Situation: In 2013 the price of Brent Crude oil feel fell from an average of c$110 to c$50 by 2014 and has yet to recover. During this time, the larger Oil and Gas companies placed pressures on their supplier chains in an attempt to maintain some level of profitability. This has seen smaller suppliers scale down, forced to sell the business and sometimes become insolvent. This impact has been on a global basis, however one of the hardest hit areas is the UK oil market, primarily based off the coast of Scotland in the North Sea. Prior to the price fall, this region had already started to see mummers of problems ahead. The problems were identified to be two-fold: The lowering availability of new oil exploration and the higher cost of extraction in comparison to OPEC and US oil sources.
Vista: We need to find alternative industries which have suitable and/or substitutive skills. This can be through a Renewable energy product, from tidal to wave to wind. It could also focus on specific roles, what core skills do Petroleum Engineer have and what other industries can this be used?
Typical binary solution: As seen with other industries, levels of protectionism is brought into use, including subsidies for supplies such as energy or duties and tariff for non-domestic competitors. These solutions only provide a defence for the industry. But what about the surrounding business from the local community, the local café. What about future generations whose families have always worked in the industry? How long can they be protected, and is it in their best interest to be protected, or is there another approach?
PLEASE NOTE: The views and comments expressed in this section are those of the authors and do not necessarily reflect Leela Capital’s policy or position of any of its directors and stakeholders.