Church and university speak out against the North Sea

Materials World magazine
,
1 Jul 2018

Following dissent from the University of Edinburgh and the Church of Scotland, Khai Trung Le looks at support for the North Sea within the country.

The Church of Scotland couldn’t keep quiet. A May 2018 statement from the church declared, ‘It is deeply uncomfortable for the church, as a caring organisation concerned about climate justice, to continue to invest in something that causes the very harm it seeks to alleviate’. 

This follows a two-year inquiry that, while acknowledging how it has profited from its investments, ultimately concluded the church should drop its investment in the oil and gas (O&G) industry.

It also follows a similar decision in February 2018 from the University of Edinburgh, UK, to commit to full divestment in fossil fuel holdings. Although the university divested in 2015, it retained £6.3m in Total, BG Group, and Atlas Copco. This decision makes Edinburgh the first largest university endowment fund completely free from oil and gas holdings.

Dìlseachd

The Oil and Gas UK annual report, Business Outlook, revealed that O&G exploration in the North Sea is at its lowest rate since the 1970s, but production remained high. Only 94 wells were drilled in 2017, the first time the figure has dipped below 100 since 1973, but the amount of oil discovered was at its highest in the last decade, at 350 million barrels.

Scottish companies have begun to manoeuvre away from the region. Energy subsea service company Flexlife, based in Aberdeen, stated that the North Sea accounted for only 10% of the firm’s annual revenue, instead seeing greater success in the Gulf of Mexico, Canada, and Thailand. Overseas turnover has increased from 40% in 2014 to 90% in 2018. Chief Executive Gary Millard commented for the Press and Journal, ‘The North Sea pretty much shut down, and the UK market is still very slow.’

Similarly, international O&G entities ConocoPhillips and Petrofac announced they would be cutting around 450 and 90 jobs respectively. CoconoPhillips stated this action was in response to the planned closure of the Southern North Sea gas terminal, a joint venture with BP. Both companies have sizeable bases in Aberdeen, but declined to speak further on where the cuts will fall.

Confidence and paranoia

There is still a high degree of positivity in the industry. The 28th Oil and Gas Survey, conducted by Aberdeen & Grampian Chamber of Commerce, supported by the Fraser of Allander Institute and KPMG, revealed heightened confidence, despite respondents revealing a turning to international markets for business growth.

The survey explored work during October 2017–March 2018, as well as assessing trends in expected production, decommissioning, and other O&G-related activities. The survey revealed 64% of contractors are more confident about conducting business in the UK Continental Shelf (UKCS) in 2018. 41% claimed to be operating above optimum levels in the region, and reported a more positive outlook towards production-related work.

Moray Barber, KPMG partner, said, ‘It feels tangibly different now to how it felt two years ago. The tone of conversation we have with clients is that they can see light at the end of the tunnel.’ 

He added, ‘A couple of years ago, it was a dark place and no one quite knew what the future held.’

‘I think the survey is very much a look forward into the future. What doesn’t come out though is there is still a lot of stress in the sector. If you are in the subsea sector or an SME, you will find the market quite challenging.’

Similarly, Russell Borthwick, Chief Executive of Aberdeen & Grampian Chamber of Commerce, warned against complacency. ‘The future strength of the sector depends on operators, contractors, and suppliers continuing to work together in the new way as the climate continues to improve. A steady recovery, not a return to boom and bust, is what is required. What is clear is that O&G will remain a key contributor to the Scottish and UK economies for many years to come.’

In April 2018, the Oil and Gas Technology Centre had received £1.9m in funding from the Scottish government towards the National Decommissioning Centre of Excellence to address future challenges in decommissioning. These include underwater cutting laser technology that, according to the OGTC, could save the O&G industry up to £90m, and increasing manufacturing capacity to enhance existing manufacturing and workshop facilities at the University of Aberdeen’s Oceanlab.

Voice of God

Considering the different factors, ultimately, the 2018 General Assembly of the Church of Scotland voted to keep investments on 23 May, stating its intention to retain its ‘seat at the table’ and persuade companies to align with the COP21 Paris Agreement, although Reverend Jennifer Adams, Minister at Duffus, Spynie, and Hopeman in Moray, was unconvinced. ‘Business models of oil companies are showing no sign of change. Engagement is not working,’ she said.

The vote to continue engagement succeeded by a slim margin. 53% voted for it, while 47% backed motions for divestment. Reportedly only 19 additional people needed to vote in favour of divestment for it to pass.

Church and Society Council Convener, Reverend Dr Richard Frazer, said, ‘It’s important to pay tribute to the incredible work that has been done over the years by people working in the oil and gas industry in Aberdeen and recognise that it has been dangerous work with many sacrifices.

‘But I think the evidence is clear that a transition to a low-carbon economy is something we need to do with a degree of urgency.’