UK Offshore Appeals to Govt for Better Terms

The UK offshore has managed to stay afloat despite the headwinds of low oil prices and shrinking assets, but needs a helping hand from government to ensure as little oil and gas as possible is left behind as decomissioning gets underway. The industry estimates another 10-20bn barrels of oil equivalent remain recoverable.

Publishing its 2016 economic report September 27, industry group Oil & Gas UK said it had three requests to make of government: first, continued commitment to the ‘Driving Investment’ fiscal strategy which recognises the need for a more competitive, simple and predictable fiscal regime as the basin continues to mature;

Second, that the finance ministry completes the work on tax relief for decomissioning, so that it may be transferred upon an asset sale to facilitate the trading of assets – a key part of the strategy to maximise the economic recovery of the province;

And third, the UK and Scottish governments should continue to promote the competitiveness of the basin and the capability of the UK’s oil and gas supply chain, recognising the sector as a key element of the economy.

Shell's Brent platform (Credit: Shell)

Industry efficiencies have already yielded a 45% drop in the cost of extracting a barrel of oil or gas from the UKCS, down to $16/barrel of oil equivalent, while production last year was up by 10.4% – the first increase in 15 years – and up 5.7% in the first half of this year compared with the same period last year. But major challenges remain, with record low exploration and a lack of capital investment. This year investment is expected to come in around £9bn ($11.7bn), down from a record £14.8bn in 2014, the report says.

William Powell