When the Iron Lady Ruled Britain (28 page)

The cost of chartering an oil exploration rig had dropped from £100,000 a day to £10,000, at which price the operator was making a loss. One of the few British companies in the business had gone bust two weeks before my visit. A joke was doing the rounds about a rig operator who called a company which had put a job out to tender and offered to do it for nothing. ‘When do we start?' asked the operator. ‘Not so fast,' said the contract manager, ‘I've still got twenty-nine bids to open.' Supply ships on the spot market were similarly chartered below cost. One operator told me that the best he could hope for was £1,200 a day, while his operating costs were £1,600. The week I was in Aberdeen only eighty-two vessels out of 138 available were gainfully employed. Against that background the oil majors had thrown themselves into reverse with the enthusiasm with which they had once gone forward. ‘An oil company saving money is a formidable sight,' said Mr Condliffe. ‘Esso actually cancelled an outstanding six months' subscription to a magazine.'

But such madnesses were not, he said, a sign that the industry was finished, rather that it was getting its costs under control. This was a cycle in the life of a sunrise industry. ‘We haven't squandered it yet; we have an opportunity to build up a world-winning technology and supply industry.' Given past ‘pissing against the wall', this seemed unlikely. So I went to see Professor Alexander Kemp at Aberdeen University, the academic guru of the North Sea oil industry. He was an adviser to the House of Commons Select Committee on Energy, and the pundit most in demand locally. I have been in many offices, but few where the paper lay quite so deep on every surface, or where treasured documents were scattered and buried with such haphazard abandon. The professor, a small man with thick glasses and fast receding hair, leapt energetically round his domain, triumphantly producing crumpled cuttings from battered briefcases with far more improbability than the conjuror producing the rabbits from a hat which a shrewd audience knows are there to begin with. He had moved recently, he said, from a smaller office, and the paper had just spread to fill the expanded space.

Britain's share of the domestic offshore industry had, he said, risen through the years to between 70 and 80 per cent. ‘We have done relatively well at lower levels of technology, where international competition was not so intense anyway. But we could have done better. There have not been all that many successes on a large scale.' Like Mr Condliffe, he saw Aberdeen's (and Britain's) long-term benefit from the North Sea in becoming competitive in the overseas oil supply markets, now dominated – for obvious historical reasons – by the United States. Although the present recession would restrict research and development, there would be a ‘second chance', when the forty newly discovered fields were opened up, but this would, without doubt, be the ‘last opportunity'.

Britain had, he said, been too open, allowing in foreign competition in a way that no rival developed oil countries, such as Norway and Canada, did. We should have insisted – and presumably still could – on joint ventures with foreign firms and the transfer of technology. Starting from scratch, companies faced formidable barriers in the foreign ownership of patents and the massive capital required. Was he not advocating protectionism that would encourage inefficiency? ‘Not,' he replied, ‘if it were properly done, fostering the child so that it grew up to be a healthy, robust adult, itself competitive overseas.' Had we ‘squandered' the oil? He pursed his lips at my inexactitude. ‘The popular view is that we have “consumed” rather than invested. There is a lot in that, though it is not entirely true,' he said. Britain had invested some of the proceeds overseas, which brings an income; taxation was lower than it would have been without the oil, which theoretically stimulated investment, though he would argue that it principally stimulated consumption. The oil should have been regarded as an asset, which the prudent manager ought to replace rather than consume.

‘However, that,' he pointed out, ‘is nice and easy to say, and more difficult to execute.' He would have liked an agency, independent of government, to which some of the tax revenues were consigned. It would have been entrusted with using the money to improve the infrastructure and provide capital for private enterprise. There were models for such an agency in both Alaska and Alberta. However, consuming the oil revenues was painless in political terms: to have set them on one side would have meant unpalatable higher taxes – at the height of the oil boom, the government drew 10 per cent of its income from the North Sea – and restraint on consumer spending.

For fifteen years there had been little constraint on local consumers. Wages shot up when oil was discovered; the trend of outward migration of Aberdeen's brightest and best was arrested (an Aberdonian businessman said that only three of his fifties class of sixty-plus graduate engineers at the university had stayed in the town); sixty thousand new people moved in, raising the population to a quarter of a million; development status with its government subsidies was taken away; yet unemployment went down. The shock of the ‘big' money was enormous. A secretary who went for a job with one of the new oil companies was offered ‘ten'. She hesitated. ‘All right, then, we'll make it £12,000,' said the personnel manager. She had thought he had first meant ten
pounds
a week! A middle-ranking press officer for a major oil company was paid substantially more than a senior journalist on a London-based paper like the
Observer
.

Traditional industries inevitably struggled to hold such people as engineers, who were in massive demand by the oil companies. Office staff were lured away. The result in many areas was not ruin, but rapid modernization. For example, managements of the city's paper mills, terrified fifteen years ago that the industry might be wiped out, computerized their operations. The accountant to one firm, which had invested twenty-five million pounds in the world's most advanced paper-making machine, said it was eerie to visit the mill: there was not a soul in sight, not even in the computer control room. Yet, even after the oil price crash, Aberdeen's unemployment remained half that of Scotland's. Without oil none of the industrial estates that stud the periphery of the city, all of them built since the wage explosion, would exist. The higher wages had also helped refurbish much of the city – in spring 1987 millions of pounds were still being poured into shopping developments – and the countryside, where ‘oilies' had bought and restored crofts abandoned by the declining rural population.

It was hard after the crash to find an American oilman in Aberdeen. The American school, I was told, was filling its places with children bussed from a US Air Force base. However, when I was lunching with John Condliffe, an American accent rose above the surrounding hubbub: there, at the next table, with a weather-beaten face, in three-piece suit, wearing a diamond ring on one hand and a heavy gold bracelet on the other, was the genuine article. The man was Ted McDowell, who had come to Aberdeen in 1973, shed an American family and acquired a Scottish one, and stayed. We met two days later shortly after dawn at his baronial, turn of the century mansion just outside Aberdeen – eleven bedrooms, seven acres of formal garden, more than fifty acres of woodland, a lake, squash court and all-weather tennis court. A log fire blazed in the hearth, peacocks paraded outside the French windows, and a black Labrador whined from the porch. It was easy to understand why this particular American laird had not joined the recent exodus.

Mr McDowell's personal story was a fine illustration of American social mobility. Although brought up in a tiny community in the middle of the Mojave Desert, he had gone to university; although he had gone to university, he had become a deep sea diver; although he had been a diver, he had risen to become an international director of a worldwide subsea company; although his life had been in diving, when I met him he had just bought three small printing companies and was planning to diversify further. He had broken with his American firm over the severity of the cuts he felt were needed to weather the North Sea development gap: he had wanted swingeing savings to eliminate the fat, while they were attacking the problem more gently.

What had surprised him about Aberdeen was the sedate nature of the boom. Although Aberdeen had grown during the oil years by between three and five thousand people a year, an American town sitting on such opportunities would have exploded with thousands pouring in overnight. It was to him an illustration that the British are not mobile enough for their own economic good. They had failed to take full advantage of the biggest bonanza of the twentieth century, which was a major reason why foreigners had been able to get in on the act. He said: ‘When I was an operations manager we would hire anyone. You passed your physical by coming through the door, and your psychological by wanting a job. I hired Americans, not because I was one, but because every morning they were the people banging on my door and sitting in reception. The British would send indecipherable, handwritten notes, and expect you to summon them for interview. The Americans would be just out of diving school, and had travelled halfway round the world on their own money. If you wanted enthusiasm and job performance, you knew where to look.' Any Britons with adventurous spirit, he suggested, went abroad. ‘They either don't move at all, or go the whole hog.'

Industrially Britain had also missed the boat, and had not made sufficient financial investment: only a handful of the drilling rigs out of over a hundred had been owned by British companies. The Dutch, the Norwegians and others had taken the big stake risks and reaped the benefits. ‘Brits were never willing to invest in the high capital side of it,' said Mr McDowell. A few who had, had made a fortune. He was sceptical that the second chance would provide the opportunities of the first. He himself was looking for ways back into the North Sea, and in the meantime was ‘hanging around town to see what comes'. With inevitable bankruptcies, there would be opportunities to get into businesses and buy equipment cheaply, and so it had proved with his printing firms. ‘I don't expect to become a printer, but I can make the firms more efficient. When no one looks at the price, anyone can make money. In tighter times so much of business is money-management,' he said.

Mr McDowell's strictures about Britain's failure to obtain a decent share of the market appeared, in general, to be well founded. Aberdeen and the rest of the country had been characteristically cautious and conservative. Oil had two crucial disadvantages: it was new-fangled and risky. The British penchant for investing in proven enterprises – demonstrated in recent times by the rush to buy shares in privatized industries – prevented Britain from exploiting fully what might prove to have been Fate's last kind roll of the dice. However, there were notable exceptions. The Aberdeen company that capitalized most on the opportunities was, by local agreement, the John Wood Group. Have you, asked everyone I met, fearful the passing writer might miss the town's prize exhibit, visited the John Wood Group?

Before oil, the John Wood Group had been a relatively prosperous fishing company founded at the beginning of the twentieth century, which owned, built and serviced trawlers, processed and sold fish. It owned or had a substantial interest in twenty fishing boats and employed between five and six hundred people. When oil was discovered, the company was controlled by the founder's grandson, Ian Wood, then in his early thirties, who was by nature a risk taker. He visited the United States where he saw the enormous possibilities for oil-related enterprise. Like Rupert Murdoch (though without, everyone assured me, Murdoch's abrasive ruthlessness), he had grown an oak tree from an inherited acorn. In thirteen years the group's income from oil activities exploded from £120,000 to £90 million, and it employed 2,500 people worldwide in engineering, onshore support, drilling and production. To provide a foundation for the future, when the logistical activities in the North Sea declined, it had bought two American companies engaged in pioneering technology. Its fishing enterprises had been separated from the oil divisions, and still employed the same number of people as in pre-oil days. The group's expansion had been financed by profits it generated itself. Ian Wood no doubt would have had a large slice of the local market whatever the competition, but why, I asked his brother-in-law and fellow director, Hugh Duncan, had no other Aberdeen company grown comparably? ‘The bulk of local people,' he replied, ‘carried on doing their own thing. We were lucky that what might have been rival companies didn't choose to be rivals.'

Once Mr Wood had grasped the potential of the North Sea, he moved fast. ‘Unless we got going, folks from the south would start muscling in,' said Mr Duncan. They restructured the company and bucked everyone's ideas up. A yard that repaired fishing trawlers in a competent but leisurely manner was no good for the 24-hour, seven-day-a-week oil industry: existing technical standards in welding, for example, had to be sharpened up. The same applied to service industries like hotels and builders: those who woke up in time to the altered nature of the market grabbed a lion's share of the new business. ‘The old parochial Aberdeen ways would not meet the needs. Adaptability was required. The offshore industry demanded new ways. It was no good sitting pretty with what you had done last year. If you did, you had the wrong mix,' said Mr Duncan. ‘We kept the door half open, and it was amazing in the first five years what business opportunities evolved.' Breaking in to the high-tech market was tough. The industry was dominated by half a dozen world names, who were ‘very, very big', and it was hard to ensure a steady return. ‘Technology results tend to be mercurial, one dazzling year and then a couple when you lose money. Stability is in steady, everyday support activities,' said Mr Duncan.

Aberdeen also had to adapt to new styles. The first Americans were brash figures, men with open-necked shirts who stuck their boots on the desk. ‘The only thing they understood,' said one British oilman, ‘was drilling so many feet a day in the fastest way they knew.' A builder told me of one such man he took to a Burns Night dinner. When the haggis was served, his guest violently stabbed the strange object on his plate, and announced in a voice that rang round the hall: ‘Christ, I wouldn't give that to my goddam dog.' No sooner had Aberdonians become accustomed to this breed than preppy Americans with business degrees began arriving. Somewhere in that international mix were the makings of a fine comedy, and I wondered why Aberdeen had never been exploited as soap opera. The possibilities for a home-grown ‘Dallas' must once have been limitless. Perhaps the lack of such a series was another example of the British inability to exploit opportunities under its nose.