Leading trade unionist calls for transparency over production costs in North Sea oil


Scottish revenues from Oil fall by 75 per cent in first three months of 2015

ONE of Scotlands leading trade unionists has called for transparency over production costs in North Sea oil, claiming that even industry experts have been in the dark about the true costs.

RMT official Jack Molloy made the comments amid an ongoing crisis for the industry, with Scottish receipts from North Sea oil falling by 75 per cent in the first three months of 2015 as global oil prices plummet.

Quoted in The National , Molloy said that industry experts were raising concerns over difficulties in calculating true production costs, but said they “won’t go public”.

“The whole issue of measurement and statistics on production is a complete minefield and really we need some honesty and transparency because nobody is grasping what’s going on,” he said.

“Oil & Gas UK [the industry lobby] has used a study from Wood Mackenzie to show how costs in the UK have increased way beyond anything else seen across Europe. But one analyst told me that even those figures are questionable because the chart they gave us included tariff payments, but not tariff revenues,” he added.

“Every other week we get different figures saying different things and it is difficult for us to challenge and question Oil & Gas UK on what’s going on.”

During the independence referendum the value of North Sea oil to the Scottish economy became a major source of contention, with wildly different predictions about future revenue from the industry.

However Molloy said that North Sea oil represented a significant amount of future wealth if the industry was handled correctly: “One thing we do know is there’s lots of oil and gas still out there,” he said.

Speaking to CommonSpace, economist Mike Danson agreed that the future of North Sea oil seemed lucrative: “The current massive investment programmes by the major players suggest that long term fortunes in the North Sea are not as gloomy as some suggest,” he said.

Danson also said that obscuring production costs was a drawback of a privately owned industry: “Retaining the sector within a nationalised holding would have been preferable throughout for obvious reasons. We know firms in oligopolies, and multinational enterprises especially, use transfer pricing and similar means to maximise profits and the oil companies are most adept at this,” he said.

The North Sea oil industry has been rocked by a series of difficulties and disputes. In July it was announced by Oil and Gas UK that 5,500 jobs had been lost in the industry due to a global dip in the price of oil which has lasted more than a year and seen prices as low as $50 a barrel.

In February and March the Unite union organised a consultation of its members in the industry which showed that 93.5 per cent favoured industrial action over pay, working conditions and working time.

Picture courtesy of Picture courtesy of Richard Child