CAB - 7 Oct 2020 - 10 Oct 2020 - Advice

Cooper cautiously optimistic over oil prospects

Oil prices may have plummeted, but BP is carrying out major infrastructure work at Sullom Voe.

NORTHERN Isles MP Alistair Carmichael is to attend a summit to discuss the impact of plummeting oil prices on the future of the North Sea industry in Aberdeen early next year.

The summit is being organised by Aberdeen City Council and aims to find an agreement to avoid or at least minimise potential job losses.

While that prospect is of obvious concern to industry watchers, Shetland Islands Council’s economic development spokesman Alastair Cooper has highlighted that big infrastructure projects from Total and BP should ensure industry activity remains buoyant in and around the islands.

Having stood at $116 a barrel in June, the price of Brent crude has slumped to around $60 a barrel – with most of the decline occurring in the past two months.

Oil prices are at their lowest since the financial crash in 2008, but remain roughly three times higher than they were in 2002 when the market rate sat at around $20 a barrel.

Carmichael said the “pretty sharp fall” in prices brought “both challenges and opportunities” – there are lower prices at petrol pumps, but the industry is a major source of employment in Shetland and “that has to be worrying”.

“I am looking forward to the summit and for the chance to discuss the best way ahead for our oil industry,” he said.

“These talks are about the future of a vital industry for Orkney and Shetland, but also the futures of those who work within the sector. It will be important for all attending to set aside any differences and work for a common goal.”

Shetland Islands Council’s economic development spokesman Alastair Cooper said he expected oil and gas industry activity in and around the islands to continue in the coming years.

Cooper pointed to the expected opening of Total’s much-delayed gas plant in 2015, while BP is carrying out “very considerable” refurbishment of its terminal at Sullom Voe and in January will start making preparations for its new gas sweetening plant.

It is hoped that Total's gas plant will finally be completed at some point in 2015.

The north mainland councillor said he understood the workforce for that project would be ramped up to around 150 by the end of next year, peaking during main construction in 2016 with around 500 staff.

“There’s still quite a lot of civil engineering and construction activity going on,” he said. “With Sullom Voe, the unit cost will drive economies and it could drive the end of life of [the terminal].

“That said, we have a lot of activity going on west of Shetland – the Lancaster field, Schiehallion coming back on stream, Clair phase two in 2017; Clair phase three being actively talked about now. There is a degree of confidence, at the right price, for exploration west of Shetland, and on the whole Sullom Voe has a future in 2015 and beyond.”

Cooper feels the slump in oil prices may only be temporary – while those in Shetland who use oil-fired central heating will find it cheaper to keep warm in the short term, he expects the price will be “creeping back up again” before too long.

He continued: “We’ve had oil as low as 10 to 12 dollars a barrel, but what we have to recognise today is that we do not have the volumes coming in from the North Sea any longer.

“We have old facilities that are having to be worked over and kit replaced. It’s all costing a lot of money, unit costs are going up and I think the reality is that there’s not much left for some of the installations at $60 a barrel, so what we’ll probably have is big staffing reductions, decommissioning becoming more of a reality in the North Sea, and a pause in the west of Shetland and Atlantic Frontier.”

Cooper added that the kit required for the Atlantic frontier is “very expensive, and the government will have to make it attractive for the industry to keep exploring”.

Categories