Jul 292016

SAMSUNG CAMERA PICTURESWith thanks to Kenneth Hutchison,
Parliamentary Assistant to Dr. Eilidh Whiteford.

Banff & Buchan MP Eilidh Whiteford has given her wholehearted backing to NFU Scotland and the Press and Journal’s campaign to ensure the ongoing viability of the north-east dairy industry.

Adding her name to the list of supporters, Dr Whiteford stressed the need for a vibrant dairy sector in the north-east, and urged shoppers to buy local milk, and to lobby supermarkets to support local farmers.

Speaking after a meeting with NFUS representatives and farmers at new Deer Show, Dr Whiteford said:

“The closure of the Muller plant has undoubtedly been a blow to our north-east dairy farmers, and it’s difficult to overstate the challenges the industry faces.

“That’s why it’s more important than ever for consumers to support farmers in the north-east. It’s also why supermarkets have to do their bit by ensuring that these same farmers receive a fair payment for the top-quality milk they supply.

“Agriculture is the mainstay of many rural towns and villages in Banff and Buchan, and I am very happy to support this campaign.”

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Jul 212016

Aberdeen accountancy firm Hall Morrice leads companies through the maze of claiming time-limited relief. With thanks to Eoin Smith, Senior Account Executive, Tricker PR.

Andrew Bell

Andrew Bell, corporate tax manager at independent accountants Hall Morrice LLP.

Britain’s economy has reached a major milestone with the country’s private sector business population exceeding five million for the first time ever.

But corporations are not driving forward the economy: the boom is being credited to the number of enterprising sole trader and partnership businesses deciding to branch out on their own.

According to the Business Population Statistics report, some 330,000 new ventures had been launched in a 12 month period leading up to the start of 2014.

Of these businesses, 197,000 were operating as unincorporated traders.

The report, produced by the Department for Business Innovation and Skills, states that the combined annual turnover of small businesses was £1.2 trillion – around 33% of turnover within the private sector.

“The numbers are phenomenal and underlines that SMEs – particularly those at the S end of the scale – are the backbone of the economy,” says Andrew Bell, corporate tax manager of independent Aberdeen based accountancy firm Hall Morrice LLP.

“The figures would appear to suggest that small businesses are recognising that an unincorporated sole trader or partnership structure is best suited to their needs. Some businesses have been a little quick off the mark to set up as a limited company when that structure is not at all suited to how they will be operating.

“For many businesses, a limited company structure is the most tax efficient way to operate the business. However, with additional legal and compliance burdens placed on the shareholders, the time incurred in meeting those obligations often means that the efficiencies are negligible or even non-existent.

“Shareholders have often felt they have no option but to carry on operating as they are because disincorporation has always been a complex and ultimately very expensive process.

“HMRC recognised this and in 2013 introduced disincorporation relief for small businesses. Essentially, it is a simplification of the rules allowing limited companies to look at their options and, if appropriate, return to or change to unincorporated status in a tax efficient manner.

“For many small firms the responsibilities that come with being a director of a limited company overwhelming and unwelcome. All too often I come across clients that are struggling to keep on top of the administrative aspects of trading through a limited company. There are many obligations to Companies House, legal responsibilities and the financial rules and regulations can be a minefield without appropriate guidance.”

The disincorporation relief applies up to 31 March, 2018 and allows a company to transfer all of its assets, or all of its assets other than cash to shareholders who wish to continue the business in an unincorporated structure, without a charge to corporation tax arising on the transfer.

There are some criteria that must be met. For example, the total qualifying assets, including goodwill, must not be worth more than £100,000; the business must be transferred as a going concern; and the shareholders must have held shares in the company for at least 12 months before the transfer date.

Disincorporation frees up time and costs devoted to compliance of company accounts, corporation tax returns, and annual returns and allows many small businesses to make efficiencies in their budget for accountancy fees.

According to HRMC, over 600,000 businesses across the UK could be eligible to make a claim for disincorporation relief. Hall Morrice has helped many limited companies, where it has been found both desirable by and beneficial to the shareholders, return to an unincorporated status, and is in the process of recommending disincorporation to many more.

With the disincorporation relief scheme due to end in March 2018, Andrew urges companies that may fit better within an unincorporated structure not to delay looking at their options.

Andrew explains,

“There are some qualifying criteria as with any such tax relief schemes, but it has been set up in a way that makes the process as smooth as possible. The scheme will run for five years, and is due to be wound up in 2018 so it is a time-limited opportunity.

“Although 2018 may seem a long way off, I would recommend that business owners start considering their options now. I’ve worked with several businesses that have been through this process and it is not something that will happen overnight.

“On the face of it, there would be no better time to opt for disincorporation when there is the incentive of relief, but it is not for everyone. There are many advantages to remaining incorporated, including flexibility over profit extraction.

“There are lots of considerations to be made, and our team will work with shareholders to weigh up the pros and cons of moving to unincorporated status. It is vitally important to make the right decision as once a claim has been made, it is irrevocable.

“If shareholders do decide that they would like to opt for disincorporation, we will prepare the claim and guide them through the whole process to make sure that all obligations to HMRC and Companies House are met.”

Founded in 1976, Hall Morrice is one of Scotland’s leading independent firms of chartered accountants and has offices in Aberdeen and Fraserburgh. Based at 6 & 7 Queens Terrace in Aberdeen, Hall Morrice can be contacted on 01224 647394 or at accounts@hallmorrice.co.uk

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Jul 082016

With thanks to Kenneth Hutchison, Parliamentary Assistant to Dr. Eilidh Whiteford.

EW with other SNP MPs and WASPI campaigners

Banff and Buchan MP Eilidh Whiteford joined with SNP MPs to take part in the Women Against State Pension Inequality (WASPI) demonstration outside the Houses of Parliament.

They demand the UK government to investigates transitional measures for 1950s-born women negatively impacted by rapid rises in the state pension age.

The SNP has repeatedly called for action from the UK government, and led a backbench business debate on the issue in January which received cross-party support.

The increase in pension age is the second for women born in the 1950s, and will have a stark financial impact on thousands of women in their 60s.

Speaking after the demonstration, Banff & Buchan MP Dr Eilidh Whiteford expressed solidarity with the women, who have now had their retirement age raised twice.

She said:

“I was pleased to see such a good contingent of Women from North-east Scotland at the event in Westminster today. The SNP has given wholehearted backing to the WASPI campaign, and we will keep up the fight for these women at Westminster.

“A large number of local women born in the mid-1950s have been badly affected by the proposed changes, and have been in touch directly with me. They can rest assured that I and my SNP colleagues will continue to press the UK Government for a rethink on how it phases in increases to the state pension age.

“Changing patterns of life expectancy do demand a response from the Government. This, however, was the wrong response, and the Government needs to consider the damage its policy will do.”

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Jun 302016

With thanks to Kenneth Hutchison, Parliamentary Assistant to Dr. Eilidh Whiteford

Eilidh Whiteford MP Peterhead Harbour (1)

The UK Government has been urged to provide clarity for Scotland’s food producers following the vote to leave the EU.

Banff & Buchan MP Eilidh Whiteford raised the topic with the Prime Minister on Monday (June 27) following his statement on the Outcome of the EU Referendum.

Concerns have been raised across Scotland, which exported £4.8bn worth of food and drink in 2015, much of it to Europe.

Banff and Buchan could face particular challenges following Brexit, given the region’s significant agricultural and fish processing sectors.

Speaking afterwards, Dr Whiteford said:

“It is vital that we work to protect local jobs and economic interests in the aftermath of the Brexit vote. Key sectors, notably in food production and processing, face considerable uncertainty, as many local firms export produce and depend on access to European markets. Many also rely on migrant workers to meet labour shortages and seasonal demands.

“While the Prime Minister was able to offer short term assurances about market access and the status of EU nationals working here, he was not able to outline any timescale for negotiations to resolve these issues.

“I will be meeting stakeholders in the days and weeks ahead to identify their chief concerns, and working with the Scottish Government to secure the best deal possible for our local industries. It is critical that we fight to defend the interests of Scotland’s people and the industries on which our livelihoods depend in the days ahead.”

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Jun 102016

With thanks to Eoin Smith, Senior Account Executive, Tricker PR.

Jenni_head and shoulders 1Representatives from local tourism body VisitAberdeenshire are heading south of the border to promote the north east of Scotland to international MICE (meetings, incentives, conferences and events) buyers later this month. Business development director Peter Medley and Jenni Fraser (pictured), business development manager, will attend The Meetings Show in London from 14-16 June, to promote the region to the lucrative meetings, events and conferencing market.

Over 5,000 meetings industry professionals from across the globe will attend the exhibition, where they will have the chance to learn about the new developments in Aberdeen and Aberdeenshire’s venue and incentive offering.

As well as exhibiting to the masses, Peter and Jenni will meet with key business MICE buyers in order to discuss the finer details of what the region has to offer business travellers.

Peter Medley says,

“Attending events like The Meetings Show is an incredibly important step in marketing Aberdeen and Aberdeenshire as a business travel destination to the wider world.

“Although business tourism has dipped in the north east of Scotland over the past year, there are a number of new developments which will make the region an incredibly attractive prospect for those organising world-class conferences and events.

“Hotel room rates, which were once at an all-time high thanks to the high level of energy industry professionals visiting the city, are now at a much more affordable level, making the region much more enticing to those looking for an affordable – and well-equipped – destination to hold a conference or event.”

Improvements to Aberdeen and Aberdeenshire’s infrastructure are making it easier than ever before for overseas travellers to arrive in the north east. Aberdeen International Airport is currently undergoing a £20 million expansion programme, which will see its landside, airside and security facilities improved and updated.

Coupled with new flight routes from Icelandair, which open up faster routes to many US cities and other global destinations, it has never been simpler to travel to Aberdeen and Aberdeenshire.

But it is not just the region’s travel facilities which are being overhauled. The Aberdeen Exhibition and Conference Centre (AECC) is about to undergo a massive £333 million redevelopment and relocation, which will see it moved closer to the airport and the Western Peripheral Route.

Due to open in 2019, the new AECC will provide greater connectivity and convenience for those travelling to exhibitions and conferences in the area. New flexible space – including a subterranean area for holding large exhibitions – will provide greatly improved facilities for those organising events.

Similarly, Aberdeen Art Gallery and the Music Hall – both situated in Aberdeen city centre – are experiencing major renovations worth £30 million and £7 million respectively. Providing the perfect venues for gala dinners, drinks receptions and conferences, these new and improved venues will be major assets to the region’s business tourism offering.

Peter concludes,

“When many think of Aberdeen and Aberdeenshire, their mind springs immediately to oil and gas, however the region has much more to offer meetings and conferences in all sectors – as evidenced by the wide variety of events celebrated by the Team Aberdeen Ambassador Awards earlier this year.

“The north east is also well equipped to cater for the incentive travel market. We are incredibly lucky to have a number of world-class golf courses in the region, including Royal Aberdeen and the Trump International Golf Links. Add to this a number of spectacular whisky distilleries which offer tours and tastings throughout the year, and it becomes quickly apparent just how much the region has to offer.

“We look forward to meeting event organisers from a wide variety of industries at The Meetings Show in London, and revealing to them exactly what Aberdeen and Aberdeenshire can provide.”

For more information about VisitAberdeenshire, visit www.visitabdn.com

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Mar 112016

Part Four: In The Long Term. By Mike Shepherd

(0)Consider this scenario for Aberdeen and the Northeast of Scotland:

There are no jobs to be had in the area, the existing industries are in decline and those employed in them are poorly paid. Unemployment is above the Scottish average. The population is falling at an astonishing rate of 4,500 per year as the locals seek jobs elsewhere.
Unfavourable comparisons are being made between Dundee and Aberdeen; Dundee is attracting inward investment on the back of preferential treatment from the government, whereas Aberdeen all on its own in the forgotten northeast corner is all but ignored.

No, not a prediction for the future, it is an actual economic snapshot of the Aberdeen area in the 1960s just before North Sea oil was discovered.

Once the oil companies leave, Aberdeen could return to economic circumstances that would be even worse than in the 1960s. At least back then there was some semblance to a diversified economy in the city. Aberdeen was dominated by the fishing industry with over a hundred trawlers in the harbour. It was also a popular tourist destination in the days before foreign travel became common.

Visitors were attracted to the city described then as the ‘Silver City by the Golden Sands’. There were two ship-building yards at the harbour and paper, textiles and combs were made in the city. Not much of this is now left. Aberdeen’s future could be an even bleaker shadow of its past if no action is taken soon to remedy this.

One thing hasn’t changed much since the 1960s however, Aberdeen’s shockingly poor transport links with the rest of the country. Given the city’s relatively remote location this does not bode well for an economic future. The road network in Aberdeenshire is a joke and the railway connection to the south has been shockingly neglected.

The rail link is still single track at Montrose, a well-known bottleneck, although a long overdue action to remedy this may now be about to happen.

Aberdeen can consider itself very hard done by. As pointed out in a previous Aberdeen Voice article ‘How Aberdeen was short-changed over North Sea oil’ – the onshore infrastructure to support North Sea oil was paid by local government and assisted by our rates / council taxes but not by the UK government. Between 1975 and the early 1990s the expenditure by the Grampian Regional Council was in excess of £100 million per year.

The other areas affected by North Sea oil are faring much better than we are. Revenue from the Sullom Voe and Flotta oil terminals means that Shetland now sits on an oil fund of £400 million and the equivalent in Orkney is just under £200 million.

hydrogen busA plan by Grampian Regional Council to levy rates on offshore platforms as a means of funding onshore infrastructure was blocked by the Treasury. Given that the UK tax take from North Sea oil and gas is now over £300 billion in today’s money, there is a strong moral case for the government to now help Aberdeen to establish an economic base for the future.

Our local politicians and media will need to shout very loudly that it was our local government that bankrolled the needs of the oil industry only for all the revenues to go elsewhere.

Yet, the perception is that the city has somehow squandered what should have been its golden goose; that some enormous pot of money was available to Aberdeen to do with whatever we wanted to. Here’s a recent example of this nonsense.

An opinion piece in the Dundee Courier headlined Aberdeen boost: right deal but the wrong city, referred to the recent Aberdeen City Deal, the proposed investment of £250 million in the city announced in January this year:

“I’d argue that Dundee and Perth – jointly progressing a City Deal bid at the moment – are more worthy of that investment at this moment.

“That may sound like sour grapes, but my rationale is this. As the black gold tap ran, Aberdeen had its chance to build a broad-based economy fit to withstand the rigours of the modern world. It had the opportunity to future-proof itself and create prosperity for generations to come. But, if not lost, that chance has certainly not been grasped.”

So what should Aberdeen do to diversify its economy?

I’m a petroleum geologist not an economist, so I will not profess to any special insights on the issue. Others have noted that the city could play to certain strengths; more could be done to attract tourists, particularly given the region’s scenic attractions and heritage. The area is strong in biomedicine through its academic institutions and who knows, a rump of the oil industry may linger in the city servicing the petroleum industry globally.

I will make one comment though. The most obvious successor to the oil industry in Aberdeen is the renewable energy sector. Aberdeen’s future as an energy city should be as and energy city. The city already hosts engineering companies and technical knowhow. There is an obvious crossover to be made.

This isn’t the first time that renewables has been promoted for the city and region. We have the Aberdeen Renewable Energy Group (AREG) and more recently the Energetica initiative to establish the Aberdeenshire coastal strip as a corridor for the renewables industry. Neither of these has taken off big time, part of the problem being the high cost bases of the area driven up by the presence of the oil industry.

Nevertheless, the recent oil price crash has focussed attention on the need to diversify the Aberdeen economy. The politicians need to push and push until this happens with absolute determination and drive. It will take government money, but for Aberdeen, the turbo-charged motor of the UK economy for the last 40 years, it’s payback time.

Mike Shepherd is author of Oil Strike North Sea, a history of North Sea oil. Join him in an upcoming session to discuss the impact of the oil industry on our shores:
March 17th 5-6pm – Blackwell’s Book Shop, High Street, Old Aberdeen. 5-6pm. Free, but please reserve a place by phoning 01224 486102 or emailing erin.matheson@blackwell.co.uk.

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Mar 032016

Part Three: The Scrapheap Challenge. By Mike Shepherd


Aberdeen Harbour. Picture: Mike Shepherd

A huge industrial undertaking is about to take place off the Scottish coast involving billions of pounds of expenditure; this is decommissioning.
As a result of an international convention for the NE Atlantic area, oil companies are obliged to remove most of the offshore infrastructure, including oil platforms and pipelines, once oil and gas production operations have ceased.

The scrap material will be brought onshore and disposed off accordingly. It will not be allowed to remain in place offshore unless there are good reasons to do so.

The scale of this operation is massive. Once the last drop of oil has been produced, it will have involved the dismantling of about 475 offshore installations, 10,000 kilometres of pipeline and 15 onshore oil and gas terminals. According to the industry body Oil and Gas UK (OGUK) decommissioning will entail £55 billion of expenditure by 2050.

Let’s repeat that figure again – an industry that will spend £55 billion (and that’s probably an underestimate) is about to hit our shores big time. The coastal cities and towns of the UK and Norway will provide the bases for this undertaking. Some of it has already happened, three of the Brent field platforms are being decommissioned, although the activity has been relatively small-scale to date.

Given the currently low oil price, it’s possible that the volume of work involved could increase substantially from now on. OGUK have predicted that 79 oil and gas platforms could be abandoned by 2024; another estimate puts this figure as high as 146 out of the 300 platforms standing in the North Sea in a similar time scale.

The world of business is acutely aware of the opportunities involved and we may be on the cusp of a feeding frenzy as companies pile in to grab what is a large and guaranteed pot of cash. The big attraction for business in getting involved with decommissioning is that it is a major growth area. Not only is there an enormous amount of guaranteed work coming up; new technologies will need to be developed given the challenges involved.

Other offshore areas in the world will eventually become the focus of decommissioning and this provides the potential for any single company to become a major internationally-established corporation worth billions on the back of gaining experience in the North Sea. The prize is enormous.

Even at this early stage it’s possible to identify trends likely to transform into future newspaper headlines. You heard them here first.

aa66The Aberdeen versus Dundee rivalry over the spoils from North Sea oil has revived. Dundee has never particularly prospered from oil and gas and this is a source of discontent for the Tayside city.

Dundee is now repositioning itself to become a major centre for decommissioning. Forth Ports, owned by a private equity company, are spending £10 million on upgrading the eastern end of Dundee harbour for decommissioning and offshore wind projects.

Aberdeen Harbour Board, not wishing to lose out on a vitally important industry at a time when the oil companies will be finally leaving the city, intends to turn Nigg Bay into a deep-water harbour.

According to the details given with the Aberdeen City Deal this will enable Aberdeen to compete for decommissioning work.

The development of Nigg Bay is controversial; local residents have been less than impressed with pictorial representations of the future development, complete with cruise ships and the surrounding open green space shown rather improbably as being left intact. The business behemoth of decommissioning will be very difficult to stop however.

One other area that could fill future headlines is the scale of the government involvement. The government are committed to a part-funding of decommissioning through tax breaks although the legislation is complex and it is not clear as to how much money is involved. The Guardian reckons the percentage tax relief is between 50 and 75 per cent of the total expenditure.

OGUK have recently quoted an estimate that the taxpayer will be providing £16 billion for decommissioning work by 2050 although this figure looks on the low side. The tax breaks will prove a major future liability for the UK government (or a Scottish government should independence come).

One question begs to be asked. What happens if an oil company goes bust and it doesn’t have any money to pay for decommissioning? I would anticipate there are contingency plans for this situation, although I suspect it’s a hyper-sensitive issue in government circles. The issue dogs open-cast mining operations in the Central Belt of Scotland and in Wales where several mine operators have folded before the reinstatement of the land could happen.

The legal and practical issues involved have proved to be a nightmare.

There are also the environmental implications. The Aberdeen Voice has already been at the forefront of highlighting pollution problems caused by the dumping of material from North Sea oil operations. https://aberdeenvoice.com/2014/04/bleak-day-blackdog-beach/

It will be important to ensure that future decommissioning work is carried out in an environmentally circumspect manner and the Scottish Environment Protection Agency will have much work on its hands to monitor all of this.

Big money will come to the Scottish coastal cities and towns over the next few decades from decommissioning. Aberdeen will get a share of some of this work, although it remains to be seen whether the city can chase off the challenge from Dundee to become a potential national centre for the decommissioning industry. It’s the scrapheap challenge.

Next week – the final part of the series: The long-term future for Aberdeen.

Mike Shepherd is author of Oil Strike North Sea, a history of North Sea oil. Join him in two upcoming sessions to discuss the impact of the oil industry on our shores:

March 9th 6.30 – 8pm – Aberdeen Central Library. Free, but booking essential. Contact the library on 01224 – 652500 or email Libraryevents@aberdeencity.gov.uk
March 17th 5-6pm – Blackwell’s Book Shop, High Street, Old Aberdeen. 5-6pm. Free, but please reserve a place by phoning 01224 486102 or emailing erin.matheson@blackwell.co.uk.

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Feb 252016

1Part Two: On Life Support. By Mike Shepherd

With oil at about $33 a barrel the Aberdeen economy is suffering. The anecdotes abound: For example, the taxi driver who tells you that his takings are down by 50% and that his last fare on a business visit to the city had been the sole occupant of the hotel.

Aberdeen has become largely dependent on oil over the years. There had been other industries in the city, fishing, shipbuilding, papermaking, textiles and tourism amongst others, but they all declined or disappeared.

Here’s an anecdote that illustrates this only too well. When I attended my children’s prize-giving ceremony at Harlaw Academy in 1998, the invited speaker was the manager of the John Lewis store in the city centre.

The theme of his talk was local job prospects, particularly oil. He mentioned in passing that the store’s annual profits closely tracked the oil price, year in, year out. By 1998, the industry had come to dominate the Aberdeen economy.

The Aberdeen economy now lacks any significant diversity, something all too apparent now that the oil price has crashed. Recent discussions have focussed on expanding the local economy by encouraging the development of biopharmaceuticals and agrifood industries.

A similar weakness has been identified in Norway with its dependence on oil. The BBC recently reported that the Norwegians are seeking to diversify with potential growth in aluminium, healthcare, farming and fisheries (it was noted that the shop price of a 4.5kg salmon shops is currently worth more than a barrel of oil).

Nevertheless, Aberdeen will probably tough things out until the oil industry revives. Let’s put a caveat on that – should the current slump last not much longer than one to two years.

The key feature to emphasize is that oil is of enormous strategic importance to the national economy, both in the UK and Scotland, and more than just its massive tax-raising boost. Whereas, the country’s power generation may be satisfied by Chinese nuclear energy, even renewables, oil is needed for transport and is irreplaceable for the purpose until alternatives such as hydrogen fuel cells and electrification of the transport grid comes to the fore (the green initiative is to be applauded but it hasn’t happened big time yet).

The need to import oil can cripple a weak economy as was all too apparent in 1973 when the oil price quadrupled at a time when the UK economy was in trouble. The lessons of the 70s hopefully have not been lost on government officials. The UK economy is not exactly rosy today either, and it would be wise not to have to import all the country’s fuel at a high oil price once the upturn comes.

A significant rise in the oil price could easily happen in the medium term. Oil price crashes result in a drastic cut in oil company investment, typically on projects which have a lead time of several years. When energy demand increases, an adequate supply is not then available and the price can rocket.

there is a large and very experienced oil and gas skill pool in the city

Thus the UK government is aware of the need to support the North Sea oil industry by cutting its taxes on oil production and is likely to continue doing so in the short to medium term. In the long term, the large tax revenues will eventually return.

Another factor concentrates the UK government’s collective mind here, the vast cost of abandoning North Sea oil and gas infrastructure.

Oil companies are required by international agreement to remove most of the offshore infrastructure; mainly oil platforms and pipelines. The government will be responsible for funding part of the costs, an estimated £16 billion out of £55 million in total by 2050.

Given current government spending constraints, they will want to postpone the expenditure for as long as possible. Unlike say coal or steel, leaving the oil industry to die bites the government where it hurts.

It is vital to keep some sort of oil industry present in the Aberdeen area to form the basis for reviving the industry in the future. A vast infrastructure of platforms, pipelines and terminals are already in place. If this goes, the industry goes and is unlikely to come back. Certain key fields act as hubs with their pipeline links for transporting oil onshore. These matter to the future of exploration of new oil in the North Sea.

New oil finds are typically small and would probably not be economic without an existing infrastructure in place. The longer the infrastructure is kept in place, the higher the oil recovery will be from the North Sea. Another key feature of the Aberdeen area is that there is a large and very experienced oil and gas skill pool in the city. They should be encouraged to stay here for as long as possible or else they will drift off and find alternative careers.

A city deal was announced for Aberdeen at the end of January this year. It’s an investment package of £250 million jointly provided by the UK and Scottish governments. The money will be used to expand Aberdeen harbour by building an extension at the Bay of Nigg, to improve digital connectivity, and to fund an energy innovation centre. The intent of the centre is to work with small and medium-sized businesses to develop new technology in the oil and gas sector.

There is also a proposal on the table to build a new energy centre at Aberdeen University. The benefit of such a centre is tangible. The recovery of oil from the North Sea is top in class, many new technologies have been developed here and the rest of the industry sees the North Sea efforts as an exemplar to copy. If and when the upturn happens, the industry will require a large number of trained engineers and geoscientists to cope with projects that have become economic again.

In parallel, the Scottish government announced that it would provide funding to improve the rail links on the east coast. A major issue is the journey times north of Dundee where a single-track stretch of railway at Montrose causes a bottleneck. There have been plans to remove this problem for years although it is yet to come to fruition. The work should now start in five to ten years time. It is to be hoped that the Scottish government will finally honour this pledge.

A major issue for the future of Aberdeen is its poor transport links with the rest of the UK given its relatively remote location. Unless these are improved substantially, Aberdeen’s prospects for an economic future after oil are somewhat limited.

The North Sea oil industry is therefore on life support and the patient is critical but not necessarily croaking. Aberdeen should survive as an energy city going forward providing the downturn in the oil price doesn’t persist too long and the tax breaks come.

Next week, we start to look at the long term future beyond oil; starting with what I call the scrapheap challenge: the decommissioning of North Sea oil infrastructure.

Mike Shepherd is author of Oil Strike North Sea, a history of North Sea oil. Join him in two upcoming sessions to discuss the impact of the oil industry on our shores:

March 9th 6.30 – 8pm – Aberdeen Central Library. Free, but booking essential. Contact the library on 01224 – 652500 or email Libraryevents@aberdeencity.gov.uk
March 17th 5-6pm – Blackwell’s Book Shop, High Street, Old Aberdeen. 5-6pm. Free, but please reserve a place by phoning 01224 486102 or emailing erin.matheson@blackwell.co.uk.

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Feb 192016

Part One: The global oil price crash. By Mike Shepherd

02 The oil price has crashed and many are losing their jobs in Aberdeen. As I write, a barrel of Brent crude can be bought for $33, much cheaper than only two years ago when the oil price was over
At $33 it is difficult to make a profit out of North Sea fields, the costs are too high.

Almost 40 per cent of North Sea fields now make no money and the rest are not giving anything like the financial returns that were seen two years ago. 

Expenditure is being cut to a minimum and there is little new exploration going on. The result has been a loss of almost 10,000 jobs from the North Sea oil and gas sector.

With numbers like these, the future looks gloomy for both North Sea oil and Aberdeen. In a series of articles for Aberdeen Voice, I intend to set out the background to the current situation and to speculate as to what might be the future for North Sea oil and Aberdeen in particular.

This first article explains why the oil price has crashed. Oil is a cyclical commodity prone to booms and busts. It hadn’t always been like this. From the end of the Second World War to 1973, the oil price had been kept at a low and stable level, about $2-3 barrel (and equivalent to $20-25 at today’s prices). A small number of oil companies controlled global production and it was this that ensured both oil price stability and steady profits for the companies involved.

A Middle East war in 1973 changed everything. This was when OPEC, the Organisation of Petroleum Exporting Countries, came to assert themselves. The result was an immediate oil-price hike and a greater degree of price instability as control over production became much more widely dispersed. OPEC would find it difficult to maintain discipline amongst its member countries.

Previous oil price crashes occurred in 1986 and later in 1999. The 1986 crash was brutal in Aberdeen, for example it saw unemployment hit a peak of 81% in the Bridge of Don area. The causes of the recent crashes have been similar – increased production by a small number of oil exporting countries and reluctance by OPEC, Saudi Arabia in particular, to maintain the oil price by cutting production. There has been a will by the Saudis to maintain OPEC market share despite the resulting loss in revenue.

The current oil price crash has been provoked to a greater extent by the success of oil shale production in the United States (fracking) and a reduced need to import oil from outside the country. The United States is a major consumer of the world’s oil.

I often get asked, ‘how long will the oil price stay this low?’ To which the answer is, ‘I don’t know.’ It’s too complex an issue to call. On the one hand, the world population is increasing at a rate of 230,000 extra humans a day. Not only that, the world is becoming more middle class, less so in the west, more so in China and India, where a sizable population are aspiring to a western lifestyle involving big cars and overseas travel. This creates long-term pressure on the demand for oil, and oil is essentially a finite resource.

On the debit side, we will see more oil production from Libya and Iran, while China’s economy is stumbling with potential knock-on effects for the global economy. The Chinese themselves are now becoming acutely aware of the health problems being caused by severe pollution in their big cities. In response, they are restricting car use and taking an interest in fuel efficiencies.

Add into the mix, the recent Paris agreement on climate change – a commitment to limit a global increase in temperature to well below 2oC by reducing greenhouse gas emissions, principally from the use of hydrocarbons. Global warming is a major challenge for humans, and in combination with massive human population increase, an environmental disaster is looming if nothing is done. Yet, here’s a major flaw in the good intentions set out in Paris last December.

What do you do about transport? The world currently needs oil to move people and goods around. Over half the world’s population now live in urban areas and they depend on their transport networks for food and basic commodities: They would starve otherwise.

The alternative is to electrify the transport networks in cities and to promote hydrogen fuel cells. This will be vastly expensive at a time when world-wide public debt is nearing unsustainable levels and in any case, it will take years to implement. Meanwhile, we will have to depend on oil until a concerted political effort solves this particular problem.

So how long will the oil price stay low? It could be as much as fifteen years as was the case with the 1986 crash (which sort of melded with the 1999 crash). Nobody in Aberdeen wants to hear that, but it’s possible. I suspect the time frame could be much shorter – the long-term pressures on oil demand will not go away and the oil price could feasibly start climbing again within the next year or two.

This is a common belief in the industry. Nevertheless, the reality of the situation is that nobody really knows. And if you did, you would make a fortune.

In the next article, I will focus on the impact of low oil prices on the Aberdeen area in more detail and will speculate on the short – term implications for North Sea oil.

Mike Shepherd is author of Oil Strike North Sea, a history of North Sea oil. Join him in two upcoming sessions to discuss the impact of the oil industry on our shores:

March 9th 6.30 – 8pm – Aberdeen Central Library. Free, but booking essential. Contact the library on 01224 – 652500 or email Libraryevents@aberdeencity.gov.uk
March 17th 5-6pm – Blackwell’s Book Shop, High Street, Old Aberdeen. 5-6pm. Free, but please reserve a place by phoning 01224 486102 or emailing erin.matheson@blackwell.co.uk.

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Jan 212016

Scottish Grocers' Federation, Pete CheemaWith thanks to Sarah Masson.

Independent retailers have welcomed the support shown for their industry from Christian Allard, MSP. The North East MSP attended Scottish Grocers’ Federation’s event at the Scottish Parliament to coincide with the publication of their Scottish Local Shop Report 2015.

The report highlights the value of local independent convenience stores to communities with 87% of retailers currently involved in community activities.

The report also illustrates that there are more convenience stores per head of population in Scotland than there are in the rest of the UK and that convenience stores provide over 44,000 jobs, including valuable services such as post offices, bill payment services and ATMs.

The SNP MSP has always backed local businesses – acknowledging their importance to local economies throughout Scotland today. The North East MSP has praised the community value of local shops, recognising that they support local producers as:

“they make Scottish products accessible for everyone buy, eat and trust local.”

Scottish Grocers’ Federation Chief Executive Pete Cheema said,

“We were delighted that Christian Allard was able to join us at our event. The support of MSPs is vital in ensuring a prosperous and sustainable independent convenience store industry in Scotland.”

Commenting Christian Allard said:

“It is important that we recognise and support local businesses in our communities especially because local shops tend to be resilient to economic changes.

“Local stores are a large part of what our communities are made up of and this report provides the evidence that clearly shows the community value of local convenience stores in Scotland.

“The report crucially looks at the active role that local stores play in both urban and rural communities. They are constantly evolving and changing to meet the many needs of the people they serve. The independent corner shop is as much a part of the past and present as it is the future.”


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