Far from exhausted, the North Sea remains an important source of energy – but its control and exploitation are coveted by the European Union. And now Brussels wants to end the concept of territorial waters for member states...
There is a future for British oil and gas – but not if entrusted to corporations and the EU
WORKERS, MAR 2008 ISSUE
With workers in the North Sea oil and gas industry joining forces to boost their strength (See article in Workers February 2008), it is an apt time to take a look at what is a strategic part of British manufacturing and energy assets. Far from finished, the North Sea remains an important source of energy, its control and exploitation coveted by the European Union.
The quest for oil
It could be said that the use and need for oil goes back to the 18th century when the stench of whale oil hung over ports like Dundee and Aberdeen. Textile manufacture and other processes of the early industrial revolution relied on the oil. For over a century whaling fleets worked the Davis Straits and other waters off Greenland. Coming full circle, this is the very area now being exploited with advanced technology for gas and oil by Edinburgh-based Cairn Energy. The exploration area – 52,000 square kilometres – makes it the biggest such operation in Greenland, adding to this company's recent major discoveries in India and Bangladesh.
Apart from the securing or seizure of oil overseas – notably in Iraq, Kuwait and other client states – the quest for 'black gold' goes back to the exploitation of shale oil deposits in Scotland for over a century. By the end of the 1800s, about 2 million tonnes of shale oil were being produced. The chemist James Young ('Paraffin' Young) patented the process for extracting lamp oil from shale in West Lothian in the 1850s, setting up a refinery near Bathgate. This product gradually replaced whale oil and candle wax which were often in short supply. These techniques to refine crude oil were adopted by new companies in the USA such as Standard Oil, set up by Rockefeller. The UK shale oil industry actually survived until the 1960s – dying only after the government withdrew its exemption from excise duty.
The first drilling for oil came in the 1930s at Eakring in Sherwood Forest, which, remarkably, was producing 100,000 barrels a day by the outbreak of World War II. However, the first hints of serious deposits came in 1959 with the discovery of the massive Gronigen gasfield. Geologists then deduced that similar rock formations would extend across the south of the North Sea as far as the coastline of England. Then it was studies of the similarities between ancient basalt and sandstone formations in coastal Greenland and Scotland that led scientists to predict that the sinking of such material as the continents drifted apart over hundreds of millions of years would form ideal traps for energy-rich hydrocarbons.
By 1964 the UK government had issued the first offshore drilling licences and it was in 1969 that the first oil from the North Sea was brought ashore. Amoco, then based in Great Yarmouth, had discovered gas off the East Anglian coast in 1965 but it was in September 1969 that they confirmed the finding of oil, extracted 100 miles east of Aberdeenshire. Moreover, the quality and pressure was sufficient to ensure a steady flow of oil to the surface. The well had been drilled by BP's Sea Quest and its own Forties oilfield was discovered a year later, followed by the large Brent field found by Shell/ESSO north east of Shetland at the challenging depth of 400 feet. Britain's first commercially producing oilfield went into production in June 1975 – Tony Benn as energy secretary turned on the tap – and by the end of the 1980s almost 100,000 workers were in oil- and gas-related employment.
St Kilda: the centre of massive oil reserves – and a looming dispute over territorial rights, with the European Union lurking in the background
Photo: WorkersA squandered resource
Several crises spurred on the desire of capitalists and their powers around the world to get hold of these British resources. Thatcher's privatising drive fatally weakened British control. Funds were needed for her war on workers and the damning verdict of the outgoing chairman of the (publicly owned) British National Oil Corporation (BNOC) on her waste of oil revenues was: "She blew it on the dole". She also funded the Falklands war with at least £2 billion of those revenues. Rapid exploitation of these energy resources had already proceeded – a process now seen to be at the beck and call of the US administration. Supplies flowing from the North Sea ameliorated the growing cost of their war in Vietnam and a fourfold rise in Middle East oil prices. Britain lost control of its oil policy to US multinationals and by the time production had peaked in 1999 it was, unfortunately for Britain, at a rock bottom price of $10 a barrel. In contrast, Norway, which has maintained a firm control over its oil, is still safeguarding 11 billion barrels of reserves while Britain's have diminished to 4.5 billion barrels.
Capitalism stands condemned for its failure to fulfil the potential seen in 1973 when the Investors' Chronicle could write: "The North Sea adventure could become Britain's greatest industrial revolution." Instead, multinational capitalism maintains control of this energy resource for its own benefit. The same can be seen in the growing alternative energy sectors.
Desperate for energy
Yet now that the value of oil is soaring and other sources become endangered, a revival of interest in North Sea oil and gas is emerging among the predators. Symptoms can be seen in the risks taken, the extreme locations, exploration deeper than ever, using cruder oils, extracting from oil sands, etc. With North America consuming over 25 million barrels a day (compared to India and China combined using 10 million barrels a day), desperation is creeping in. The US company Halliburton, of Iraq fame, launched last month the construction of its new £20 million North Sea headquarters in Aberdeen, "highlighting our confidence in the future of the North Sea" as its UK vice-president remarked.
The recent buying of Shell and Exxon Mobil's controlling interests in the Dunlin oilfields northeast of Shetland by the British independent Fairfield Energy is a small move against foreign control. It was followed by a plea for more British investment by Malcolm Webb of Oil & Gas UK: "It's vital that investment is made, because we need to prolong the life of that delivery infrastructure, so it's there to produce these smaller fields that we are now finding."
Despite the rising oil price, last year Britain and Norway were the fastest declining major oil producers. But oil is still abundant. And a killing is being made – Royal Dutch Shell made nearly £14 billion profit last year. Thousands of workers risk their lives for and depend on this industry – 137,000 in the Grampian area alone in 2006 – and capitalism cannot be trusted with their future.
EU to exert control
Among the threats to contend with is the acquisitiveness of the Scottish separatists – their break-up-Britain scenario is music to the ears not only of the multinational companies desperate for a foothold in our North Sea reserves. Behind them and looming large is the European Union and its desire to control and harness all such resources within its dominion. Its presence is felt in the current dispute over territorial rights to the massive oil rich area around Rockall and the St Kilda archipelago. This is centred about 200 miles from the south coast of Iceland. The closing date for staking claims is May 2009. Iceland is reluctant to compromise with Denmark (for the Faroe Islands), Ireland and Britain, who follow an EU line.
This comes at a time when the EU intends to end the concept of territorial waters for member states. This is envisaged in its 2006 consultation paper "Towards a Future Maritime Policy for the Union". The consultation period is now over (June 2007) and the British government has welcomed the proposal! Moreover, with the new constitution, energy policy would slip out of British control. Item 4 of the Presidency Conclusions of June 2007 calls for an integrated energy policy (under the guise of concern about climate):
"With its decisions on an integrated climate and energy policy, the European Council in Spring 2007 underlined the synergies between these two key areas and paved the way for improved climate protection and dealing responsibly with energy." The next stage is the EU Commission bringing together the Maritime and Energy policy in a European Action Plan. With such whittling away of the control of energy sources goes the continued weakening of our independence as a nation.
The US Geological Survey has assessed the amount of recoverable conventional oil in the world at 3000 billion barrels (with about a third extracted so far) and foresees a huge expansion of natural gas extraction dominating global energy supplies from 2040. This story has a long way to run.
Books for further reading:
The Oilmen: The North Sea Tigers (Bill Mackie, pub. Birlinn)
Why Carbon Fuels will Dominate the 21st Century's Global Energy Economy (Peter Odell, pub. Multi-science)