The UK North Sea sector needs support from Westminster to encourage fresh investment and achieve its full potential, a conference heard yesterday.
Malcolm Webb, the chief executive of industry body Oil and Gas UK (OGUK), was speaking at a debate on Scotland’s energy future, hosted by the Scottish Council for Development and Industry at Murrayfield Stadium in Edinburgh.
Dismissing calls from some quarters for a windfall tax on the industry, Mr Webb said it was already highly taxed and needed incentives to help it play its role in meeting future energy needs.
Traditional energy resources would be important to the Britain for many years to come, he said, adding: “The transition from a UK energy supply with fossil fuels at its centre to one based largely on the use of renewable energy sources and low carbon technologies will not happen overnight.
“But, if investment in our own oil and gas is boosted, domestic production will be a crucial support on the road to the new energy mix.”
Mr Webb warned that any failure on the part of the UK Government to support oil and gas would create an “enduring crisis” in Britain’s energy supply. This could have “unthinkable” economic and social implications for the UK and Scotland in particular, he said.
Mr Webb highlighted the contribution the North Sea industry made to the UK economy as well as the 500,000 “high-calibre” jobs directly tied up in the sector and the billions of pounds a year in creates in export orders.
He warned that these could soon be at risk unless oil and gas firms were given an incentive to invest in the recovery of the 25billion barrels of oil equivalent or more left in the basin.
Mr Webb added: “If under-investment in the UK’s oil and gas continues as it has done over the past few years, the production decline we’re currently witnessing will not be slowed. Oil and gas recovery will be negligible by 2020 and supply chain companies, which are hugely valuable to the UK economy in their own right will leave with it.”
Mr Webb said declining production from the North Sea would improve only if companies were willing to risk the hundreds of billions of pounds needed to develop new projects and were encouraged to make the commitment.
He said later that oil and gas firms were not asking for tax cuts, but rather more generous capital allowances as an incentive to invest.
This is part of a strategy pitched to Prime Minister Gordon Brown by OGUK earlier this year in the hope of promoting investment in marginal field opportunities, unlocking reservoirs west of Shetland and encouraging enhanced recovery from existing operations.
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