive to belittle its economic importance, Could it be that Westminster did not want to fan the fire of Scottish nationalism by admitting to the economic significance of the oil and gas offshore?

oil rig
Will the sun set prematurely on the UK oil and gas era?

Even now we seem to be sleep-walking into a situation where:
  • Billions of barrels of oil (estimated to be almost half the total already extracted in the past 40 years) may be left untouched.
  • We rely on various regimes in the east to keep our supply taps open (assuming we can afford to buy their oil and gas).

When some 75% of the UK’s prime energy needs are fed from the North Sea and 500,000 quality jobs in the UK depend on the industry, that is surely a prospect we must avoid at all costs.

Look at the other side of the North Sea for a very different example of how the North Sea bonanza has been handled.

  • The Norwegian oil and gas sector is buoyant.
  • More and more of the major players in global offshore oil and gas technology and services are moving into Norwegian ownership.
  • Norway is investing heavily in new oil and gas facilities.
  • The infrastructure of Norway’s oil capital, Stavanger, puts the infrastructure in Aberdeen to shame.

Not only is Norway seeing the benefit of an enlightened immediate view, it has also ensured that its oil industry will bring long-term economic benefit.

Norway started an oil and gas fund in the early days of the North Sea industry. The Norwegians estimate that their oil fund will grow over the next ten years from $430 billion to $850 billion.

By contrast, on this side of the North Sea we have no such nest egg. Indeed, our national debt in November 2009 was a staggering £829.7 billion and on public services we continue to spend £247 million per day more than we earn.

It seems obvious that successive governments have looked on North Sea oil as simply a short-term cash cow to support their spending plans, with no thought to building a long-term benefit.

Not only do we now have little to show for the what Andrew Marr called the “epic” achievements of the oil and gas industry, anyone looking over to the other side of the North Sea can see that Stavanger is overtaking Aberdeen and the United Kingdom.

Are their sights set on taking Aberdeen’s crown as Europe’s energy capital?
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