BANFF, Alta. – Of all the issues Talisman Energy Inc. has been grappling with in the North Sea, the prospect of Scottish independence wasn’t at the top the list, CEO Hal Kvisle said Thursday before Scots voted to stay in the United Kingdom.
Polls had suggested a razor-thin margin between the pro- and anti-independence camps, but a majority of Scots voted against a split. Scottish independence leader Alex Salmond conceded defeat early Friday.
Talisman’s (TSX:TLM) United Kingdom operations — based out of Aberdeen, Scotland — have faced numerous operational headaches and Kvisle acknowledges some properties may have to be abandoned.
Though Kvisle said he wasn’t quite rooting for the Yes side, he said Talisman would work with whatever government was in charge.
“We of course would like to see a continuing stable situation there and so we would not be encouraging independence,” he told reporters on the sidelines of the Global Business Forum in Banff, Alta, as vote counting had just begun.
“But, at the same time, the Scottish people will decide what they want to do and companies like Talisman have to work within whatever arrangement is there.”
Kvisle called Scottish society “mature” and “capable” and said the ability of an independent Scotland to operate tricky offshore oilfields wasn’t a concern.
“Sometimes I think the Scots understand it better than the folks in London do.”
One worry was the prospect of higher taxes and royalties if an independent Scotland were run into financial trouble in a region where the government take is already “onerous,” Kvisle said.
“In fact, the North Sea is a place right now where royalties and taxes need to go down in order to make more activity economic. There’s a lot of oil left to recover there,” he said.
“The big problem we face, as an industry, is most of it’s uneconomic and one of the contributors to that is, interestingly, the very high tax rate introduced by the (David) Cameron government (in London).”
“Whatever government is in control of the North Sea, they’ve got to pay some attention to the economic rent and how they go about collecting it.”
Kvisle, who took the reins of Talisman about two years ago, has been ushering the company through a big strategic shift.
Instead of focusing on a hodgepodge of regions around the globe, Talisman is concentrating on shales across North America, Colombian oilfields and offshore holdings in Southeast Asia.
It aims to divest billions in non-core assets, but those in the U.K. North Sea, part of a partnership with China’s Sinopec, are a tough sell.
“Our ability to sell assets in the North Sea is extremely challenging quite apart from any government that’s there and I don’t think any change in government would make it any easier,” said Kvisle.
“It’s the fundamental problem of old assets that have very expensive abandonment liabilities and just reliability of old machinery and equipment.”
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