Britain’s oil and gas industry yesterday revealed it is investing up to £6billion in new North Sea developments this year – the latest sign of an upturn in offshore activity.
Industry body Oil & Gas UK also said that energy firms are considering projects which could lead to £60billion being spent on bringing 70-plus fresh fields into production over the next decade.
Another good sign is that the number of wells being drilled to find oil and gas is expected to rise this year.
The triple boost for the North Sea is outlined in the industry’s annual economic report. It came just a week after oil and gas firms said they were ready to invest hundreds of millions in the search for new fields.
There were bids for 356 blocks in the 26th licensing round for offshore exploration – the largest number since the first round in 1964.
Although the North Sea is past its peak after more than 40 years of production, Oil & Gas UK is still optimistic about the future.
Chief executive Malcolm Webb said: “As the economy seeks to accelerate out of recession and refocus on manufacturing and technology, the oil and gas industry should be recognised for the important engine for growth that it is.”
He said the UK industry – which supports 440,000 jobs – had the potential for a great future.
British oil and gas production last year was 2.4million barrels of oil equivalent (boe) a day – down 10% on 2008. Oil & Gas UK said this was greatly influenced by a 9% drop in UK gas demand.
Output this year is expected to be around 2.3million boe a day – down another 5%.
But the industry said that, while 39.5billion boe have so far been extracted in UK waters, between 15billion and 24billion boe still remain.
Mike Tholen, economics director and author of the report, said: “Contrary to the general perception that reserves are dwindling fast, the oil and gas produced from beneath our seabed still meets the vast majority of this country’s primary energy needs over the year – 94% of our oil demand and 68% of our gas demand.
“Importantly, with sustain-ed investment, encouraged by the right business environment, we will have enough oil and gas still to satisfy half of the UK’s needs in 2020.”
The industry said offshore investment had dipped to £4.7billion last year, following unexpected tax changes and rampant cost inflation.
But Mr Tholen said business optimism was returning and the investment figure could jump back to as much as £6billion in 2010 and then possibly rise again next year.
He said the past and present governments recognised the importance of a stable tax regime and had shown a willingness to tailor it to attract new investment, so investors had a more certain backdrop on which to make decisions.
“This is important because we know that currently companies are considering developments which could lead to £60billion of investment in new production over the next decade. In this year alone, we could see £16billion committed to new projects.”
Mr Tholen said there were plans to develop more than 70 new fields, with an average size of 26million boe.
He said there were 195 wells drilled offshore last year to find and develop fields and he expected a small increase on this figure in 2010.
“We need to step up (drilling) if we are going to make the most of the North Sea,” he added.
Sir Robert Smith, Liberal Democrat MP for West Aberdeenshire and Kincardine, said of the report: “This is an important reminder of just how much the oil and gas industry contributes to industrial development and jobs in the north-east as well as the vital revenue to the UK Government.
“It is important the government works closely with the industry to ensure maximum investment in the North Sea.”
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