A leading oil and gas industry body yesterday underlined the need for greater collaboration in the sector, with the publication of the latest edition of its Economic Report.
The 2014 instalment of the Oil & Gas UK publication styled as the “definitive guide to the current status and future prospects of the offshore oil and gas industry in the UK” echoed recent research from Sir Ian Wood on the way forward for the industry and urged better coordination between industry and government.
It also stressed that all levels of government must work hand-in-hand to boost investment and increase recovery, with more joined-up policies “critical for success”.
Oil & Gas UK said “significant” reserves remain offshore “but radical fiscal and regulatory reform are urgently needed” to help maximise their recovery, alongside action to cut unsustainably high and ever-rising costs.
Chief executive Malcolm Webb said the industry has a crucial role to play in the future wellbeing of the UK, supplying around 35% of the country’s energy needs and supporting 450,000 jobs.
“However, to support a lasting and sustainable future, today we’re calling for greater collaboration between governments, between government and industry and within industry itself to face and fight the challenges ahead,” he said.
“Full implementation of Sir Ian Wood’s recommendations for regulatory reform, and far-sighted changes to the fiscal regime, are needed in the next 12 to 18 months to stimulate new investment in exploration and production.”
Economics director Michael Tholen also called for an easing of the tax burden and a simpler set of support mechanisms. Unit operating costs are now about 60% higher than they were as recently as 2011, Oil & Gas UK said.
The report also found an “encouraging” level of production during the first half of this year, with a 1% increase after several years of double-digit declines.
The group said the data also marked good news for the supply chain, providing more opportunity for future growth and jobs.
Mr Webb said Oil & Gas UK research suggested reserves of between 15 and 24 billion barrels of oil equivalent remain on the UK Continental Shelf, but also noted a recent lack of exploration success and slow rate of bringing discovered resources through to maturity.
“The magnitude of the task ahead means that over one trillion pounds of expenditure, in 2013 money, will be required if the recovery of above 20bn boe is to be achieved,” he said.
“However, the UK has to compete for each and every pound of that investment. If the current trend of rising cost continues, the UK Continental Shelf will cease to provide a healthy return on investment and we’ll feel the brunt through falling levels of activity.”
Meanwhile. north-east-based wellhead engineering firm Plexus also backed Sir Ian Wood yesterday, after winning an award for innovative use of research and development at Aberdeen & Grampian Chamber of Commerce’s North Star Business Awards.
“I sincerely hope that the excellent report encourages more investment in the UKCS, and believe that Plexus is ideally placed to capitalise on a resurgence in North Sea exploration activity,” commented chief executive Ben van Bilderbeek.