First oil

By the time this issue of World Oil hits your mailbox, the UK’s controversial referendum on participation in the European Union (EU) will either have just occurred or be ready to take place. While the results are hard to predict, two things are obvious—the referendum has generated some of the nastiest political talk in the UK, ever, and discussions about the effects on E&P activity, if the UK leaves the EU, are almost non-existent.

The rhetoric swirling around the referendum has been remarkably similar to some of the nasty exchanges seen in the U.S. presidential campaign. Members of Prime Minister David Cameron’s ruling Conservative Party have been attacking each other, much in the way that Republican party members in the U.S. have been for or against Donald Trump. Then there are the swipes being taken by opposition Labour Party members against pro-EU exit factions in the Conservative Party. These altercations are similar to the harsh rhetoric being dished out by Democratic front-runner Hillary Clinton and Republican presumptive nominee Donald Trump.

The UK referendum debate has become so nasty and personal, that it has actually prompted former Conservative Prime Minister John Major (tenure from 1990 to 1997) to enter the fray and denounce the members of his party that are pro-exit from the EU. This is quite a remarkable thing, since he was regularly lampooned during his tenure as PM for being boring in both temperament and attire, to the point that he was labeled “The Grey Man.”

Yet, Sir John is anything but boring in his current comments. Here are eight words that he has used to describe the pro-exit folks, better known as the “Leave campaign”: Fundamentally dishonest. Squalid. Frankly fatuous. A deceit. Misled. That’s quite a collection of verbage, and the dangerous thing about it is that these words have been directed toward prominent members of his own party, including former London Mayor and current Member of Parliament (MP) Boris Johnson; current MP, former member of Prime Minister David Cameron’s cabinet and former Conservative leader (2001-2003) Iain Duncan Smith; and current MP and Lord Chancellor Michael Gove. So, these are well-known folks, and Major’s comments will not be forgotten anytime soon. But one should add that Cameron certainly agrees with Major’s pro-EU stand.

Meanwhile, we’ve heard little about how a departure from the EU could affect UK oil and gas. However, there are some areas to consider. For instance, EU countries control the fossil fuel reserves found in their territories. They are also responsible for licensing the exploitation of those resources. So, national governments are obliged to follow a common set of rules laid out in the EU’s Prospection, Exploration, and Production of Hydrocarbon Directive. If the UK leaves the EU, it must rely on its own licensing rules in the future.

On another note, to help prevent offshore accidents from happening, and to ensure the proper response if they do, the EU adopted the Safety of Offshore Oil and Gas Operations Directive in 2013. This directive mandates that the safety of offshore installations is vigorously checked before they go into operation. If the UK were to leave the EU, it would be free to craft its own safety regulations.

Because a significant amount of power plants and industrial processes will continue to use fossil fuels in the future, the EU is encouraging the use of carbon capture and storage (CCS) technology to decrease greenhouse gas emissions. This is another area in which the UK will have to carve out its own policy, if it leaves the EU. Last, but not least, the EU has been worried about public concerns over shale development. Thus, the EU has been working on a set of environmental and climate safeguards, which some industry folks have thought would be too severe. Leaving the EU would free up the UK industry from such shackles. We shall see what the British voters think, when they go to the polls on June 23. 

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com