At last the penny has dropped with Oil and Gas UK regarding the real state of the North Sea.
For us to say we told you so seems a bit cheeky. But we have warned time and again in Energy that exploration activity on the UK Continental Shelf has for years been running at nothing like the level necessary to deliver a stream of potentially viable new oil and gas discoveries for the future developments hopper.
We said in the January edition of Energy that, after the current Indian summer of projects, there is precious little to follow. Economist Tony Mackay warned of a collapse in investment post-2017.
In the Energy’s January Well Slot, Simon Robertshaw, of analysts Hannon Westwood, warned: “The picture for exploration drilling is grim. Our records indicate that the 13 exploration wells spudded in 2013 represents a new low as it is two wells fewer than in 2011.
“To put 2013 exploration on the UKCS into a historical perspective, not since 1965, when the sector was in its infancy and just 10 exploration wells were spudded, has exploration activity been so dismal.”
Miserably little oil and gas seems to have been found. Compare this with yet another record year for Norway.
The Treasury has to get off its backside and deliver proper incentives to the North Sea if its own revenue projections from this massively taxed industry are to be anything like realised.
Ryan Crighton reports in today’s P&J that rig availability and the ability of smaller companies to secure equity capital are major hurdles and that OGUK’s CEO Malcolm Webb is calling for urgent action from government and the industry.
In my view the Treasury has to get off its backside and deliver proper incentives to the North Sea if its own revenue projections from this massively taxed industry are to be anything like realised.
I’ve never bought into the parsimonious approach to field allowances and I am baffled as to why exploration drilling tax shelters have never been restored. They were scrapped in the early to mid 1990s.
In Norway, tax breaks for exploration drilling are proving a wise investment by the government that sits in Oslo. Indeed 2013 ranks as another record year for Norwegian exploration.
As for access to capital for small exploration and production companies; so long as the UK’s Alternative Investment Market (AIM) remains the poorly regulated casino that it is today, most oil and gas minnows stand little change or raising the money they need to finance their ambitions.
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