Sir Ian Wood is to head up a UK Government review of how the offshore oil and gas industry can be maximised, it has been announced.
The Wood Group founder will oversee the independently-led review announced by UK energy secretary Ed Davey today.
“The UK’s oil and gas industry is a key component of economic growth, our energy supply and technology development and we must do all we can to ensure its potential is reached,” Wood said.
“It is an honour to be asked to undertake this important work and an opportunity to bring my considerable knowledge and experience in the industry to the review. I look forward to getting started.
“I will consult with Government and industry on the key lines of inquiry that will make a real difference to improving our economic recovery including optimising use of and extending life of infrastructure, production efficiency and maximising the use of key technologies.
“The review will also consider the current structure, scale and effectiveness of the Government stewardship regime given the technical and commercial complexity in what is now the mature phase of the UK continental shelf.
“The values involved in UK oil and gas are so large that even modest increases in key production metrics over time will deliver significant economic benefits.”
The review will be charged with making recommendations for improving the future economic recovery of the UK’s offshore oil and gas industry, worth an estimated £27billion a year to the country’s economy.
It will cover a wide remit aimed securing the sector’s future, which Davey admitted faced heavy challenges due to the maturity of the continental shelf, despite ongoing investment.
“Our offshore infrastructure is getting older, and we are seeing a decline in the rate of exploration and in the amount of oil and gas that is being recovered,” he said.
“All these issues need to be addressed if we are to stimulate innovation in this sector and see maximum economic benefit for the UK in the decades ahead.
“Sir Ian is a highly respected figure in the industry and his leadership will bring firepower and credibility to this much needed work.”
Tax regime changes would not be looked at by the report, said Davey, after changes to tax rules in 2011 – but the reports findings would be considered by the Treasury in deciding future tax policy.
“It is too soon to review the effectiveness of these changes and so this review will focus on other factors such as the licensing regime, optimising use of and extending life of infrastructure, production efficiency, better collaboration across the industry, increasing the exploration effort and maximising the use of enhanced oil recovery techniques,” he said in a written statement to Parliament.
“It will also look at the current structure, scale and effectiveness of the government stewardship regime in line with the increased technical and commercial complexity of the mature market.”
The report will be the first in more than 20 years to review the sector, and will report its interim conclusions this autumn before delivering its final recommendations early next year.
The review was welcomed by industry body Oil & Gas UK.
“The UK oil and gas industry is a driving force for Britain’s energy security, economy and innovation,” said chief executive, Malcolm Webb.
“In overcoming the challenges of producing oil and gas in a mature province and in ensuring the basin’s full potential is realised, collaboration between companies in the sector and a well-resourced and expert regulator is crucial so we welcome the launch of this review.
“We look forward to a comprehensive, critical and robust examination of the pertinent issues.”
The announcement came as the Scottish Government’s own industry-led strategy marked its one-year anniversary, and Holyrood energy minister Fergus Ewing welcomed the UK government’s report.
“Oil and gas is the largest industrial sector in Scotland, it supports employment for around 200,000 people across Scotland and it accounted for more than a quarter of the UK Government’s corporation tax receipts in 2011-12,” he said.
“Oil and gas will remain an enormous economic resource for decades to come, with the remaining oil and gas reserves having a potential wholesale value of up to £1.5 trillion.
“This implies that, by value, more than half of the oil and gas reserves in the North Sea could yet be extracted.
“The Scottish Government is already working constructively with the UK government as part of Pilot and the Industry Council, and we look forward to working closely with Sir Ian to ensure that the review best reflects the challenges and opportunities facing the North Sea sector.”
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