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Aberdeen: The Millionaire Factory

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In the late 1960s, exploration works commenced in the North Sea, resulting in the first major find of oil reserves close to Aberdeen in 1970, and consecutively leading to the city being given a name of the ‘Oil Capital of Europe’. And the name is still in use almost 50 years after the discovery of the hydrocarbon deposit. In 2012, when oil prices were at historic highs, Aberdeen managed to surpass London, ranking first in the number of multimillionaires per 100.000 residents over the UK. The middle class benefitted from high prices as well - an average employee working in the oil & gas industry was making £64,000 a year (approximately €88,000 at that time).

Fat years were followed by a crisis. By 2015, the principal seaport of Scotland, previously full of oil tankers, had become surprisingly empty. The reason is that every third offshore platform can no longer be cost-effective once oil prices fall below $50 per barrel.

Now the industry is, however, recovering. Representatives of the Competence Centre for Mining-Engineering Education under the auspices of UNESCO got convinced of it after coming to Aberdeen and taking part in Subsea Expo 2020, the world’s largest subsea conference. The latest engineering solutions and developments presented at the exhibition also suggest that Britain will continue investing in the oil industry. In connection with this, paying a visit to the University of Aberdeen was a reasonable decision for the UNESCO’s Center delegation.

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Most of Scottish start-up ideas that find implementation at research institutes and production sites originate from the University of Aberdeen. Alexander Kemp is the Professor of Petroleum Economics. He has been teaching students at the University of Aberdeen Business School for 50 years, with his specialisation being economics of the oil & gas sector - in particular, taxation-related matters, royalties, exploration and production licensing, and other issues. In his interview to ‘Forpost’, Prof Kemp explains why Aberdeen is set to remain the oil capital of Europe for a long time to come, and that the popularity of the UK’s fifth-oldest university will stay high both among British and foreign students.

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Is there a demand for your graduates? What work opportunities do they have?

Yes, there is a demand, but it varies across the study fields. In our university, we have several schools and different study programmes. Students come here to study engineering, geology, law, divinity, languages, and other disciplines. Upon graduation, many of our students decide to continue their education and pursue Masters or PhD degrees.

My specialisation is ‘Petroleum and Energy Economics’, and my former students are mostly employed by oil & gas companies. The petroleum industry is huge here. Some graduates go to work for the Government of Scotland, some go back to their home country and apply for work at the local or international petroleum companies. There is a big range of opportunities out there, and employability is quite good. Over the last few years, oil prices have come down, which has inevitably affected our activities at the North Sea. But now there is an upturn, and we are expecting the market trends to stay positive.

What are the pay rates for graduates?

Although the oil industry has been going through a recession, salaries are still quite high up here. Those people who work at offshore oil facilities in the North Sea can expect to be paid about £50,000 a year on average. In contrast, an average salary in the industry over the UK is only between 26 and 27 thousand pounds. Therefore, working offshore makes perfect sense, even though industry specialists used to earn more a few years ago.

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The University of Aberdeen is the third-oldest university in Scotland and the fifth-oldest in the UK. It was formed in 1860 by a merger between King’s College and Marischal College, but the officially recognised date of the university’s establishment is 1495. That year King’s College was founded. As of now, the university consists of a few major schools: Business School, the Arts and Social Sciences School, Life Sciences and Medicine School, and Physical Sciences School. As some of the schools encompass several study disciplines, they are further subdivided, and altogether teaching is organised across 12 different schools. For instance, physical sciences are taught across three schools - these are School of Engineering, School of Geosciences, and the School of Natural and Computing Sciences.

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Do you partner with other higher educational institutions?

Yes, we have a cooperation with, for example, a Chinese university. We have obligations to them, and they, in turn, have obligations to us. Our staff go there every year to give lectures. We are also collaborating with Curtin University. It is located in Western Australia, and we have been engaged in some joint research activities. There are indeed other partners as well, but these links are rather informal.

I am personally involved in joint work with a Norway-based University of Stavanger. Our research concerns most notably such issues as petroleum taxation and fees levied on natural resources.

How much of the university’s budget is funded by the Government and how much do businesses and individuals provide?

The core funding source for the University of Aberdeen is the Scottish Government. Unfortunately, the funding we get is not enough to sustain. To compare: a student in England is charged up to£9,250 per year, while here in Scotland students pay zero. The Scottish Government allocates to us £5,500 for each undergraduate student annually, which is not that much after all.

Consecutively, we have to look for other sources of money. One of these sources is international students - from China and other countries - who have to pay fees if they are not from the EU. Also, we hold regular fundraising events. This year, university turns 525 years old, and all these years we have been organising fundraising campaigns.

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The admission criteria for the University of Aberdeen are transparent: excellent knowledge of English, a school certificate, recommendation letters from school teachers, and an online application. As a rule, those who get admitted are either A-level students or at least they mostly have A’s and B’s. Non-EU students need to pay for their education: those who choose arts and humanities end up paying no less than £14,000 a year; studying medicine or engineering will be substantially more expensive, an annual payment starts with £18,000. Accommodation at the university dormitory will add up a thousand pounds more to student expenses.

Engineering or liberal arts education: Which of degrees results in higher income, if comparable?

It depends on the chosen profession. If the graduate is a lawyer, he/she will succeed. If one is an engineer, it is an open question. On the other hand, those who go to work at oil & gas enterprises, they have quite good salaries, a lot higher than the average ones - especially if they work in offshore mining. I would also like to add that here, in the UK, there is intense pressure on mining companies, as we need to have more women working in the petroleum sector, including the offshore industry. Therefore, we are encouraging ladies to go studying petroleum engineering and working in this field.

When I was young, there was not a single lady working offshore, but already back then, in Norway, they thought the situation would eventually change. Now we are in the same position here. I do not have the data to confirm that, but I know that companies are also facing strong pressure to employ more women in senior positions. To summarise, there is a promising outlook for ladies, on all the levels.

The University of Aberdeen has two original campuses; both are facilities previously owned by either one of two colleges that formed the university. The campuses are great architectural masterpieces, but new buildings are also built within their territories. The King’s College campus covers an area of 35 hectares around historical buildings. Altogether, they form a quadrangle with the inner court, two sides of which have been rebuilt and expanded with a library wing. Therein the Crown Tower and the Chapel are located, both built in the 16th century. Marischal College, on its part, occupies a neo-Gothic building, construction of which has started in 1835. The additional buildings were opened in 1906; together with an original three-sided court, they are the best examples of neo-Gothic architecture in Great Britain.

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There is an opinion that the North Sea will run out of oil in the next 20-30 years. Do you agree? How will it affect Aberdeen’s economy if this happens?

One has to be aware that an essential factor is oil prices. As the price of one barrel of oil is now under $60, oil extraction is less profitable than it was last year, and if the prices stay the same, production volumes are likely to remain small. Or, on the opposite, the oil price will increase up to $70 per barrel, and production levels will increase as well. In this case scenario, the life of the field will get shorter.

We do a lot of modelling and research on the matter because we need to know when exactly depletion of resources happens. This information is important for oil & gas authorities too, since they are the ones to carry out decommissioning activities. And we are talking about£50 billion here, which is a lot of money.

What is a major research topic now?

Because of politics, we have been mostly discussing the energy transition. I am dealing with the same issue in my own research as well. In general, we are under intense pressure to reduce CO2 emissions, and the oil industry is not an exception. I am an economist. My work is to go through all stages of the production process and find out if there are opportunities for CO2 reduction.

For example, oil fields must be supplied with energy. For these purposes, either diesel or natural gas are used now. What we do is we look for other ways of supplying offshore fields with power, which would cause a lesser level of emissions. As an idea, electricity may be generated by wind farms, or it may be brought from onshore.

In Norway, it would seem reasonable to use power generated on the continent, partly because the hydro-energy industry is so huge there. Here, in the UK, that would be a rather expensive option; therefore, we should instead opt for wind energy. Wind platforms can be installed in the sea, not far from the field. If the wind is not blowing, energy stored in the batteries powers up the field, and when the strong wind blows, we can accumulate that energy and save it for later.

In the end, we will have to implement some of these measures due to the British Government being committed to achieving net-zero emissions by 2050. It is a very challenging goal. Besides, environmental protests occur all over the country. Activists demand we stop extracting oil and say we should close all fields immediately.

Did Scottish people support Brexit? What do they think of it?

62% of Scottish voters preferred we would remain in the EU. It is a difficult political situation, neither the Scottish Government is pleased with it. Our authorities for obvious reasons would like to keep the link with mainland Europe. The same goes for the University of Aberdeen - we want to retain the link with the EU. It was only last week when our Principal set up a£100,000 fund to assist those EU students who will still choose to study here over the European universities.

Talking about the collaboration, how do you motivate new students to enter your university? Do you mostly visit schools and colleges in Scotland or abroad?

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We are paying now more attention to cooperation with local schools. Our Principal himself went to a few of them to talk to high schoolers and encourage them to apply to our university. Regardless, we are still in need of students from other countries, whether they are from Europe or not. We are not going to get more financing from the Scottish Government due to budget constraints. We are receiving the flat fee for each student, which is not likely to increase. Thus, we must be looking for other funding sources.

There is a little under 15 thousand students who are currently studying at the university. Among them are students from Russia, Kazakhstan and other CIS countries, as well as European, African and Chinese students. The University of Aberdeen regularly tops the UK University Rankings and is highly valued by global employers. Almost 1400 people work in the university, of whom many have come from abroad to teach here. The university provides opportunities for international exchange. Those who want to study overseas can spend one term at one of the universities in Europe - for example, in Germany, France, or the Netherlands. There is also a double degree programme implemented in conjunction with a Chinese university, which requires studying in China for two years.

Finally, Aberdeen is home to one of the world’s most famous maritime museums. Its specific feature is that a significant amount of the museum’s exhibits are connected to the North Sea oil industry, starting with earlier days and ending with the latest oil & gas exploration technologies. Another peculiarity is that, unlike in any other technological museum, expositions are arranged vertically, around the 8.5-metre-high model of the oil production platform. As a nice bonus, the entrance into the museum is free.

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