It is perhaps the trait of an eternal optimist to focus on one piece of good news during bad times, but that is exactly what the North Sea needs to do right now.
If you follow oil and gas industry news closely, in the past week you will have seen conformation that investment in UK waters has fallen significantly, that oil giant Shell is cutting contractor rates and that the Brent Crude price – alarmingly – continues to sit at around $85 dollars a barrel.
The week before, we also had BG Group revealing it was putting the Jackdaw development on hold due to costs.
For a basin used to good news – tales of record investment and job creation by the thousands – it has all come as a bit of a shock.
But there has been one glimmer of hope amidst all the gloom of recent weeks – the giant Cygnus gas project.
According to a report published to mark the start of drilling at the site, the development will create or secure 1,500 jobs and pump more than £1billion into the UK economy.
To hear figures like that being spoken about again is welcome respite.
The UK Continental Shelf has been crying out for a vote of confidence from one of its key players, and alongside BP’s recent announcement regarding work starting on its Kinoull field, that is exactly what Cygnus is.
As oil prices fall, some have been quick to write-off the North Sea.
However, major projects like this prove that there is still plenty of life – and profit – in our oil and gas sector.
There is little dispute that falling oil prices have spooked firms, but the drop is far too recent to be blamed for projects being put on hold, because investment decisions for major projects are weighed up over time.
The unstable tax regime here in the UK is a more plausible reason for the sudden pause in activity. Many firms will be waiting to see what the Chancellor’s Autumn Statement holds regarding the fiscal regime.
George Osborne has made positive noises about backing the Wood Review’s recommendations – but the time has come for him to deliver with actions.
He is currently undertaking a comprehensive review of the tax regime. What he now does with the findings of that review will be key, because the decisions he makes over the next few months could well shape the industry for a generation.
Jacqueline Law is a senior corporate and commercial law partner at Aberdein Considine, a Scottish law firm with offices around Scotland including Aberdeen, Edinburgh, Perth and Glasgow.
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