WED MORNING: POLITICS OF OIL & GAS – THE BIG QUESTIONS

Audio recording of introduction and Harvie and Wills papers and discussion

Trevor Stack (Conference organiser and session chair)

Conference host: Centre for Citizenship, Civil Society and Rule of Law (CISRUL)

  • group of researchers who study politics, but politics beyond the way the term usually used
  • only one of us in Politics department – the rest in history, law, theology, and anthropology and business
  • interested in not just the politics of ‘politicians’ but the politics in us all, in our everyday lives

Similarly, “politics” of conference title meant to be broadly interpreted

  • good to keep historical perspective – first speaker Chris Harvie is historian, as is Helge Ryggvik and co-organiser Terry Brotherstone
  • just as important to keep an international perspective, hence the conference subtitle

Much of CISRUL’s work has been theoretical, but this year decided to expand our horizons

  • talked to schoolteachers and education authorities about how citizenship is taught, with eye on Scottish Curriculum for Excellence
  • one of things found is that Scottish schools very wary of anything political, which will be interesting because Scottish government now directing schools to engage pupils with the Referendum
  • Referendum is also stimulus for this conference – we decided to…

Seize the moment of Referendum campaign to stage this public debate on future of oil & gas:

  • whether or not one agrees with Independence, the Referendum is producing a great deal of political debate
  • our idea in holding this conference was to seize moment to debate future of oil & gas
    • this is Aberdeen and oil & gas was the issue we expected to arouse most passion
    • oil & gas already central issue in UK-wide Independence debates

Oil & gas issues

  • Referendum debate mainly concerns  whether an independent Scotland would  rely on oil revenues and, if so, what revenues it would have
  • but – many other issues around oil & gas including in our debate here
    • not just what oil revenues but what we do with them, how to use
    • environmental issues, including
      • shale gas
      • renewables
    • workforce issues
      • role of unions
      • skills shortage
      • health & safety (this is 25th anniv of Piper Alpha)
    • behind all these issues, the big political issue of who decides all these things

Aiming for  joined-up debate in sense of trying to…

  • connect up all these issues – revenues, environment and workforce, as well as politics behind them
  • connect up people – found speakers with very different perspective but who will  engage with rather than dismiss each other
  • connect Scotland and the UK and the rest of the world
    • oil & gas is absolutely global topic
    • also need to learn from other countries – invited experts on Norway, Canada, Bolivia, Brazil, Nigeria, and the Caspian countries

Christopher Harvie

Ex-MSP (SNP) and historian

Paper presented (I decided it was easier to read the paper than to give a summary of it)

Jonathan Wills

Shetland Islands Councillor (Independent), writer and environmentalist

Powerpoint slides

Picture2

Referendum is misconceived in that no country is independent: question is who takes decisions

Only handful of Shetlanders are for home rule in case of Independence, despite media reports

1972 Shetland Councillors set out aims:

  • plan and control oil developments
  • everyone to get share of revenues etc.

Despite vigorous criticism and UK political opposition, passes laws and reaches agreement to ensure

  • Political influence
  • Revenue sharing
  • Environmental safeguards

There were benefits to oil industry (which also more worried about SNP) in ‘Shetland deal’

  • Joint company Sullen Voe Association had and has legal control of refurbishment of oil terminal, including Council members: characterised by industry as talking shop but in fact legal authority – and time to use powers
  • Therefore, if industry executives see advantage, will do deal with local authorities – executives are not demons

Value of Shetland oil funds: estimated £273.4m, which allows for building of

  • Leisure centre
  • Museum
  • Cinema and arts centre

However should only spend income, not capital

  • Council dipped till to fulfil growing expectations that oil money creates: massive overspend, and will have no oil reserves left by 2017
  • This is not oil industry’s fault but fault of irresponsible Council, although new Council trying to rectify

Discussion

With apologies to those whose names I missed (entered as ??). Not all the questions appear in the order in which they were made – the chair took several questions at once, but I have linked speakers’ replies to the particular question they were asked. The symbol > indicates a reply to a question. When a speaker is replying, as is usually the case, I’ve just put the speaker’s initials.

John Corral, Aberdeen City Councillor: tried for years to encourage people to…

  • study engineering but failed
  • use public transport but failed

> Chris Harvie

  • in Baden-Wurtenberg, career in engineering has equivalent status to academic, as opposed to Scotland – cannot undertake reindustrialisation
  • on public transport, 70% of Scottish population lives in Central Belt, most of which should be using public transport

Steven, write of Point Magazine: for Jonathan Wills -1 not better to have plan to use wealth to generate more, such as locally-owned windfarm?

> JW

  • there are schemes to generate revenue and original principle was to spend only income generated by revenue, but revenue itself being spent on assumption of continued growth
  • do have plans for renewable schemes though do also have shares in BP

Malcolm Webb: what sees as danger of oil funds? is there a moral hazard?

> JW

  • SIC not disinvesting in fossil fuels
  • tendency to gamble, and to buy stocks and shares – which is not long-term investment in economy

Nick Gotts, independent researcher and activist

  • examples of successful behavioural change, e.g. attitudes to smoking, drinking and driving > could also apply to energy saving
  • however, in case of energy saving, we are faced with campaign of lies, funded by rich Americans who deny climate change as well as other energy issues

??: possibility of public energy project?

> JW: what proposed by SIC is precisely public-controlled windfarm

> CH: recent closure of workforce-owned high-end fashion textile industries in Scotland, at hands of committees dominated by financial executives

Owen Logan, photographer and co-organiser: begins by noting that first 2 speakers were Labour members who became nationalists; OL is socialist

  • is comparison with Germany not misleading? is it not too romantic to believe that Scotland can simply reinvent itself as economic democracy?

> JW

  • what have achieved in Shetland is not socialism but Norwegian social democracy in one county
  •  unless Scotland has self-government, doesn’t see how can realize social democracy

Euan Mearns, editor of Oil Drum: is new Curriculum for Excellence likely to improve maths and science skills that essential to rear engineers?

> CH

  • neither mathematic nor language skill deficits are being addressed by Curriculum for Excellence
  • in Baden-Wurtenberg, yes very different civilization to Scotland – believes that Scottish Independence will be defeated if Scotland threatened with “not getting X-Factor” or something like that
  • to John Corral (see above: AC Councillor) what efforts made by ACC Planning to create network of places of work and accommodation to make public transport realistic?

> John Corral notes that Aberdeen demography has changed very quickly, including industries moving out to outskirts from centre city, replaced by student flats etc., but…

    • Peripheral Route (bypass) will generate ribbon development of business along it
    • huge resistance from residents to any development that not residence
  • to Jonathan Wills, notes that Shetland oil fund has only very small amount of money

?? Hard to see how Aberdeen has benefited from investment in civic infrastructure, as Shetland appears to have: why different in Shetland?

?? Oil fund has been very beneficial for Shetland – for example, swimming pools in every town, which had never happened before – but also mistakes in use of money

?? Instead of oil fund, 85 pence in every pound goes to UK government in taxation; even though UK now net importer, government makes more from imported oil than Saudis do from their own oil > do ‘get good screw’ out of industry, even though not setting aside in small fund

> JW

  • tax rates are now actually extremely low in UK
  • in UK not sovereign oil fund as in Norway, revenue used otherwise, including to destroy the miners

Audio recording of Webb and Zalik papers and discussion

Malcolm Webb

CEO, Oil & Gas UK

oil6

Oil industry is largest investor in UK economy and balance of trade relies heavily on it

  • can no longer supply all UK demands, so would have to import
  • do export substantial oil goods and services

UK industry is undisputed global leader in subsea engineering

  • substantial employment and high average earnings
  • good safety record, though no place for complacency

Highest-taxed industry by far and all going into UK

  • ranges from minimum 62% to maximum 81%
  • this year due to enormous capital investment (£13.5 billion annual) currently will only pay around £6 billion pounds, but much more if include tax at pump
  • every field is paying tax > no subsidy from government

Up to 24 billion barrels left to extract and MW believes that this is underestimate

But there are challenges

  • too steep decline in production rate in recent years, though believes that current levels of capital investment will abate and still massive producer
  • believes that natural gas has still much to offer, including to global CO2 reduction challenge

This achievement in spite of some awful political decisions, which have bordered on capricious

  • but now emerging consensus between industry and UK and Scottish government, across parties
  • industry should not become political football > Oil & Gas UK doing everything to raise industry’s political profile, including by improving image of industry – recent survey has revealed that public misperception of industry

Who should take decisions? Collaboration between

  • investment companies across supply chain
  • unionised and non-unionised workforce
  • government

> Strong inter-dependence between stakeholders, and these achievements could not have been replicated by state, even though some look back nostalgically to period when state tried to run North Sea oil

What role should the workforce have?

  • important to have coming-together with workforce, as exemplified in Step Change in Safety: open dialogue that faces challenging questions, reaching sensible conclusions
  • pleased that workforce representation in PILOT and new Industry Council

About Scottish Independence

  • Oil & Gas UK believe industry should adopt ‘studied neutrality’ since this is matter for electorate
  • do ask all sides that industry is not damaged in process – and believes no such damage at moment, given high revenues currently
  • duty of industry to live with whatever outcome

Anna Zalik

Associate Professor, Environmental Studies, York U, Canada

Powerpoint slides

Vulnerability of workers in global North: perhaps less in UK, following Malcolm Webb, but certainly in Gulf of Mexico, Nigeria, and other regions

Focus of her work on US, Canada, Nigeria and Mexico: inter-connections between them

  • Mexico nationalised oil & gas in 1938; Shell then began drilling in Nigeria
  • US East Coast high-grade refineries are now idling because cheaper to produce elsewhere, including Latin America; instead lower-quality crudes being produced, despite higher CO2 emissions

Oil industry continues to be social product > affected not just by industry’s internal dynamics but by social context in which embedded

  • importance of protecting economy and society to avoid otherwise inevitable consequences of capitalist development, including vagaries of global market
  • though industry may favour regulation, there are limits to regulations that seek (for example,  unlikely to agree to cease production in region for a period, even if necessary to avoid damage)
    • e.g. many now criticizing Canadian state as being classic example of ‘regulatory capture’ by which regulatory bodies (National Energy Board in Canada) serves interests of those it is supposed to regulate (i.e. industry)
    • industry also attempts to use regulation to stifle criticism: for example, Shell attempted to ban Anna Zalik and other critics from participating in public hearings
    • issue of inequality: The Spirit Level shows that inequality leads to poor qualities of life not only for poor but for rich > oil industry does often create inequality… which tend to generate conflict, as it did in Mexico in 1938
      • on that occasion, despite US and other fierce protests, Mexico got away with it even though paying below agreed levels of compensation

Discussion

oil3

?? Has tax on oil & gas caused rise in household energy costs in UK?

> MW: denies that oil & gas has caused rise in household energy costs

George Frynas, Prof at U Middlesex

  • noting that oil & gas would be larger share of pie in Scotland, though even in UK has contributed to macroeconomic effects, including UK outpricing in terms of labour costs
  • also agrees that none of oil revenues have been set aside for rainy day
  • calls on Oil & Gas UK to make presence felt in bringing lessons from Bolivia, Brazil and other countries to UK

Euan Mearns, editor of Oil Drum

  • revenue from oil & gas only 2% of GDP across UK but would rise to 15%+ in Scotland
  • energy security issue: whereas since 2004 no longer net exporter of energy – will we need bluewater aircraft carriers to defend?

> MW agrees that important to engage in discussion openly, which is why here – success often has its costs, e.g. 1.4% unemployment in Aberdeen but may bring problems

  • though yes revenue would be even more important in independent Scotland,  still thinks will not be overwhelming
  • agrees that security of energy supply is crucial, and wrong to think of North Sea only as cashcow –can also bring us energy security and we are important exporter, too

> AZ

  • notes that industry is more resistant to royalties than to taxes, because harder to find ways around royalties – which is one of reasons why Chavez’s policies have been controversial
  • in Nigeria, oil industry has benefited from violence in Niger Delta, because has led to rise in oil prices on global level > make more money
  • if environmental controls put into place, may put operations out of business

> MW

  • finds offensive suggestion that industry promotes violence in Nigeria to jack up price of oil
  • industry is very high cost regime… and taxes will have to be reduced in order to ensure energy security
  • coal is real villain in CO2, especially that produced in China and India, and not oil & gas which have fewer toxic emissions (recommends reading The Carbon Crunch) and believes that oil & gas will contribute to reducing CO2

Owen Logan

  • Jake Molloy (RMT union coordinator, speaking tomorrow) unable to come today because son just involved in industrial accident > health & safety remains issue, and RMT has remained critic
  • with respect to unions, success of which MW speaks does not just have “costs” as he said – it is a disaster: far from being friendly, democratic influence, oil & gas industry in North Sea has pioneered the most draconian anti-union regime

>  MW

  • denies that industry has serious industrial relations issues – Jake Molloy and others are collaborating in several projects with industry bodies > “let’s not go on harking on the history”
  • question of how revenue was spent (or misspent) is for politicians to decide
  • not sure that current UK regulator is well enough resourced – large holes in organigram and stretched with issues such as shale

> AZ (in response to previous points)

  • in Canada, oil revenues were being used to build up successful health service, but later governments decided not to invest revenue in health and other such public services – this was political choice
  • about gas, need to think carefully – concerns about possible impact of fracking on water sources
  • in Nigeria archival sources show that Shell sold guns to both sides of conflict in 1960s… and whether or not want violence, fact is that they benefit from commodity price booms which can be caused by it

Helge Ryggvik

  • asks MW about creation of jobs in oil industry – whether is rising or falling

> MW: gives breakdown of employment figures

  • in Norway centralisation of international business in Oslo and offshore in Stavanger

> MW: agrees that replicated to some extent in UK, with much international business around London

Nick Gotts

  • for MW, oil industry is now advocating gas as ecological – may be less damaging than oil but nevertheless contributes to climate change
  • for AZ, believes that Iran is interesting example of how oil revenues can be used to reduce poverty, promote health and education

??: MW says that industry does not receive government subsidies, but important to define what subsidies are > for example, tax breaks are also a kind of subsidy

> MW: tax breaks do not reduce below cost of production, which is what subsidies are

Mandy Meikle, Transition Town: any figures of links between carbon capture storage and oil recovery?

> MW

  • carbon capture can be used for oil & gas recovery – not used yet but there is potential for this: agrees that do need to look at advanced oil recovery techniques
  • believes that CCS can be used alongside gas to make for carbon free production

?? (working in Iran for past 4 years: worried that cultural factors being left out of debate: in countries like Venezuela, Mexico etc. which has weak institutions and high % of GDP > for example in Venezuela, “magical state” is purveyor of “magical solutions” – no real investment of revenues despite rhetoric

> MW this is political question on which industry has little to say

John Aberdein, novelist and activis: welcomes MW’s commitment to studied neutrality on Referendum… but asks whether regrets intervening in politics of city in 2010, when wrote to Council in support of Union Gardens project

> MW: hurt by responses to his letter – actually trying to encourage Aberdeen that great future, has potential to be recognized centre, but needs to be brave in developing some of its infrastructure… wouldn’t do again, though, and didn’t mean to interfere in local politics

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One thought on “WED MORNING: POLITICS OF OIL & GAS – THE BIG QUESTIONS

  1. J Bruce May 9, 2013 / 10:19 am

    Bizarre contribution from John Aberdein, tangential at best and rather mean spirited. Perhaps as someone living away from Aberdeen he too regrets writing a letter opposing Ian Wood’s project. Certainly he should have taken the opportunity to distance himself from Mr Webb’s abusers.

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