Politics is not the only business in which a week can be a long time.
The recent nosedives taken by most currencies linked to the European Commission's exchange rate mechanism (ERM) have made life too hectic for European companies in all sectors.
The ERM was set up to prevent currencies among EC member nations from changing too much with respect to one another. Ironically, the members' requirement to keep their currency's exchange rate within strict limits made the currencies hard to defend.
As Germany stuck to its high interest rates and doubts grew over French acceptance of the Maastricht Treaty, on which the future of EC political and monetary union depends, weaker currencies were savaged by speculators on the stock markets.
In a fruitless effort to bolster sterling, the Bank of England lost about 1 billion ($1.7 billion at last check) in 1 day, buying the pound with foreign currencies.
So Britain pulled out of the ERM to let sterling float freely on the open market. It floated downward. The government looked to France for strong backing for Maastricht, and the French responded with the worst possible answer: 50.95% said "yes" to the treaty, and 49.05% said "no," leaving intact all doubts about EC's future.
British oil companies have viewed the sterling crisis as a sideshow.
Their interest has been in the dollar:sterling ratio. Because they earn money in dollars and spend it in pounds, the mood is positive. Current projects will continue as planned. But there will not be a spending spree unless a settled, favorable market inspires one.
"In the North Sea there is a great reliance on stability in all things," said Christopher Ryan, public affairs directors of the U.K. Offshore Operators Association, London.
"The industry is often faced with marginal circumstances in future developments. Anything that disrupts the region's stability is unwelcome because it is becoming increasingly difficult for companies to justify investment in the North Sea."
Oil companies are not saying much in public, but they are certainly making their feelings known to government in a direct way. They point out that the oil industry is a rare bright spot in a sluggish U.K. economy.
"The oil companies will continue to invest in the U.K. North Sea," Ryan said, "providing stability can be maintained. They will not be deterred by short term fluctuations, but reactions of the market are not over yet. We are in the eye of the storm."
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
