THE UK Government was told yesterday it must urgently provide a targeted boost to investment in the country’s oil and gas basin.
The plea came from Malcolm Webb, chief executive of Oil and Gas UK, at a subsea technology breakfast held by the industry body in Aberdeen.
He said: “While 38billion barrels of oil and gas have already been extracted from the UK continental shelf (UKCS), up to 25billion barrels still remain.
“Provided necessary investment is attracted to develop these oil and gas reserves, their production could satisfy up to 65% of our oil and a quarter of our gas needs out to 2020, however, given the severe cost inflation experienced on the UKCS since 2005, productive investment over the last few years has not been sufficient to stem the rate of production decline.
“The industry is achieving cost savings using subsea production processes, for example, but alongside this the UK Government must urgently provide a targeted boost to investment.
“Not providing this boost is a sure-fire recipe for an enduring crisis in UK energy supply, beginning in the near future and with potentially disastrous economic and social implications for the country.”
Daily output from UK waters last year was 2.8million barrels of oil equivalent, down 6% on 2006. Mr Webb said the production decline rate would only be improved if the companies willing to risk the hundreds of billions of pounds required to develop new projects were encouraged to do so.
He added: “The strategy proposed to the prime minister, both at his meeting with Oil and Gas UK’s board in May and in our submission to the Treasury’s fiscal consultation, was to give a targeted boost to investment in several areas; principally those marginal field opportunities that are not attracting capital despite the high oil prices we have seen in the last six months, and unlocking the development of reservoirs west of Shetland.
“A boost to investment in these areas has the potential to not only increase production in as little as 18 months, but also increase UK Government tax revenues in the medium term.
“Given the halving of oil prices we have seen in the last three months, it is more important than ever for the UK Government to ensure the competitiveness of UKCS projects so that they can attract the capital needed to maximise recovery of our reserves. Time is short.
“The UK Government needs to act now and we will be looking forward to the pre-budget report with particular interest.”
Alistair Birnie, chief executive of industry body Subsea UK, said after the breakfast: “There is no doubt that the UK subsea sector is in a very healthy position and the advances in technology and expertise in this area are critical to ensuring security of supply. Subsea engineering will enhance recovery from producing oil fields in the UKCS above the existing 45% average rate.
“Subsea processing in particular is a major break-through and will be used for the first time in the UKCS by Venture.
“It is widely recognised that we continue to lead the way in subsea and there is a huge potential prize to be won for our economy if we can anchor the skills, expertise and technology here in the UK.
“We will only do this if we build on our success internationally through a can-do attitude. We need to revitalise the supply chain and get out there and do the business around the world.”
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