 I welcome you all to this, the 31st meeting in 2015 of the Economy, Energy and Tourism Committee. I welcome all members, I welcome our witnesses who will give evidence shortly, and I welcome visitors in the gallery. I remind everyone please to turn off or at least turn to silence all mobile phones or other electronic devices. We have apologies this morning from Patrick Harvie, who is unwell. Item 2 on the agenda. Can I ask the members our content to delegate to the convener responsibility for arranging for the SPCB to pay under rule 12.4.3, any expenses of witnesses in the evidence sessions on the future of oil and gas in Scotland and renewable energy in Scotland? I agree. Item 3 on the agenda. We are continuing to take evidence in relation to our look at oil and gas in Scotland, and I welcome our first panel of witnesses this morning. We are joined by Deirdre Mickey, who is chief executive and Mike Thullin, who is economic director of oil and gas UK. Welcome to you both. We are also joined by James Bream, who is research and policy director at Aberdeen and Grampian Chamber of Commerce. Thank you for coming along. Before we get into questions, I think that Deirdre Mickey, you were hoping to say something by way of an introductory statement. Yes, convener. Thank you very much and good morning, ladies and gentlemen. We really appreciate being invited to give evidence today. What I would like to say is just set some context before we get into Qs and As. Oil and gas UK, Mike and I work for oil and gas UK. We are the leading trade association for the offshore oil and gas industry. We are not for profit. We have over 520 members across the whole of the UK. A lot of them, 85 per cent of them, are actually from the supply chain. We cover the whole range from your big operators to your smaller operators and right the way through the supply chain. You will all be quite familiar with the oil and gas industry, but it is always good to reinforce what an amazing industry we have in the UK. We continue to support hundreds of thousands of skilled jobs. We have contributed to the security of energy supply in this country for many years. If you think about it, the lights have not gone off since the 1970s. In terms of investment and taxes that have been paid, we have paid billions of pounds to the Treasury and made huge investments in this country over the years. The economic value of our contribution is significant. We have seen record investment over the last three to four years. We were up 14 billion pounds in terms of capital investment in 2014, with big projects coming through. The upside of that is the big projects coming through. The downside of that has been that we have also then seen an acceleration and an escalation of costs. We have also seen an efficiency dropping in our industry over the years. Of course, that has been compounded by the very sharp and now sustained drop in the oil price, which is really challenging our industry at the moment. As an industry, we are very focused on turning things around. We are concentrating on the areas that we can influence. That is the cost piece, the efficiency piece and looking to make improvements there. We are seeing costs reducing and we are seeing efficiencies improving as we go through. We are working cooperatively with the Treasury, the regulator and the Government generally in trying to turn the industry around. The downside is that we are seeing job losses as a result. We recognise that this is a very significant issue and a very personal issue for people who have been made redundant or at risk of being made redundant at an individual level and at a family level. We recognise that and are looking to work very constructively and positively in that area. As I said, there is an upside to the actions that we are taking in terms of production increasing for the first time in 15 years. We are seeing costs coming down and we are seeing production efficiency improving. We are going through extremely challenging times as an industry and we expect those challenging times to continue. We are not seeing that likely to change very much in 2016, but we are very focused and committed as an industry to continuing to ensure that we have a sustainable industry that can come through these difficult times and continue to provide the economic value to Scotland and the UK. I appreciate being asked today, I appreciate your interest and obviously asking for your support as we go through these difficult times. Thank you very much for that introduction. I think that you have touched on a number of issues around taxation, the regulator impact, the impact on the wider economy, the cost-based health and safety issues, which we will want to pick up in the course of the questioning. We have about an hour and 10 minutes for questions. I would ask members if they would keep their questions short and to the point. It would be helpful if members would address their questions at a particular panel member and then, if you want to come in and respond to a point address to somebody else, if you just catch my eye, I will bring you in as best as I can as the time allows. Responses that are short and to the point would be helpful to get through the range of topics that we want to cover in the time available to us. I wonder if I could just start off and pick up on a point that you mentioned. There may be addresses initially to yourself, James Bream, about the wider economic impact that you provided us with the oil and gas survey that was done by Aberdeen and Grampian Chamber of Commerce by University of Strathclyde looking at the broader impact. We have already heard some evidence about the broader impact of the decline on the economy in Aberdeen and the northeast. Can you just give us briefly your assessment of the knock-on effect of the decline in the oil price and what impact that is having on the local economy in Aberdeen? I think that the context to start is the numbers that are out there in terms of jobs. I commend Oil and Gas UK for having a go at assessing that, because it is extremely difficult to do. We have tracked redundancies company by company and, to a certain extent, you can do that. Below a certain level, it is not possible, because they do not have to be made publicly available. What we know is that, in the last year, around 14 per cent of the workforce has been lost in the operating community. We need to remember that that started in 2014, so that 14 per cent is not the full picture and it will continue to next year. We also then have the supply chain impact and, easily, you can track about 8,000 jobs there. Quite quickly, without doing any clever maths, adding those together with some very small multiplier impact, you get to a figure in the last year of somewhere in the region of 25,000 to 30,000. The 65,000 figure is entirely feasible, even if you take a ban. What you have not seen, I was interested to read the SPICE report, is a real impact yet on unemployment data. There has been a nudging up in the claimant count in the north-east. At this point, it is too early to use that as a real indicator. You are seeing people on gardening leave being made redundant on packages that are unlikely to claim, people relocating back, perhaps expats. That is a pretty blunt tool. We have started to look at data around the north-east to get a bit more of a feel for activity levels. A few things I will just flag up. Commercial property is certainly a softening of the office market, quite a significant one. More workshop and shed type space is holding up. Hotels, as you have probably heard, are in other areas, but there is a significant fall in occupancy from somewhere near 80 per cent to about 66 per cent, year-on-year significant drop there. Average roommates are also falling from about £100 a night to £75. House houses, we have seen previous this time last year about 88 per cent of properties that went to market were selling. We are down to 73 per cent now, so that is a real fall. We have also had a look at jobs, so we have spoken to some recruitment consultants. The number of jobs being posted with them has halved since this time last year. I think that the last one is that people have talked it in an anecdotal way, but we have approached some of the car dealerships as well. Their order book this time last year was healthy but falling with some of the higher end looking at about 30 orders a month. Literally, there is nothing in the order book for the year ahead. You can look at the lag in the Government data and that can be explained away in some respects. The question that we are asking ourselves is we are now starting to see the impact ripple out. It is a question of how long does this softening go on? We do not know that, but we do know that it will continue through 2016 and we forecast more redundancies in a report. Are we through the worst, or do you sense that there is more to come in terms of redundancies, or is it so dependent on the oil price that is impossible to make any forward projections? We could properly answer that question. The first question is is it through the worst in terms of production and cost efficiency? The question that you are asking me is about redundancies. Where we are is that we have seen a real hard and sharp reaction, which has been necessary. What we will see in the next year is a slowing of the percentage rate fall in redundancies than there has been in the last year. However, that comes clearly on the back of an extremely difficult year. What is left behind is a situation where those still remaining in businesses will feel more impacted. It is difficult to retain morale when you are going through these multiple processes. We are not at the bottom in terms of the reduction in employment, so that is for sure. I will probably concur with what James Dyrdys said. It is not just an oil price impact, but companies respond to having less money to invest in new opportunities. They are trying to curtail the expenditure on running their businesses because there is such big duress from the fall and on price. Inevitably, there will be further job losses, not least as the outlook remains much lower than anticipated even in the spring of this year. In terms of where we are going forward on redundancies, do you have any indication where you think that the industry is going? Will we see more in the course of the next year? We have to calibrate the picture again in the spring. What we are seeing now is that companies are putting together their plans for the coming year. We are working with companies to get an oval picture of that investment outlook and the spend outlook. Hopefully, by the early spring, we will have a good picture on investment and what the opportunities are looking like. As a result of that, we will get a much better thermometer of the outlook for the next year. I have two other issues that I want to raise, but I have three members who have caught my eye. I want to come in with supplementary, specifically on the economic impact. I am interested in the evidence that you have presented so far. I guess that there is a question about how far the economic impact goes along the supply chain. We have seen large-scale job losses from the operators and major contractors. What is a little bit more difficult to get a handle on, because I do not think that there are any Government figures on the impact further up the supply chain and beyond the north-east, clearly on the north-east and beyond the north-east. It would be interesting to have comments from We get an approach from around the UK to ask what is going on. Clearly, the supply chain is a UK supply chain. Recently, we have been approached by companies in Fife who have had to reduce their working days in the week. We have had comments and questions from companies in Birmingham who sell fasteners for the oil and gas industry. The impact has been felt throughout the UK, and the activity levels are now being felt further down the supply chain. I would say that it is an observation from visiting companies that sometimes the smaller companies can be a little bit more fleet of foot in terms of diversification, in terms of moving into different markets than some of the larger ones. When we are at the stage where we are starting to see that ripple effect, the lack of activity in terms of investment or the fallen investment starts to pass its way through. I completely agree with that. There is no one part of the industry that is taking the brunt of it. That is across the whole piece. That is a very important thing to remind ourselves of. James makes a really important point about the diversification piece. We have a very strong supply chain that is rooted in the UK but has a very strong export base. One of the things that we need to be thinking about as we go forward is supporting them, making sure that they anchor themselves here and are looking to diversify and to improve their export opportunities. As we move into the future, we need to ensure that we have a strong supply base that is anchored here but with a very strong export market. Specifically, would it be fair to say that there is clearly production of oil and services in the general sense that there is a particular impact on manufacturing in Scotland and in other parts of the supply chain? In other words, companies that are making things for the industry and do not necessarily have other customers ready to have them? What we have seen hitherto with, if you want to call them cycles, is that international markets have been a bit of a safe haven. We have not seen confidence falling in international markets this time because we have our own challenges in the region but there is a global picture here. There are challenges in international markets so the manufacturers and exporters are finding life more difficult. However, there are always new markets and new opportunities and I think that we have an £11 billion supply chain in Scotland, larger in the UK. Proportionately, over the next couple of years, we will probably see the proportion of export and international business grow from the record 50 per cent that we have had in 2013 to a greater figure. The trick is how we secure that UK cluster and not lose it to overseas markets as we see the UK CES continue to operate in a different way than it has in the past. Obviously, I hear what you are saying in terms of some of the gloomier predictions, but I notice that in your report for the chambers on page 7, when you asked employers in the next 12 months what they anticipate employment numbers to be, 44 per cent said that they anticipated employment to remain the same and 19 per cent thought it would increase. Does that give grounds for optimism? 63 per cent think that it will remain the same or increase? I think that for optimism in the world, we should all be hopeful people. Where we look is that the aggregate level and its aggregates that we tend to look when we have looked at the numbers that people report and this is based on their year ahead budgets. The overall number will be a decline in employment. I think that we are certain about that, but that does not tell you the story of individual companies, some of which are doing well, succeeding and will continue to grow. Every single company has a different story, but the aggregate one is that the year ahead is going to be extremely tough. I think that that depends on where you are in the life cycle. If you are at the front of it in terms of drilling and exploration, it is really tough. However, if you are working on production and OPEX-related activities, your order book is more likely to be a positive one, and that gets reflected down in the supply chain. It is a mixed picture, but going back to what James is saying, it is a mixed picture in terms of optimism. There is some really good stuff that is happening in terms of companies turning themselves around and improving their efficiency. Recognising that we are going through really challenging times, there are tough decisions to be made, but there is good stuff happening as well. We have to get that balance right in terms of how we—we do not lose confidence in the industry going forward. My other supplementary question, if you do not mind convener, was mentioned earlier about the record levels of investment in 2014. When will we see a payback for that investment? You are already beginning to see that. Over the past five years, there has been a very strong investment since 2009-10. It has started to pick up. In 2009, that saw the sanction of the lag and toll more field, a massive development of Whistler Sheddens, which is coming on stream in the near future. There are already production events coming on stream, which is going to push production this year by about 8-10 per cent compared with a year ago. Despite inevitably the gloom on what is going on, production is improving. That is responding to investment. Operation efficiency is getting better, so even in down times, we are doing better where we can. That West of Shetland field that you mentioned, do you know when that is going to be coming into production? I think that that is not the autumn this year, but I miss the exact date on this one. Will that make a significant difference? It will. It is one of a number of fields. There is a lot of activity in West of Shetland, the Clare field that is coming on next year, Quad 204 Shehalian, and a lot of developments there. We have stuff in the central north sea as well. There are still things going on. It is not a completely empty order book and not a completely empty industry. I like the optimistic approach that we are taking this morning. James, maybe I could focus my supplementary to you initially. Did you factor in the impact on the austerity programme that the rest of the country is being impacted? We are focusing here on the energy sector, the oil and gas sector, and there have been redundancies. We are talking about cost efficiencies, cost efficiency improvements, and we are using lots of different terms like that. When you were coming forward with your report, do we factor in the impact of the other areas of austerity? There is probably a simple way to answer that. The oil and gas report itself looks at the sector as reported by businesses within the sector. One thing that I would highlight is that there are a number of wider streams of work that are going on in the northeast, which potentially are extremely exciting. We are looking at some new arrangements in terms of economic development, some of that being driven by the private sector. We will all be very aware and supportive of the city region deal negotiations that are taking place at the moment. For that, it is based on what has been called a renaissance scenario, which, when we look at other cities around the world that are dominated by a single sector, often they decline or go through a renaissance. Part of that renaissance in the northeast can be driven through technology, innovation, diversification and internationalisation. A lot of that is the focus of the city deal, but also other sectors such as food and drink and tourism. A lot of that is based around things that are important for the oil and gas industry, such as making the northeast an attractive place to do business and be and make sure that it is well connected. I think that you are right to highlight austerity. I would probably rather highlight the opportunity around some of those things. That is fantastic. My point was that, was the northeast actually protected from the austerity to some extent? Was there a sort of bubble within the northeast that the impact of the rest of the country was having through the austerity programme? There was a degree of—it did not really impact on the northeast until the cost efficiencies, until the oil price fell and then we started seeing it? We did some analysis, looking at some European data between about, I think it was 2002, this was a few years ago, 2002 and 2012. We were one of the highest performing regions in the whole of Europe metropolitan regions. Not only did we counter cyclical in the UK, we were actually counter cyclical across the whole of Europe over that period of, as people call it, the Great Recession. I think that there was a lot that protected us and clearly might raise the point of record investment. That record investment happened over a period where the rest of the country was under significant strain. We have weathered that particular storm and because we are kind of cyclical, we will now go through some of our own challenges. Again, I think that we are well up to that with the right support. I have a couple of questions for myself and then I will bring in other members. You mentioned diversification, maybe start with yourself, James Bream, because I was looking at your oil and gas survey and you have a comment on page 14 where you have asked firms' expectations of whether they might become more involved in unconventional oil and gas activities and looking at the opportunity to diversify there. I think that you say that 67 per cent, two thirds of all firms expect to see an increase in their involvement in the area in the medium term. Is there an area that you see there being opportunities? If so, do you think that the Scottish Government's moratorium on fracking is helpful or unhelpful in this regard? Thanks for that. This is the first time that I have asked this question. I would say that the response needs some more analysis in the future and we will probably ask the question in a slightly different way, because this could be a reflection of international markets. Already, there are a high number of supply chain companies, particularly as well as operators involved in this internationally, so it might be more a reflection of that. Obviously, the activity in the UK in this area seems to be a little bit further away than the immediate opportunities that exist in international markets. If companies were looking at the immediate opportunities, they probably would not be looking in the UK as a way to really substantially change their business base and supply chain companies. The opportunities are not in the UK at the moment there elsewhere. I think that they look limited in the medium term here in the UK. I do not know. Do you have a view on this from violent gas in the UK? As James mentioned, diversification is something that all companies clearly will look for. They have great expertise and great capability in the UK and that made in the UK brand is something that they are going to obviously stand on the best they can for this downturn. Are we being held back in the UK from progressing this agenda and creating jobs here? So, could you clarify what you mean behind that question? Mr Bream has just said that the opportunities are out with the UK. I am wondering why we are not seeing more opportunities in this field in the UK given the skills clearly are transferable from the offshore industry to the onshore industry. At the point that we are at in the UK, other people are already delivering unconventional activities and we are not yet in the UK. If I were a supply chain company, I would be looking at the immediate markets, which are there and ripe to exploit. I think that we are, as you all know, going through our own regulatory processes at the moment. As and when those conclude, I am sure that companies will start to see opportunities here. Okay, let me ask you another easy question then. We have heard a lot in recent months about campaigns to divest from the oil and gas sector. MSPs around this table have had letters from constituents saying that their pension fund is invested in fossil fuels. We regard that as very bad, it is bad for the environment, it is bad for long-term planning. What is your view on that? Is it helpful to have campaigns running? What sort of message does it send out for the future of the industry and for people looking to make careers in the industry that those sort of campaigns exist? The campaigns exist, so we have to respond to them. Part of that is making sure that we get the facts out onto the table. Part of the anti-fossil fuel campaign is that we need to make sure that people understand that there is a difference between the fossil fuels. We should not be, pardon the pun, tiring them all with the same brush. Gas is a bridge to the future in terms of a lower carbon economy going forward. The fact that we have an indigenous resource on our doorstep that offers gas to help us to move to a lower carbon economy going forward is a really positive thing. I think that it is really important that those campaigns take that on board and we get those facts out into the room. Building on your other point about that is undermining the fact that there is a future for the industry. This industry has always been challenged by being a sunset industry. I have been in this industry for a very long time and that is what people said to me when I came into it. I am still here and I am working with colleagues who have been around. We do believe that there is a very strong sustainable future and part of what we all need to be doing is encouraging people to understand that there is and that we will look for skilled jobs and skilled people for many years to come. It should not be detracting from people having confidence about coming into the industry. If we were to take the advice of all those people writing to us and where to divest, what economic impact would that have on the sector, on the Aberdeen economy and on jobs? I think that it is not going to be helpful in the debate. If you think about it, the majority of reserves are actually held by the national companies rather than the independent oil companies. That is not going to help. The IOCs, the independent oil companies, are the ones that are prepared to have that debate. You want to be working with them and not being part of that debate rather than just stopping off the debate. I think that that is a very short term and with unintended consequences. Yes, good morning. I hate to disappoint the convener, but I have talked to some geological professors that fracking is currently because the structure of the UK, a geological structure of the UK, is not a commercial proposition, I am told, but I will leave that as it is. Can I just ask on that basis, though? Clearly, the international price of oil, when suggests, has been depressed because of, if you like, the Saudi Arabians, for example, trying to offset the price of fracking in the United States. What research have you done in terms of the forward price of oil that comes from fracking, particularly in the United States? All that you can see over the past years is that shale oil production—unconventional oil production in the States, hangars—have become more efficient and more cost effective over the past three years. So, where at some point maybe $70 and above were needed, you are seeing businesses sustained at prices well below $70 now. How that emerges, we will have to see, but that is in many ways a strong feature of the business now. Since we are now on to the oil price trends, you may not have been around 30 or 30 years ago when the Saudi Arabians were not that old. The Saudi Arabians basically caused a fall on the oil price then, and then the industry has been here before and recovered. I know that the price of oil has gone up and down, and it is under $50 at this moment in time. Basically, what trend do you see? Do you agree with some other experts who are saying that it is going up to $75 maybe in the next year or two? I know that you cannot predict the future, but we have been here before. How do we recover? I'll ask how it was here 30 years ago, so I claim that one for sure. So, there's a technical answer, something called reversion, to mean overtime prices seen to end at where they have been in the past, and the average over long period has been in the $60, $65 range, where things emerge over time. Clearly, much stronger oil demand now than there was 30 years ago, and so far, supply is exceeding demand, which is a depressing price, but demand is continuing to increase. Over the long term, there's a much greater likelihood than not that prices will go up. Whether they go up above $100, many other factors that you mentioned will determine that. You're saying that the industry was a prediction that, way back in the 60s, this was the last 50-odd years in our sea. You've just said that all those newer fields are coming on. Basically, we can see another 50 years, but would you agree with me as we do get 20, 30 or 40 years from now, as the supply decreases, prices will eventually reach $200 or $300 a barrel? I think that the answer is who knows. I don't think that we'd like to predict that, but back to Mike's point, when you look ahead, you do see demand increasing. It will be how we answer that demand, how we resource that demand in terms of oil and gas, and from renewables and other sources as well. I wouldn't want to predict that. I'm following on from what Mike Alon had to say about the reduced break-even price of shale oil and gas from the United States, but looking at the North Sea, the break-even price is clearly critical in the North Sea, as in terms of what price of oil or sustained production and what reduced price leads to major loss of production opportunities. Do you have a view as an average on what the break-even price is and on how much you need to reduce cost in order to meet that break-even price for enough of the basin to continue in production? Obviously, as the committee would understand, there is no one-size-fits-all answer, because, in the early years of your production, the break-even price is much lower than we are seeing in today's market. However, most fields that we have in the North Sea are in their middle age, or even more mature than that. Clearly, we are having to manage a much greater balance of cost and relatively low production on those facilities. Break-even prices, even now, there are fields that can cope with the current prices, but they do not have excess cash to reinvest in new opportunities. I am confident that break-even prices are coming down because costs are going down. The real issue is how much cash a company has got to reinvest to do new things, not just to sustain existing businesses. There is no simple answer, but, as I suspected, you would say, but, in terms of trying to get from your sense of what scale of cost reduction gives the North Sea the mature fields a future beyond the next couple of years? On a positive note on that, what we ourselves are seeing is that, over the next two years, something like 20 per cent of cost is coming out of running the North Sea's facilities. There are new things coming on as well, which can help to balance that further. The industry is doing a massive amount, not always seen quickly, to try to adjust its cost base and cost globally coming down as well, which helps. Yes, we are on a period of painful reassurance. Some fields will inevitably be decommissioned because they have reached the end of their productive life and done so quicker because of the very low oil prices, but there is still a future out there for our business. I want to continue this discussion about the oil price. Currently, we have an oil price below $50 a barrel, yet we are seeing oil production increase in comparison to last year. The North Sea has been in production for 40 years, and for 30 of those years, the oil price has been below $40 a barrel. Back in 2000, we heard last week that it was as low as $9 a barrel. Why is the industry in the difficulty today bearing in mind that, for 75 per cent of the time of its existence, the oil price has been below $40 a barrel? You have probably gone to take two things into account. First of all, last inflation. 15 years ago, in 2000, we were producing nearly three times what we do. Yesterday, the oil price was a lot lower, even then, just before 2000, dropping below $10. But even then, buying power felt like a lot more money than it does now. There is the inflation effect, and we were producing a lot more. We have fields now producing a lot less. We are having pretty fixed running costs, so things are a lot tighter because of maturity and because of the age of what we are doing. I wanted to ask about the cost aspect of it, because you have said that costs are pretty fixed. Earlier, you said that 20 per cent of costs are being removed. The Energy, Climate and Change Committee at Westminster recently heard that in the North Sea costs have doubled over five years. What is the reason that you mentioned that there is acceleration in costs in the North Sea? What is the reason for the acceleration of costs? There is no one item that you cannot point to, otherwise we would address that. It is a mixture of things. We have been operating in a hot market, so your supply demand has got out of kilter. We are also operating in a mature environment, so there is more complexity involved in what we are doing. You have an older asset infrastructure that requires more effort and is more complex. Your big fines of your rents and your 40s are now looking at much smaller accumulations, which are more technologically difficult to get after. You put all those things together and you have a more costly basin to manage. Getting clever about how you do that is part of the issue. That is why we cannot point to one thing and say, that is it. We have to try and address the range and see how we manage each of those areas. Does that make sense? Given the fixed cost base, we need to increase productivity from those fields. Again, we have heard evidence that the extraction rate in the UK is 40 per cent and in Norway it is 60 per cent. Why is there such a big difference in extraction rates between the UK continent and it will shelf in Norway? When you look at that in more depth, what you see is that both in Norway and in the UK, there is a range of answers depending on the field, scale or whatever. Suddenly, others, when they look at experts and look at it, see that there is not as greater disparity as first appears to be the case, but that companies in the UK continue to try and pursue to recover the greatest they can from the North Sea. The approach that you will hear separately from the oil and gas authorities, the approach that they are driving with the industry, with our trade association, to maximise economic recovery, is around the whole philosophy of making the most of what we have in the way of opportunities. No oil man is wanting to shun what the opportunities are. They are trying to do them in a safe and economic way and maximise that recovery. I am just looking at the downturn in oil production that we had prior to this year. Looking back again at the Energy Climate Change Committee at Westminster, it was highlighted that in July 2015, the oil and gas UK industry safety report recorded another increase in safety critical backlog and that prior to August 2014, 36 out of 42 months showed a backlog in all three categories of planned, corrective and deferred maintenance checks. It was suggested that production was prioritised for those 36 out of 42 months. Is it reality that the oil industry, when the price was high, was deferring any maintenance in order to squeeze as much out of the oil field when price was high? Part of the reason for the downturn in production is that it is now catching up in this maintenance. I would disagree with that. When you are looking at the safety critical maintenance, we have seen an increase in that trend and it has been something that we have, as an industry, been concerned about and we have, as an industry, been looking at it to try and understand what has been driving it. Companies have also been looking at their own individual performance to challenge it. Again, as a trade association, we are undertaking some analysis of it and we will be able to report back on that. We think that we have a better understanding of why it has moved in that way. It is not a trend that we like to see, but one thing that I would like to reinforce is that, when you have safety critical maintenance and it moves into a backlog, it has had to go through a very robust risk assessment to work out why, if it can be deferred and for how long it should be deferred. I think that people should be reassured that, even in a trend that we do not like to see, the actual maintenance that has gone into that has been risk assessed in an appropriate way. We are still looking at 36, 42 months, where there was a backlog of maintenance checks. Surely that is not acceptable? No, that is what we are trying to understand. There will be a variety of factors of why that is not acceptable. Some companies will put in maintenance that is not safety critical. There will be reasons why companies have done what they have done, but the point that I want to reinforce is that, when something goes into that backlog, it has gone through a very strong, robust risk assessment that is also regulated by the HSE. I do not think that there is necessarily a correlation between safety performance in that regard. I might be trying to focus my question towards your theory, if I may. Perhaps the first question should be, what current discussions have you had with the UK Government regarding the optimism in the oil and gas sector? Primarily, towards ensuring that we have the appropriate skilled workforce for the decommissioning up to 2040, when we are looking at 470 installations and 5,000 wells being decommissioned. The initial thing is what discussions have you had with the UK Government. Is it now with the regulator, with Andy Samuels, or are you still engaging with DECC directly and with the Treasury directly? In relation to the first question, we are working very closely with the regulator. Andy is behind me, as I speak. We welcomed the setting up of the regulator as part of the wood review, and we see that as a really important means by which we can work, this industry can improve its performance. You need a strong, robust regulator, and we appreciate the fact that the Government did set that up. We look to make sure that we have a robust and constructive relationship with Andy and his team moving forward. We will be working very closely with the OGA, and we will also continue to have discussions with DECC and the other relevant departments that impact our industry. That is very important for us. The tripartite approach that the wood review is articulated and pushed for in relation to working with Treasury, working with Government and the regulator and industry is something that we are very supportive of. It is something that we absolutely support because we think that it is crucial to making sure that the industry is successful going forward. Does that answer your first question? In relation to your discussions with the UK Government, you seem to be suggesting that it is certainly robust discussions. Are you able to influence the direction that has been taken with DECC and Treasury in relation to ensuring the future within the sector? Absolutely. That is a key part of the industry's role to work closely with DECC and Treasury in relation to the future of the industry. We are currently going through consultations with Treasury in various areas, looking to see where there are opportunities to reduce fiscal barriers. That is consultation that we are fully involved with at the moment. The answer is yes. Were you able to influence the direction of travel in November? In this recent one, as I said, we are currently going through consultations with Treasury. So that would be no, then? The fact is that it is a timing issue and we are working with Treasury to look at those various issues at the minute. DECC is an opportunity for the sector. It is worth £41 billion by 2040. That is an opportunity. What I would like to reinforce is that it is not the next industry. What we do not want to see is an acceleration towards decommissioning. Maximising economic recovery, which is again what the wood review is very focused on and what Andy and his team are looking to make sure that we drive for, is that we have to push out the economic recovery of this basin for as long as we can. We know that we have to move into decommissioning at some point, but we need to make sure that we decommission when the time is right and that we do it in a safe and efficient manner. It can never replace the industry that we have because it is not going to support security of supply. It is not going to support the same number of jobs, but it can be a centre of excellence for the UK. How do we retain our workforce, our skilled workforce, to ensure that the decommissioning at when the time is right is done appropriately and safely? We are looking to see how we go about doing that. We will be working very closely with the OJA who are setting up a decommissioning board that is looking to develop a strategy for the next five years, but we will look to answer some of those questions as to how we manage a smooth and effective move into decommissioning that does look to establish the UK as a centre of excellence from which we can then export our expertise around the world. If you think about it, we are a maturing basin, but so is every other basin around the world. We are just slightly ahead of them, so there are means being set up by which we can do that. It is an opportunity that we cannot afford to miss. It is an opportunity that we have to manage very well and we have to manage it effectively and to make sure that we do it in a very cost effective and safe manner. We are on record the same before that the fact that we are a frontier basin actually gives a perverse benefit in that we get to try some things before others. It is actually quite exciting from our point of view to see the OJA established and the work that they are starting to do now. They will not do the decommissioning, but they have the opportunity to work with industry to set out a strategy. One of the opportunities with that strategic approach is that when you see a baseline load of work, you can plan that in a slightly different way with decommissioning. That allows the supply chain to engage. The supply chain will step up to the plate. I am absolutely sure that the OJA will not directly engage with it, I suspect, but by setting out the strategy, there is a real opportunity there. With decommissioning, we can do something slightly different. Mike, on a few occasions, suggested mature and older, and I was starting to get a degree of empathy coming across the table. I am just wondering, with regard to the ageing infrastructure, we heard from the unions that there is perhaps a safety issue that is not being addressed, and they would appear from what they are saying—their terms are a culture of fear, growing—that they are at a stage that they are reluctant to report incidents of perhaps safety issues. That would be extremely serious, I think. I am just wondering, what are you doing to try to redress their fears? I know that you have been working with unions, but they are indicating quite seriously that there is a culture that, if they report something, they could lose their job. Surely, that is not the case. We are certainly aware of the unions' concerns, because, as you said, we have met them and discussed those issues. We want to make sure that people are confident that they can report issues where they see them. They have their own mechanisms within their own companies, and they also have the HSE whistleblowing line, which is an anonymous one where they can report where they see concerns. A reinforcement safe production is absolutely what this industry has to be about. If you are hearing from your constituents that this is of a concern, we need to be urging them to pick up the phone and raise these issues. Let me know about them so that we can work together to address where there are concerns, because if it is an issue, we need to be addressing it. You read the report from last week, or were aware of the report from the trade unions that we had in last week, and the concerns were raised there. If you have not seen that report, I am quite sure that we will be able to provide that. I will just stay with the health and safety issues for a second. You are saying that it is anonymised. Again, the trade unions are suggesting that, although it is anonymised, because of the nature of reporting, they still feel that it could come back to particular individuals. How do we address their fears that safety is an absolute paramount? Yes, your job should be safe, but safety is paramount above everything else. It is something that we have to reinforce. Obviously, if there are concerns about the HSE whistleblowing line, which is the last defence, we need to address that. We need to look at that going forward so that people can feel confident that they can use it and that their concerns will be listened to. That is something that you can take on. I will take that on you. I have a number of members who want to have supplementary thoughts on decommissioning. Can we please all be brief? We are getting behind the clock, so I will start with Joan McCall. I got from you a hint of caution with regard to rushing too fast into the decommissioning road. I was struck by Mr Vaz's comment, the Bondickinson comment in the chamber of commerce report, in which he says something similar. He basically says that the industry will be eating away its own bones, but it will go down the decommissioning route if that is where the incentives are. Obviously, there is a tax incentive to decommission, but the Scottish Government, for example, has been calling for an exploration tax credit. If the industry is faced with the incentives to decommission but not to do further exploration, it will go down the decommissioning route. Do you say that that is correct? I think that we are looking at fiscal barriers. We are looking at each of those areas, exploration, decommissioning and infrastructure. You are right, we need to make sure that we get that balance right. Mike, do you want to say a bit about those areas in terms of the exploration and the decommissioning? First, in the decommissioning space, there is no specific incentive to decommissioning. In the first place, if you decommission, it costs the company an awful lot of money, someone who is relevable through their tax regime. Will they rather keep the business running if they could? That is still making money for that concern and allowing a taxable income. The balance is still around trying to run assets safe and well for as long as they can do, rather than decommissioning. Even if assets go through decommissioning, technology has moved on. If there are new discoveries, it is not that loss of any infrastructure or loss of all the opportunities. We can reach further back from longer distance now through subsidy tie-backs and a whole range of technologies to recover more from less infrastructure, albeit that we do not want to see that go needlessly. You would be keen to see more exploration to see an exploration tax credit then? I am keen that we work the process that we are working through with the Government, with the OGA and with the Treasury to make sure that the tax regime is not a barrier to activity in exploration. Do you think that it is just now? I think that the biggest problems at the minute are a shortage of cash to invest in exploration in the UK, so we need to be competitive in the first place. Find the opportunities, which a lot of good workers have been doing, not least the state-sponsored seismic that is going on now. The OGA is working hard to help us to look at the licencing regime to be smarter on licencing, so most of the barriers are not around tax. Yes, tax may help, but it is not the simple answer to a very complex problem. I want to go back to the issue, particularly about the evidence that was given last week by the three unions. If you have not read it in detail, I would get the opportunity to suggest that you do, because what comes across very strongly is people who are committed to the industry, but are very concerned about what is happening in terms of decisions that have been made. I think that the charge that has been laid of interest in your comments in this, you talked earlier about reducing cost and increasing efficiency. What was coming across last week was that that reduction in cost and increased efficiency was the expense in terms of conditions of the workforce and health and safety. I understand and am aware of the unions' concern in this regard. I would reinforce that the pain and the impact are being felt across the industry. There is no one area or one set of workforce that is feeling this particularly more than anybody else. It is an impact that is being felt across the piece. Companies are having to make difficult decisions, because any industry that has seen a 60 per cent reduction in its revenue has to do something fundamental to address that. Difficult decisions that are impacting at a very personal level are having to be taken. What are we doing that is a bit different in this space? The work of the Scottish Enterprise Task Force has been very welcome and has been different in addressing the downturn. It has set up three pace events in Aberdeen that have been attended by more than 850 people at each one. That has been about working with the people who have been made redundant or who are under threat of redundancy and looking to support them as they go through these difficult times. It is tough and challenging, but I really believe that, as an industry, we are very focused on ensuring that we maintain safe production, and that is the mantra that is going to take us through this. We are doing everything we can to support our workforce, recognising that people have done and will continue to lose their jobs. Can you explain why production costs are lower in Norway while worker terms and conditions are seemingly better than the evidence that we saw last week? Norway benefits, in one sense, by being a younger oil province in the UK. Activity costs are, if anything, often reported to be slightly more expensive in Norway, but because we are producing much more per feel than many bigger fields in Norway, the cost per barrel typically are lower. That is where they feel advantage compared with the UK. They are less mature in the business, so that cost per barrel thing is better. You talked about the health and safety issues. We were told last week that the helpline was not worthwhile. The unions have become a conduit for workers' concerns, which is legitimate if they are generally concerned about their jobs. What contact do you have directly with the trade unions in a regular basis to hear those concerns? We met them a couple of weeks ago. Part of that conversation was, if you are seeing issues that are coming up, we can work with you on those. If you can share with us where you are seeing the issues, that will enable us to see what we can do in that space. We have met the unions on an on-going basis, perhaps not as regularly as we should, but there is a commitment to make sure that we have regular engagements going forward. You will now meet them regularly, and one agenda item would be what are those health and safety concerns. Behind that is a concern around informal blacklisting. Historically, that has happened, which explains why people might be concerned. Would you take the opportunity at regular meetings to explore their concerns around the question of blacklisting? Whatever is on the agenda, we are happy to discuss. There is nothing that should not be on that agenda. Do you think that the energy skills task force, when you talked about peace, is really how do you deal with the fact that people are losing their jobs? Should that task force also be addressing the concerns about how there are ways of maintaining jobs and sustaining jobs rather than simply being that it has to be about redundancies? That is an interesting question. The task force has certainly been focused on helping to mitigate the actual impact. The task force is still on-going, and part of its remit is to look to see where people can move into other sectors and what are the opportunities. That is the point of making. If there is a presumption that there is no alternative to redundancy, you do not have that conversation, but other decisions that are being made that mean that jobs are not being lost unnecessarily. I will give you an example. Last week, we were giving evidence that moving to three weeks on, three weeks off shift rota creates further problems. How was that tested, or have you seen people testing that, as opposed to the same? By definition, it means that there are fewer helicopter journeys, so it must make sense. There may be other consequences to that kind of rota, which reduces productivity. Is that task force a place where that discussion could take place? We have seen many companies move to a three-on-three-off rota. That is because they see that there is an opportunity, not just in terms of cost and efficiency, but that there is a safety improvement. You are taking out back-to-back, so there is a safety opportunity there. Three-on-three rotas have been successfully used in the industry for years with no negative consequences. From a safety point of view, a three-on-three move is very positive. It can be seen as a very positive move. Why do you think that three unions do not think that they actually talked about the impact and the health and wellbeing of people who are working and their concerns about the impact on different productivity? In terms of the concerns that the unions have, when you go through a management of change, when you move to a three-on-three, that is robustly assessed within HSC guidelines. No company will make a deliberate move to make their workforce unproductive. They see benefits in doing that, not only in terms of the business, but in terms of the workforce. It is not an unsafe thing to do by any means, and we have proven that over the years. You have the evidence for that. The unions, when they are concerned about the impact on the mental health and fatigue of the members, do not stack up with the research that they have. Certainly in terms of the experience that we have had as an industry. Their concerns are legitimate, and it is something that we should make sure that we continue to work with them on. However, as I said, we have robust assessment processes to ensure that, if you have put somebody who is fatigued, that is something that you would take into account in terms of how you are managing your offshore workforce. I wonder whether you thought that, in some cases, there was a short termism around changing rotas. It was something to move to in circumstances where you needed to make savings. In fact, it might become productive. Would your advice be to companies to get the evidence first before the shift? Last week, the suggestion was that it looked like a way of doing something quickly, because there is a problem. I would reinforce the fact that the drilling community has been successfully doing three weeks on three weeks off for years and has done it very successfully and has been very productive as a result. You would need to explain why, in the past, they did not shift to the rotas if they were very productive and sensible. Presumably, they have done it at a time when there was not a crisis. Not all companies have looked to see what their optimum operation is. Seven or eight companies have moved to this particular rotor. Others have chosen not to, and they have done it on the basis of what works best for them in terms of their particular business. It is not a blanket approach at all. It is a thoughtful approach that they are applying because they see an opportunity to improve their performance and their production and their productivity. I think that there would be people who would be sceptical about that if it would then have been something that has been rolled out over a long period of time, rather than a point where there are real challenges. I am interested in your review. One of the bits of evidence that came up last week was on the use of non-European maritime workers and the particular concerns of RMT for British seafarers that they were not going to be operating any longer in the North Sea, and there are concerns that there is a consequent impact on jobs, obviously, but also on the safety of the workforce who are then doing those jobs. I wonder if you have a view on the use of—I think that it was described as a loophole in the legislation, which meant that we were putting at risk jobs for British maritime workers, but also for the terms and conditions of those workers who were coming in. I am aware of that concern. It is not something that we have the remit for in our trade association, but it is something that we can certainly raise with other trade associations who are directly responsible for that particular area. Would you have a view, or should you have a view, given the impact on the industry of being served by a maritime workforce with poor terms and conditions and potentially measures around safety? I think that, from an industry point of view, it is important to us that our people are rewarded appropriately and fairly across the board. Is that something that you will pursue then? It is something—again, as the trade association, for what we are responsible for, it is not something that I have a direct influence over, but I am certainly happy to raise it with the trade associations that are. Can I just follow up on one point that came out of the trade union evidence last week that John Lamont has raised? That is the issue of common standards, which was raised by the trade union reps who told us that common standards could be enforced across the industry, so that contractors moving from platform to platform, from company to company, we are not having to relearn and adjust their practices. That would drive up productivity considerably and drive down costs. Is that something that you have a view on? We have a step change in the safety body that is looking to do exactly that, especially around safety opportunities. It is something that, as an industry, we recognise that there are opportunities there and that we should be pursuing them. I am conscious of time a bit, so I have two members who want to come in at the end. If there is time, we might get some supplementaries, but I will start with Chick Brody first. Thank you for an impressive contribution this morning. I would like to address the issue that Dennis Robertson raised, which is how do we retain our workforce? I do so on the predication that the IMF says that there will be a partial recovery of price to the $75 barrel. Brent Crude is talking about upwards of $70 in 2017, and the economic recovery agency is talking about more than $80. My first question is a somewhat parochial one on the basis that we have talked about the clear ridge. After some long investigation, we have determined that we are now probing the availability of oil and gas in the Clyde and the Atlantic margins. What do we have to do to encourage the oil companies to pursue with the academics who are now doing it to pursue the possibility of what would be cheaper oil, because it would be a lot nearer land? So, both through the OGA and previously through DEC, there continues to be the licensing around the UK of opportunities. I know of no company that is explicitly pursuing opportunities in and around the Clyde. I know of some that have looked in the past. Were they still pursuing those opportunities? Maybe they would be a different conversation. I am not privy to the outcome of those. There was a licence issued in 1984, PL262 to BP, and the drilling and the then Secretary of State for Scotland said that there was oil in exploitable quantities in George Unger. His compatriot in the Thatcher government, Michael Hesartine, stopped it because of nuclear submarine passage up and down the Clyde. Villages were built, Ardrossan Harbour was bought. I just wonder the personal frustration. What do we need to do to look at not just the Aberdeen issue, which is of course very important, but to look at oil around the rest of our shores? Alas, that predates even my entry into the industry, so I am sure that the OGA and others are looking at licensing those opportunities where they think that people will pursue those opportunities. I will build on that. As Mike mentioned earlier, the OGA and Treasury gave £20 million in terms of seismic, and I am sure Andy will talk about that. That is looking at frontiers that we have not addressed, so one in the Rockwell area, so not quite where you would like it. There is some off-tire, but I am interested in the Clyde. We have talked earlier about how this is a mature basin, and yes it is, but the other point to make is that there are still frontier opportunities in the area. As part of the work that the OGA will be looking to do, as Mike said, is in terms of licensing and the opportunities that the information around the Rockwell areas and the central part of the North Sea will be available in spring 2016, so that might bring more opportunities. It is just that the company Providence, as Mike said, has based on their exploration, reckoned that there are half a billion bottles of oil off Rathlin Island, which is just south of the molloc entire. I will keep propagating. The second question, perhaps to James, is that some people get concern rightly in terms of the environmental impact of burning oil, but of course it is much more important than that and it pervades all aspects of our life. What I do not understand is why we never use the vertical integration capability of oil and using oil-based or getting companies to use oil-based products to manufacture in Scotland. Why did that happen and is it too late to make it happen? I am not sure that I can answer that with any great evidence, I am afraid. The way that the oil and gas industry works is that we have our operators and our supply chain, and the product then goes on to be used for all sorts of things. When you look at the oil and gas sector, I guess a lot of people think about the oil, but actually the gas is in itself extremely important and used for a variety of products. I am not sure that the vertical integration is necessarily important. From my point of view, if I were to go to a business, they would probably say that it is not something that we are interested in or indeed it is, and they would base that on sheer business economics. Forgive me, we have an energy jobs task force. I wonder if the downstream products that are oil-based or realising gas are part of the conversation going forward in terms of how, if we are laying off people in Aberdeen, are there other activities that we can encourage in terms of inward investment to that area that uses that raw material? I know that it is going to go through the refinery and what have you, but… Possibly. I am not on the energy jobs task force, so I cannot really say whether it is in the remit. I suspect probably not. I think that companies themselves are generally the ones who look around how they diversify. I am not sure necessarily that the public sector in its widest sense intervening there would necessarily be of help. That said, the support of SDI, UKTI generally is really important for continued success in international markets in terms of FDI. I am not sure that I see an immediate opportunity, but it is possible that I am missing something there. I have to get it on the record. Is the UK still self-sufficient in oil supply? Alas, no longer. It has been a number of years, probably a decade or more since we started to go below being self-sufficient. We are producing roughly half our oil and roughly half our gas demand in the UK. Basically, it is costing, if we look at our balance of payments, that is costing a lot of money to import oil from other countries. We are a net import of oil and gas, but we still otherwise displace an awful lot of oil and gas that we otherwise would need to import half a billion barrels of oil and gas a year at least extra if we did not produce what we do now. Can I turn to the press release that Deirdre Mishie put out? Government figures show that demand for our product oil and gas will continue to provide 70 per cent of our energy to 2030. Beyond billions of barrels of oil, Chick Brody went on about the fact that there are still opportunities in the whole of the surrounding areas of Scotland for extraction. Our supply chain is worth £39 billion. We have the capability to maintain a significant contribution to Scotland and the UK, but the future over the next 50 years is the hands of industry, Governments and regulators. What would you do as an industry to, and I go on to the point that Joan McAlpine went on about earlier, in regards to what the UK Government is incentivising you to do or to help you? What would you like to see if you had a wish list tomorrow, now is your opportunity to tell us? What would you like Governments to do, regulators to do and the industry to do, to bring back the employment that we deserve? That is a very good question. I just point out that we are at the end of our time, so that we can have a fairly short response. That would be very helpful. What is our ask? Our ask is that you keep us on your agenda, whichever both Governments that you continue to understand the importance of this industry. At Westminster and at Holyrood, you keep us high on your list and you continue to understand the challenges and you continue to support us. That is the request of you as a Scottish Government and of the Westminster Government. We have asked companies what it requires to maintain their interest in the UK in the sector. They are very clear that it is labour, retention of the cluster in the UK and connectivity to international markets. In that respect, one thing that I would ask is that, so far as you feel able and that you back the city deal negotiation, it is really the one show in town that enables the cluster to survive. Lewis, we are all desperate to get in with the questions, so I will have a very quick question. Just to give Deirdre Wickey the opportunity to say, if that is also the view of oil and gas UK, that the city deal is critical to going forward. Thank you Lewis. No, absolutely. We are very supportive of the city and shire deal. It is really important to Aberdeen, obviously, but as Aberdeen is so crucial to the oil and gas industry for the UK, the success of Aberdeen is critical to the success of the industry generally. Thank you Lewis. We are absolutely behind it and want to see it successful. On that note, we have to call matters to a close. I thank you all very much for coming. It has been extremely helpful to the committee. We will now have a very short suspension to allow a change of order. I welcome our second panel's warning. I am delighted that we are joined by Sir Patrick Brown, who is the chair of the Oil and Gas Authority and the Samuel Chief Executive. Before we get into questions, I think that you want to say something by way of an introductory statement. Good morning, ladies and gentlemen. I thought that I would better start by trying to give you a sort of scene setting for this new regulator, which has now been running for six months. It took on, as you know, the former licensing responsibilities of DECC, but also this new remit that came out of the wood review. I have invented regulators, and I have also served on companies that have been regulated. So when I took this job, I made it clear that I wanted it to be a regulator like no other in a sense, because it was not going to be autocratic, it was not going to be bureaucratic, it was going to be limited in its size because regulators can just grow and grow, and that very seriously throughout the organisation, we would be seeing our role as a member of a team, of a partnership, call it what you will, with industry, with the unions, with the governments, and with the gas UK, all the players, because we are clearly aware that unless we, perhaps as the body in the middle, unless we can persuade people to do things sensibly together, then MER UK will not work. I thought I would put that down. We are new, we covered a lot of ground and Andy will no doubt tell you, and I think he's done an amazing job in getting us to where we are now. But obviously, as government changes, the regulator is formed, it's pulled out of government, new responsibilities arise, there are sometimes some difficult questions about who does what, and that we are sorting out with debt. But I just thought I'd set the scene and say, thank you for inviting us and we look forward to your questions. Thank you very much. We've got about our four questions this morning. I'll let you decide between yourselves who will field the questions, perhaps, and I would ask members to keep their questions as ever short and to the point and answers as short and to the point as possible would be helpful. Can I maybe just start by picking up on your last points, Sir Patrick, about the relationship with the Department of Energy and Climate Change? What if you say a little bit more about how that's going to work? In particular, are you going to do what they say or are they going to do what you say? Or how is that going to operate? It's not quite like that. We are going to have some very clear roles as regulator and we are going to be independent in the execution of those roles. And I'm absolutely clear on that. We are not going to be in the position where ministers can ring up and say, do this. Absolutely not. If ministers or their officials ring up and say, could you help us with something? We will look at it and say, is this part of our remit? Then if it is, then of course we'll be helpful. But what we will not do is get ourselves involved in any sense of the policy of the government of the day because I think that would be just completely wrong. But conversely, will you make recommendations to the government and to deck about areas where you think that that should change? We as a body, like anybody else in the country, can make recommendations to government about things that need to change. And perhaps if there are things that aren't working in the UKCS that we think should change and our deck's responsibility, of course we'd be bound to say to them. Okay, thank you, that's very helpful. Okay, I'm going to move on to some of the health and safety issues. I'll start off with Dennis Robertson. Thank you very much and good morning, gentlemen. You're probably aware that the trade union are concerned at the moment within the industry that health and safety is being compromised due to cost efficiency. Do you have a role to try and ensure that the industry is maintaining health and safety to the highest standards? I think that that's probably what we need to get on record, that health and safety is paramount, but the unions are concerned that it's being compromised due to cost efficiencies. Do you have a view on that? You'll be aware of the Scottish Energy Jobs Task Force and one of the things that I worked led along with a couple from industry was an engagement on May 22 where we got what I call the whole system together and I insisted that we had offshore workers, safety reps and the unions in the room and it worked very well because I think their voice is vital to the debate. I think the unions themselves and I now meet with them regularly would be the first to say and I think they said it last week that the industry leaders obviously walk the talk on safety but are there some unintended consequences particularly during downturns like we're experiencing right now? I had a very good meeting with six of the union chiefs three weeks ago and I said how can I help, how can the regulator help in this? I explained that we have very close relations as you would expect with the health and safety executive who in terms of regulatory capacity take the lead here however it's vital that we also do our bit. I explained also that we have a memorandum of understanding that Richard Judge, the chief exec of the HSE and I agreed and we have regular meetings with them to make sure that we're very joined up and particularly to make sure that we're not doing anything for example in our primary aim of maximising economic recovery that could go against safety and I'm very confident we're not. What the unions asked me to do was to hold industry to account on their commitments and I'm very happy to do that and that's something a regulator should do. We have a role around stewardship for example and part of that we'll look at their how are they managing their operations and are they efficient. The unions also asked me to to spread positive stories of which there are many there are some operators doing some outstanding work and then the third thing we talked about and it relates to the second is and it's something I'm passionate about having managed operations myself is you get the safest and most efficient operations when you engage with your workforce in fact now more than ever is the time when operators should be going offshore listening to the workers offshore because that's actually where the smart ideas come from and obviously and frankly this thing about safety concerns sit down in the t-shack spend a couple of nights offshore and it's pretty hard not to find out what's going on. My experiences at offshore work is a very open when you actually take time in their workplace. The engagement with the workforce is something we're passionate about. Nexon have done that brilliantly I would argue over the last two quarters and they demonstrated continued safe operations and they are remarkable I think 40% increase in offshore productivity so wrench time which is the the time productive time spent per shift has gone from five and a half hours to eight hours this is something that other companies have been talking about for years and Nexon have shown how you do it through brilliant offshore engagement and of course the unions fully support that approach so I think there are some strong clues as to what works well we also know what doesn't work well which is rapid changes without workforce engagement so we absolutely support and I think it's good for business it's definitely good for safety really good engagement. So would you commend Mr Salmond would you commend the standardisation then of the approach like for instance Nexon I mean I saw the Nexon presentation it was an excellent presentation and how they did engage and certainly would commend it to the the rest of the industry because they started off with health and safety it wasn't production it wasn't cost efficiency it was health and safety you know that that's basically their starting point is that something you would commend to the rest of the industry and how can you influence them then to have this sort of standard standardisation this a collaborative approach to health and safety so that there are two things there so first of all on commending just really good safe operations I was delighted that actually it was a brilliant session I think we had in this room myself and with Nexon and shortly after that we published it actually to make sure that it was widely picked up I was very pleased when quite a number of companies approached Nexon direct some came through us and said can we sit down with Nexon and understand what they've done so I think just sharing positive good practices can be extremely powerful and we will continue to to do that on standardisation it's a curious thing you know the industry have been talking about this for decades I was at the Oslo Energy Forum two years ago in Norway and it was a huge conversation as people were beginning to see that costs across the North Sea both sides of the median line were in a very unhealthy position and I've met with chief execs not just local MDs more recently and asked well you were talking about this two years ago what are you doing and it's it's still quite hard and I it comes down to leadership I I'm hoping now you know if there's one benefit of this downturn it will be a transformation of some practices including standardisation and by the way that doesn't limit him an innovation actually you know standardising some things will create space to be more innovative in other areas we are seeing some really good examples sub-sea seven shared with me some very good work that they they've shared publicly at offshore Europe where they've now got a standard solution for subsea tiebacks for normally pressured normally temperature tiebacks by the way we've got 200 discoveries out there already and if we can drive down the cost through transforming how that the how these are developed there's a massive opportunity a further 20 billion of investment could come from that that's something we're pushing very hard through the technology leadership board which we now co-chair and I was very pleased when subsea seven came along and said we've got a solution that can yield a 40% cost reduction and this is the important word here is cost this isn't price cutting this is a this is a different way of working that creates a much more efficient and more value adding solution so those are the kind of things where we're really promoting wherever possible yeah I mean I'm delighted to hear the optimism and certainly the the work and the the opportunities for the subsea sector are are probably not particularly recognised at the moment and that's maybe a message we need to get out of that but as a regulator what what can you do to ensure that health and safety remain permanent within the industry and if it's not if if industry isn't compliant or you feel that not being compliant can you do anything as a regulator we we are not the health and safety regulator appreciate that but I'm just wondering if you've got anything in terms of you license the industry we do yes we don't have any formal sanctions around safety clearly but you can within the license can you not can you influence in terms of saying look if you don't comply with or or you feel that there's there's issues can do you have I think that's rather stepping on the patch of the health and safety executive I mean they have the powers they have the investigatory powers they have the enforcement abilities and I don't think we should get in the way of them carrying out their job if we see things that they haven't of course we'll let them know but I think it must be up to them to take the enforcement steps okay John Lamont because going back to this question of health and safety would you accept in a time when I mean I'm encouraged what you said about the relationship between unions but a time when people are fearful for their jobs they're less likely to be frank when you're an open meeting and the unions are saying that people feel that that they're unwilling to go to the health and safety executive so what mechanism can you put in place where those concerns are relayed to you and perhaps through you to health and safety executive if that has been identified as a problem currently I've managed safe operations across various parts of the world for the last decade and one thing that's clear to me is change is unsettling and you know the industry has been talking about human factors for the last decade I think it's increasingly recognised that you know where people's minds are has a large part to play on whether an operation is safe or not so absolutely am I aware as are all industry leaders that during an unsettling period one needs to pay even more attention we have our own OGA workforce that they go offshore as part of our metering duties I've asked them themselves to to keep more of an ear out for any any worrying trends they haven't reported specifically clearly there is a you know when people are concerned about their their future jobs that is not a good thing so the sooner industry can get through this period of change the better but beyond that in terms of the the effectiveness of or not of the current reporting regime I do think as as you know you heard Deirdre will pick that up but also the the health and safety executive should be very concerned if that's actually not working because that is a vital safeguard I will certainly mention that to them next time I meet with them as well. Would you would you expect minimum standards around engagement with workforce? I think minimum basic standards are always very good yes and you would identify them in conversations with any operators then that's what your expectation would be that's not part of our regulatory duty it comes back to though there's a as one of the members has already alluded to there's a very strong relationship between well-run efficient operations and safe operations so some of the things that we're looking for in our standard stewardship around efficient operations I have no doubt that the health and safety executive are looking at similar things and that's why we agreed we should be joined up in our approach going forward. I mean I think there would be a concern if you're saying well it's not really our patch to deal with health and safety if health and safety hasn't got the resources or people aren't contacting them what they need and there must be something surely where you report something to the health and safety executive that they would report back to you they had done something about it my fear is that we're going to end up these concerns are disappearing but they actually have a huge impact on the workforce and of course on the roadway industry. If specific concerns relate to us we will of course not just report those but then make sure it's followed up I think that is a basic with safety you don't just kind of see it you have to own it and my team will follow up with that. Richard Lyle. Thank you convener, I pardon the work that I'm going to use but this situation is man-made at the end of the day you go into any trading floor in the stock exchange and they dictate the price of oil. I've just learned earlier from a question asked that we're not sufficient in oil now it's costing us billions and if you go into the balance of payments Britain is now billions of pounds in the red and balance of payments at the end of the day gentlemen I would hold you to account to encourage the industry to invest we've got all these extra fuels that we that are lying out there that could be used we have a situation where we're told earlier that because some fields are 30 40 years older it's a cost but also it said that any new field like say Norway is a lower cost so what do you intend to do to improve this man-made situation of a downturn in the oil industry in Aberdeen particularly but in in the UK if you want to take the UK at all an awful lot is the answer and there's a risk we may take on too much and we can talk about that so we've just published our corporate plan for consultation my chair gave me a very good challenge what will success look like in five years can you really really kind of test your team that we're doing we're leaving no stone unturned within one caveat we agreed early on that we will we will not have a headcan that will exceed a curious number of 179 it's a number I came up with in an early draft of a business plan but the the serious point there is that the mission is quite large and it also overlaps with other government departments both UK and Scottish and we need to make sure we keep our focus on our primary mission which is maximising economic recovery so what are we doing we've got a sector strategy a draft already being formulated for exploration stewardship infrastructure we're doing a lot of work with Treasury as you heard earlier I can say a bit more about that on the fiscal side we're also working with investors to help them see what it every time I meet with them they are I would I think I would summarise it as impressed with the pace of change and what both governments have been doing to support this industry compared to what they're seeing in other places where they operate around the world that is not to say there isn't a lot more to do there is but I think our job is to you know we talk about driving investment creating the right conditions where companies want to invest in parallel with our corporate plan consultation led by deck but obviously with very strong input from ourselves has been the MER UK strategy consultation that was launched a couple of weeks ago and this is a very important document actually and we've had very good feedback from industry and the workshops in Aberdeen and London that defines if you like the meat on the bone of what really is our primary mission and how we intend to to do it and the obligations it places on industry I think it's important to point out in that though it does not give us as a regulator the power to force companies to invest but it does create a use it or lose it mentality now it's no good asking a company to lose a valuable license if no one else wants to come in and take it on so we need to make the space an attractive going forward so the kind of work we're doing and we've made a start like using very you know to massive value actually the 20 million we got from treasury to go and get some new data some new size we can in highly prospective areas we hope we're not going to then just publish a data on its own we're getting a process at the moment we're going to try and add value to that by highlighting the prospectivity so we're recruiting as best we can good geologists geophysus and other people to to really highlight the prospectivity we'll through that we'll take a good look at areas like the Clyde as well you know anywhere that we think there is a that's the point I was going to ask you next you know at the end of the day if you go back to the 70s there was all the licensing and and the whoosh suddenly all the the infrastructure and and the work that suddenly came in all the different different places so there many other like chick brody said earlier there are many other places within the radius of scotland shores that have undiscovered oil so we know that oil companies want to maximise profit and and maybe are doing a downturn but you now are encouraging them and and also you're going to be putting out license in these just to just to let me know and the committee know that you're putting out licenses in other places where there's no explanation at this moment in time so all like all future licenses are always subject to the environmental assessment which is again it's a different regulator this time it's the environmental regulator within deck so we always have to caveat and that's potentially one of the issues with the Clyde I mean just on the Clyde actually we're looking at it because it's an analogue for the Rockle which is the area where we just shot a vast amount of new 2d data so we're extrapolating the geology the Clyde we think the basins are actually a bit small and whilst there are a few shows we the the current view is it's probably not hugely prospective but it doesn't mean you know with new thinking perhaps new data new ideas never say never but there are a whole bunch of basins around our shores that need to be looked at and this was one of the reasons that Sirian made the recommendation the previous department did not have sufficient people sufficient funds to to leverage data and sufficient just overall resources to do a job to really highlight the prospectivity we can't change mother nature but what we can do is make sure we give ourselves the best chance of maximising recovery from whatever we've got I think data is is worth just pausing on there is a huge opportunity we need to make sure that the the wealth of data that's been acquired over 40 50 years is much more leveraged by the regulator but also by industry you know so there are many you know we've talked to um there are promote companies for example small small outfits but with excellent geoscientists give them access to data they can turn that into really good new concepts that can then excite companies to come in and invest so certainly on exploration we're we're almost finding there is too too many good ideas and where the chair and I are trying to impose a discipline where we try and encourage not just us but industry because we're working this collaboratively through the new boards we set up what are the top three opportunities for next year let's please focus let's get them over the line the boards and the MER UK forum that we set up will be publicly um held to account because we will we will issue minutes and an annual report so there'll be a lot more visibility going forward on priorities progress and I think this will further encourage investors because they can see that things going when I speak to investors though that the headline is the concerns they used to have about fiscal instability are receding the the treasuries driving investment plan helps them an awful lot that's not to say that there isn't still work to do on fiscal and we we can talk about that they're encouraged by the new regulator but they want us to keep focus they are a bit worried that the like we are about mission creep and actually they are encouraged that um you know it's interesting this year is probably will probably maybe the first year that we have a better exploration success right the Norway Apache have made three very noticeable discoveries and have very generously shared some of that information which is good for them and their shareholders but it's actually very good for the basin there's nothing like a bit of success to to breed an appetite to invest more I mean just those discoveries by the way two of them were in very very mature areas around barrel and forties and it just shows and in fact I met the their exploration geophysus recently and he's rightly proud of the work he's done and it's leveraging the latest high quality 3d seismic so we ran a workshop the day before offshore europe where we got 20 of the the largest companies together and highlighted the benefit of new 3d data for unlocking prospectivity and that was very well received because actually technology moves on very quickly in this area and we need to make sure companies keep up to date with that opportunity I'm encouraged by your comments and I hope you won't let deck stop you doing what you intend to do and so basically my last question is do you see a further renaissance of the oil industry in Scotland the chair and I talk about scenarios and you know I think rightly in the previous session and it's something I'm hugely worried about I see some very difficult scenarios potentially and I am writing to other parts of government frequently with to share the context obviously living in Aberdeen you can't avoid it and I am really worried I can see some worse scenarios frankly than than was talked about in the earlier session I can also see some very good scenarios our job as a regulator is to to look to the future and with different lenses and make sure regardless of things that we can't control like the global price of oil we're doing everything we can to support maximising economic recovery and with that investment and then with that obviously jobs but I I I'm actually at the moment more concerned than optimistic if truth be told thank you okay I've got two members of the follow-up start with chick brother and then Gordon Macalton good good afternoon just in the context of what's being said and what you're saying is very impressive I'm surprised that you're going to be beyond the fact that you said last month the deck or the changed climate committee that you're a regulator but you are looking and you've just enunciated the the promotion of investment and on that basis what's the relationship between you and deck because in another energy area perhaps our feeling is the relationship between the regulator and deck hasn't been as encouraging as one it might hope when they're perhaps not as assertive as you are seem to be what's the relationship with deck is a perfectly normal one we're the child that is getting away from the parent but it's it's a very friendly relationship we are not under pressure in the sense except to get on with doing what we have to do and on the day today Andy there's a sponsor team within deck that has kind of oversight of what we do and it's a very good relationship there clearly I talked about the the vital legislation both the energy bill and the MER UK strategy that's a very collaborative relationship which it needs to be both of those are led by deck but they they they get a lot of good input from us and vice versa I think Patrick alluded to at the beginning as we set ourselves up we find that some parts of the system for example the supply chain seemed to want us to do more than we have been set up to so that's something that we're taking back to government to have a conversation around because I think it's important for us that we retain focus but also we don't want to let people down but there are clearly other agents other departments such as biz UKTI Scottish Enterprise who have more of a formal role in some areas than we do what we find is again being based in Aberdeen and I hope people would say generally quite good at listening we hear the opportunities we hear the concerns and we try and join the dots because I think this is an industry that is it's a critical time for the industry and I think the right leadership and the right kind of forward moves are vital I'm not concerned about you it might be deck that I'm concerned about so that's why you know are there any inhibitions or hurdles that are put in place to what you obviously have a clear strategy in terms of what you're trying to achieve no I think with Patrick's support people are very happy that we need to gain the independence whilst industry you know who would like to be the levy to fund us I think they're realising actually that's how apparently most other regulators funding but it also gives them some certainty and that you know it's not going to be you know at threat down the line and I think that that maybe was the problem with deck over the years that you know the department shrunk over time so I think the independence will protect us for the future part of that independence is that apart from stuff which is really commercially confidential we're going to be open things are going to be on the website what we're doing why we're doing it the decisions we we or Andy and his team will make and the board will approve they'll all be there I wanted to go back to the point you raised earlier about the importance of data and I noticed when you were in front of the energy and climate change committee at Westminster you said we have recently acquired 20,000 kilometres of new data over two vast areas I'm just wondering if you're able to say you know where those opportunities are and how significant they think you think they could be so that was the data over the Rockall area west of Scotland and the mid North Sea high which lies between the southern North Sea and the central North Sea the Rockall is a very interesting area there are some you know for such a large area and what is you know we always say a highly petroliferous province the the North Sea or the UKCS compared to many parts of the world where people go exploring we think the prospects are good there are some wells with some very interesting shows the next stage they will be to to get the data interpreted and then hopefully we'll run a licensing round subject to those environmental assessments and we're consulting with industry we think the next licensing round should be targeted at these frontier areas get some healthy competition and interest if we're successful companies will will no doubt bid with 3d seismic which will be the next stage there so we think this is very important but it's not going to be a gain change in the next two years which is why we're also in parallel trying to highlight the opportunities that already lie within the basins within licences the small pools the discovered resources likewise the mid North Sea high there's definitely an active hydrocarbon system there so we think the prospects are very good right and in terms of of those prospects UK oil and gas operations director recently said that there was up to 23 billion barrels of oil remaining UK continental shelf so these two vast opportunities as you've just highlighted would that be in addition to to the already identified up to 24 billion barrels we we talk about a range and our range is between 10 and over 20 actually and it includes some element of that 30 for the mid North Sea high we're actually very keen to to sharpen our estimates as we bring in people that can really leverage the data as I talked about earlier we think it's it's just the obvious next stage so we will probably find actually the upper limit may go up actually as you as you get more data I hope so a key point of all of this though is the is the success the chance of success because that's what industry really factor into when they're they're making their expiration decisions so getting the right data and de-risking the prospects what we tend to find is that it's not hard to come up with with big numbers but industry for example will be very low to anything that's not a you know a 15 percent or higher chance of success so we need to help de-risk some of these plays. Ian McClelland of Edison Investment Research after the chancellor's autumn statement said that he feared that without short-term fiscal support the door is closing early and much of the UK's remaining offshore reserves and he was very critical of the fact that there weren't any fiscal announcements and I wondered whether you had spoken to the treasury about getting fiscal incentives into the autumn statement particularly around exploration? My work on the on fiscal matters really started actually when I was with industry I used to be on the fiscal forum and then the autumn statement last year I think was a pivotal moment when the treasury launched their driving investment plan and in that plan was a recognition three key principles one was that over time the the tax burden needs to fall I think a very key second principle which was really driven also from listening to the good work of the Scottish expert commission and people like Prof Kemp and Melford Campbell was a recognition that the the value of the industry these days is often more about the supply chain and the 35 billion a turnover than just the the offshore tax take and then the third principle is it needs to be internationally competitive at the fiscal forum this time last year there was an agreement that the priority was the investment allowance and there was some very good work to get that over the line for the march budget clearly another priority was was the overall rate of tax and there was a 10% reduction in special corporation tax we also worked with treasury just to provide some evidence and particularly around our concern of what we call the domino effect and the fact that in the most mature parts of the basin they were still paying the highest tax rate and I think that had some influence over the reduction in PRT which was a positive surprise in terms of the autumn statement this year I wasn't expecting anything because we the driving investment plan had you know publicly said that we would we would then or treasury would work with industry with support of the OGA on the next three priorities that industry had put up which were expiration access to late life assets which is is a crucial one and infrastructure so those workshops have been going on I think the last one will probably complete next week ahead of the the fiscal forum on the 16th of December and I think that will be an interesting conversation to see has there been some convergence of thinking is there something that can be done probably for the budget next year but that really is a matter for treasury so you didn't ask the treasury for any measures in the autumn statement we we we wouldn't necessarily ask we would provide evidence and advice and we haven't you know we haven't received anything specific what we're doing is working through these three work groups to see what is the most important what I would say is that certainly an expiration which is often talked about we think there's an awful lot of non-fiscal work that needs to happen and happen very quickly and we're we're very very focused on that and I can expand on that so what about extending investment allowances to cover the costs of aging assets well there was some good work done after the budget that was then announced in the in a summer statement that actually did that so there was quite a big extension and we we provided advice on that the intention being to promote you know new investment on those aging facilities and I think that's been well received and I think it's um we saw actually some quite substantial new investments on quite mature areas straight off to the the budget um as well um some companies announced some quite big investments so I think the treasury are absolutely on board with um the fact that some of these these old facilities you know it's not standard maintenance it's kind of a complete overhaul and that requires um you know the investment allowance so I think that principle has been established as um I appreciate you know I appreciate your contribution this morning I think a lot of it's been very positive but as Mr McClellan said you know like this there was nothing in this autumn statement and more really more incentive needs to be done and I know that from the Aberdeen chamber of commerce's review of the industry in the spring this year 81% of contractors said that tax issues are a constrained on activity now given the way that the chancellor actually talked up the OBR's figures in terms of looking ahead in terms of the oil price and many would say and it went down very badly in Aberdeen the mockery that the chancellor indulged in around that I would have thought that you would have been keen on behalf of the industry to push for measures that would that would give an incentive given the given the central point in his statement that the oil price played but what I would say is that um I I discuss tax very frequently when I meet with industry and actually it's not top of their list because many of them are not paying tax it's obviously a private matter to them and we don't see the data but what they tell me is that regrettably that they're paying very little tax right now so they have other ars of the OGA and and of government more broadly and that's not to diminish the importance of following through on the driving investment plan and I think that is vital but particularly and we're trying to help industry to have taken the lead on this but it's actually cost and efficiency that are the really vital work streams right now Prof Kemp's done some brilliant analysis over many years and I think it was last year he published that a 15 percent reduction in cost would be worth five times a 10 a further 10 percent reduction in sct it has a very very substantial and positive impact on companies economics and we've talked earlier about standardisation and I think you know it's it's no secret that the Treasury also are intensely interested in what industry are doing to actually really grapple this and and as we've talked earlier it's not about price reduction this is about a transformation in how they work and particularly how operators and the service companies work together and you know so the kind of work that I'm very interested and keen to support is in trying to get those those interfaces working better although it's not my direct responsibility I just see it as such a huge opportunity we hear from every service company if they can get it if they can get involved with operators early in a project they can add a lot of value through coming with you know solutions rather than being told what to do people like Melford Campbell and the chair and I met with him last week for a very good session talks about you know can we get demand led rather than relying on rather bureaucratic supply chain processes so I do think there are some amazing opportunities for industry if they will grab them and and and it's it's kind of obvious actually if you think that drilling costs have increased by 700% over 15 years you know that has to be a low hanging fruit to to address that and there are some companies who are and guess what they're the ones who are maintaining or even increasing activity there are some companies seeing a counter cyclical opportunity so I do think the the cost and efficiency is the most important thing actually right now for industry to address yeah I don't know there's a number of measures we can take out just like the Aberdeen Chamber of Commerce survey showed that 81% contractors thought tax was an issue and you're saying that it's not an issue I'm not saying it's not an issue I think I think the fiscal regime is always a I've been very clear actually um before I started this job I was asked to present actually to a the oil and gas UK annual council which is coming up again next week and I looked at the slides I presented and I had five four main priorities one was cost and efficiency the other was getting on with word the third was the the fiscal reform and the fourth was leadership and you know transforming the the industry and the culture and I think those those four priorities are as important now as they were a year ago okay and just one last question convener if you'll enjoy me um in the most recent Aberdeen Chamber of Commerce report that we've got today that was done with Strathclyde University it showed that half of operators were unclear as to what your role was um now given that you've got a um a statutory role over MER that's a problem isn't it if they're unclear what your role is I spoke to James about that this morning I think it was half of contractors because I think that that survey is aimed at the the contractors um the service company which are not part of the MER UK obligation actually so they're not cited under the the infrastructure act or the the draft energy bill and as the chair alluded to earlier there's a there's an important question where the boundaries of the OGA OGA remit lies but what I said to James is we have some very good materials that I think say what we do do and I've asked him to more actively share those with his membership I've also said please when you've got meetings let us know we'll come along myself or one of my colleagues and we'll very happily um explain what we do with a slight caveat that we've got a bit of work to do internally just to determine where the boundaries are um some of my team by the way would like to do an awful lot more because we you know we we see I'm saying no because we have to do the key things first so it's just that balance but we we do see opportunities and like I say I think the most important one of those is is what you know the Melford Campbell the service sector and particularly in the the northeast is full of great ideas if we can get those heard more early by the operators that can create a lot of opportunity they talk about um plenty of low cost high impact solutions and I think that could be transformational please one of the things I was keen to ask about was what your view is and I noted your comment a few moments ago that you're currently more concerned than optimistic when you're looking at scenarios but behind that what does your view as to why the UK continental shelf is so high cost relative to other comparable provinces um and where are the low-hanging fruit in terms of increased collaboration and tackling those costs in order to shift from the pessimistic scenarios to the optimistic ones what is it that industry needs to do better in order to address those costs the reason that the UK is is higher cost I think the main one kind of Mike Tollin alluded to it and I I agreed with his comment was that um we've now got 300 fields producing a third of what they used to compared to say Norway where they've got a third less fields producing quite a bit more so just the the mathematics mean that the cost per barrel goes up I also think and it wasn't talked about by the earlier group but it certainly plays in my thinking that there was a period of prolonged oil price where the the service sector became massively stretched and overheated I came back into this basin um three three years ago I think it was at the peak and I found it very hard to get um you know the quality of service that I had been used to when I'd worked here previously because the whole supply chain was extremely stretched and with that came massive inefficiency so I think going forward but you know we have to retain the skills we have to anchor what we've got and we have to seize the opportunity my concern is that it's a bit like an aging patient you know other basins and they are and I swap notes with the Norwegians the Alberta energy regulator I met with recently the this is a global issue but younger basins are going to be more resilient whereas you know we it's why we we rushed out our report in February on the domino effect we have this unusual situation with lots lots of interconnected old assets that are at threat in terms of the solutions um standardisation is massive it is a huge opportunity I think true collaboration I know ASCO have come up with a just a simple logistic special sharing proposal that can save 100 million I'm delighted now that six companies have got together and have agreed um that they are going to share spares and inventory that's a 50 million opportunity it took them a while but it there's a good kind of cultural point here having spoke about it for a long time and struggled to get you know everyone on board when six of them said we're doing it suddenly those outside the camp said oh we want to be in the camp and the answer was whether you can join in the end of q1 when we kind of open up again so I think there's a message around leadership and not trying to get everyone on board but you know get groups on board and then others will quickly follow we see lots of opportunities like that I had a very good meeting with a John Pearson who chairs the industry efficiency task force um they have launched their rapid efficiency a change which is where companies will share good ideas we will we will support the take up of that I think the most important thing with all of this though is leadership and behaviors so I surprised the adjudant mentioned it because I think it's quite good um OG UK um with industry have come up with an efficiency charter the nice thing is it's pretty simple it's memorable it's got five key points standardisation is one of them we have said that we will support that absolutely um not with a regulatory duty but certainly with an influencing um so I am optimistic that the the cost and efficiency is an area where it can transform I would like to see a lot more pace on it um notwithstanding that if oil stays at $40 for another couple of years which is one credible scenario that is a very grim scenario I really hope that doesn't happen but I'm not an expert on global geopolitics and supply and demand and in terms of what OGA itself does and you've described some of that very fully um but you've also alluded to the issue where an operator is sitting on old infrastructure pipelines for example which they no longer have much value from other than renting it to other operators with peripheral fields is there a role an active role for the OGA in ensuring that those networks of pipelines don't fall over because um one operator or or or or or operators with mature fields no longer gain value from them and and and does the model of OGA conducting seismic exploration at its own hand or or commissioned at its own hand does that model also apply to other things that can be done within the sector two very good and difficult questions actually the first one's at the heart of the MER UK strategy and has been much debated and I was delighted and the chair attended the session in London also that um I think industry really appreciated the thought and drafting that had gone into this strategy which effectively does give the OGA the power to prepare and publish a regional plan that will show and we're doing this in a couple of areas right now because we have to so the northern North Sea and the southern North Sea trying to come up with what we think is the best regional solution and then of course we can share it with operators and if their plans don't meet our expectations we we get into the stewardship regulatory conversations and potentially have to use our powers but I think industry are very supportive because they can see that it's in their interest because done right this leads to to more value for everyone a little example of done right is the the operational gas group in the northern North Sea where companies work together in very difficult circumstances and a lot of companies to maximize the benefit of fuel gas including bringing gas from Norway that has recently got agreed and is a is a nice small example of what we'd like to see a lot more going forward but I think that the point there was that industry saw that taking a bigger picture can quite quickly create more value on the the model around I think on we'll we'll see hopefully we'll be able to demonstrate real value from the 20 million investment on the seismic and hopefully it may be something that we repeat in terms of a more interventionist we are asked sometimes for example will government step in and take on aging infrastructure that no one else wants to operate and I pass on those conversations to policymakers in in in Whitehall I think not surprisingly the answer is no because if the market doesn't want it why would government want to pick it up our job is to make these things more attractive and to make the market work so we are aware of some market failures one of them actually which is is crucial is transfer of late life assets and that's why treasury have got that as one of the the key work streams that's being worked at the moment there are potentially some some barriers including fiscal barriers that are stopping new companies come in and pick up and maximize value from the aging assets if that's if there's one ask I tend to get from private equity and I meet with them regularly it's can you try and solve that one I'm not sure it's going to be easy in fact I'm sure it's not going to be easy but we've got some very intelligent people in treasury and elsewhere industry working that very hard because I think that could be a game changer and one thing that I guess both treasury and the Scottish government might ask you about which I asked oil and gas UK about a few moments ago is the Aberdeen city region deal in terms of the industry its ability to plan for the future is that something that user as a regulator will comment on if asked by government either Scottish or UK government yes what should happen we've been working very closely with Scottish Enterprise particularly on the technology and innovation part of it they've been extremely interested in the work that we're leading with industry on the technology leadership board because that's seen as a precursor we've provided some value cases which needless to say the value is extremely high and I think that's that's very useful and support to the city region and deal we would like to see the overall business case but we wrote a letter of support caveated to obviously needing to see the business case which is being worked because we do think this is a good thing and we think you know more broadly there are some fantastic skills across the UK CS but obviously in the northeast and it's back to creating the right conditions anchoring those skills and maximising the export opportunity as well thank you very much okay I think that time for just one last question with regard to the skills and projection to the future are you concerned at the moment that there may be a possibility that we could lose some of that skilled workforce and the opportunity after our exploration and with the mature fields required to close and we've got decommissioning which is extremely valuable again are you concerned that the skills may not be there and do you have a role to try and encourage companies to retain that skill for the future and do you have a strategic plan for decommissioning three very big questions um well it was all my short question i am i am concerned we i was concerned from day one of my job i was concerned even before i started my job so we we formalised our concern and our call to action report in febru since then i've been very active on the scottish and jobs task force which has been a pleasure to contribute to and i think it has been a a very good task force i have to say and the bit i've done particularly on there is working with others is on the values and principles and recently we've been asked to take on the the leadership bit as well potentially more specifically though when we meet with companies and we we've done this at pilot dinners and every opportunity we have we asked them what are they doing and notwithstanding the difficult economic situation they're facing they are looking to retain graduate schemes apprenticeships where possible they understand the importance of that we obviously highlights our our appreciation of that and our support for that my hr director has gone further as a subgroup of the the scottish and jobs task force he's he's working transfer opportunities anything we can do just to kind of anchor and keep them i think the kind of ideas that bob keylers talked about publicly are very good ideas so we support all of that and both sides of the border so we also have a role to highlight the gravity of the situation and some opportunities um with colleagues in biz and uk ti and we have a very good relationship with them as well just all the decommissioning oh yeah decommissioning the um so sarian and in the wood review um called for a single decommissioning body because he recognised um you know notwithstanding our primary role to keep things going and maximize the economic recovery there comes a time when you know decommissioning is the right thing for for a particular set of assets um there was quite a plethora of different bodies involved we've worked with them to and got agreement to form the single decommissioning kind of senior board um they in fact they've got their first meeting i think this week which will then report into the mer uk forum one of my kias is to take a strategic approach we are not waiting for that we've been doing quite a lot so in the southern north sea we found that there were eight operators decommissioning 500 wells getting them to work together has led to a 40 cost saving but i think more strategically it is a great opportunity for the service sector um as was remarked on the previous session it could be an international competitive advantage if done right i think the first thing that where we can help is actually being very transparent about what's coming up because i think in the past the service sector heard about it but then it never came so they kind of said well is this a real opportunity or is it something that just gets being pushed back i think we have an authoritative position that can actually publish and we have done a draft of that in our draft court for a plan our best estimate of what's coming up and when um we know that some organisations such as um the Aberdeen harbour are very interested in that as they look at potential expansion plans and look to see this as a good opportunity going forward so i think the transparency of data is a no brainer i think getting operators to work together and phase their approaches a no brainer taking due attention of changes in regulation osbar and the like is vital there are massive opportunities and some threats for the industry so we feel we have a role to kind of scan that forward horizon um we've also flagged us as an opportunity to the cross party select committee um this is um under the last parliament they were particularly focused on local content we've suggested that actually for this next parliament obviously that remains a vital consideration but we've flagged it we think decommissioning could be a really good topic for that group and they agree so hopefully that that group will kind of get up and running as well so i think there's quite a lot we can do um but there's you know it's a strategy that's being formulated actively right now thank you right thank you i think answers out of our time thank you very much uh to you both um mr samio answer patrick for coming and answering our questions this morning it's been very useful uh and at this point we will uh suspend briefly and go into private session