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The Big Conversation:

Published in the Energy Supplement of the Press & Journal – January 2004

During December 2003, the UK Government launched the "Big Conversation," a bid to gauge what ordinary voters think should be Labour's priorities. It was reported that the Prime minister has focused on voter-friendly domestic issues such as crime, education and health. 

Is it time that we also begin the Big Conversation about the future of our UK oil and gas industry?  During the past decade or so, several initiatives were launched by the oil companies as well as by Government departments, which affected the industry we have known and loved.  It started with partnering and Alliance, and then it moved to CRINE (Cost reduction in the new Era) and eventually to PILOT and LOGIC.  Along the way many new organisations were created (remember CMPT, then ITF?  Also OPITO, then Cogent) Many of the steps taken were worthwhile, but they also left the industry feeling battle fatigued.  A well-placed colleague in industry told me that he felt some of the initiatives were well intended, but he also – under his breath - reminded me that the road to hell was also paved with good intentions. 

For myself, I have a simple mind, and what I focus on is that the total number of people employed in our Scottish oil and gas industry has nearly halved in the past ten years.  This, in part, is obviously as the result of the maturity of the UKCS, but I recall that in 1995, I predicted that if we do not maintain our competitiveness and more importantly if our exports do not double by about 2005, we would lose half the number of people employed in this sector.   

This time the debate should not be restricted to a dialogue among the oil companies, and a select number of service companies, but among every engineer, and technician who works in this industry: our industry’s ordinary voters.  What are their hopes and aspirations for Scotland and her oil and gas industry?    

In starting any major debate, I believe that it is helpful to simplify the issues we need to focus on.  Labour Party’s Big Conversation has focused on crime, education and health.  So, what are our industry-saving; our “voter friendly” issues? 

In the property market it is often stated that the three major criteria are location, location and location.  It might be too simplistic to say that the survival of our industry is also dependent on competitiveness, competitiveness and competitiveness. 

There are over two thousand companies in the Scottish oil and gas supply chain.  Many initiatives have focused on increasing the birth rate of new businesses, without examining how many businesses actually survive beyond their first critical three years.  The majority of our companies are small or medium sized enterprises (SMEs), and our public sector organisations have done an admirable job in nurturing and supporting them.  But when these same companies reach the critical size that can truly compete in the international arena, we sit back and watch them sold down the river to overseas predators.  A number of government ministers and leading overseas industrialists from competing economies have mentioned more than once to me that they love Scotland; it is the best incubator for high technology innovative businesses they know.   

With the advent of e-commerce, we truly live in a global village; therefore, you can ask yourselves whether the ownership of businesses in a global economy really does matter?  It is true that from time to time we have attracted overseas companies, which base their international or Eastern Hemisphere operational base in Scotland.  But these companies, although welcomed, are nevertheless rare.  I believe that as long as strategic decision making is conducted outside Scotland; as long as (some) overseas affiliates operating in Scotland are restricted, by their head offices, to which markets they can export; as long as research and technology development is carried out outside Scotland, then, I believe that ownership does matter. 

I continue to believe that the key to Scotland’s competitiveness is innovation.  For that reason we all welcome the creation of the Intermediate Technology Institute for Energy (ITI-Energy).  This, I hope will be based on funding research as well as development in areas that enhances the country’s leadership position in strategic technologies.  Having done that, the ITI-Energy must ensure that the emerging technologies are adequately anchored in Scotland.  And as it will be paid for by the Scottish tax payers, the ownership must be maintained for and behalf of the Scottish people.   

The recent report published by the Scottish Council Development Industry (SCDI) on exports in the oil and gas sector posed more questions that it provided answers for.  No matter which way the statistics are compiled, the message seems to be that the percentage of revenue generated by our companies, particularly the small and medium sized enterprises (SMEs) is not sufficient to guarantee the long term vitality and the viability of the oil and gas sector in Scotland. 

The restructuring of the industry has brought many good and also some bad results for us.  But increasingly when I talk to colleagues at all levels of business, I realize that one important factor has been lost:  Fun has been taken out of the industry.  The sense of adventure; the creativity and risk taking that formed the cornerstone of the thinking of the founding fathers of this industry has been eroded.  Nothing demonstrates that fact more than the very low level of exploration drilling activities that are taking place in the North Sea – and that is with a backdrop of continuing low new discoveries at global level. 

Finally, if I had a magic wand, and if I could influence the future of the Scottish oil and gas industry, I would wish to revitalise the sense of pride that existed in this country.  Pride in what Scotland has always been good at:  engineering, innovation and pioneering.  Not having been born in this land, I have been told that if only our football team faired better, it would bring back the national pride.  But as they say, football might be about life and death:  this is much more important than that!

Published in the Energy Supplement of the Press & Journal – January 2004. Article prepared by Kourosh Bassiti