While the UK’s offshore industry is indeed facing pressure there is huge remaining potential – with up to 23billion barrels of oil & gas still to play for.
Tax reforms announced in the Government’s 2015 Budget and the setting up of the new regulator, the Oil & Gas Authority, provide strong foundations for the regeneration of the North Sea. The onus is now on industry to align around a common purpose and work together to build a more sustainable future through safe cost and efficiency improvements.
North Sea oil & gas is a hugely valuable industry and a prize worth fighting for; supporting 450,000 jobs; paying billions of pounds to Treasury each year; fostering advanced technology; and meeting half of Britain’s oil & gas needs.
However, this industrial powerhouse is under threat – falling prices have intensified challenges which already existed. Global competition for investment dollars in a mature basin means we must improve our efficiency and reduce our cost base.
That’s why my priority for Oil & Gas UK will be first and foremost, looking at what this organisation can do to help companies drive efficiency. We want to encourage co-operation to ensure industry delivers as much of the prize for the UK as possible.
My predecessor Malcolm Webb’s contribution to this sector has been immense and I am lucky to be “standing on the shoulders of a giant” in the task ahead of me in building the organisation and its representation.
Oil & Gas UK will speak for the whole of the industry, we will work to raise the positive profile of the sector, and to ensure a safe, sustainable and competitive North Sea industry and its thriving supply chain. I am looking forward to continuing the great work already begun in this area.
In order to bring industry together, Oil & Gas UK is this month (June 17-18) holding its Annual Conference, right here in Aberdeen. Focused on the theme ‘‘MER UK: The Next 40 Years”, we will explore the critically important issues facing the UK Continental Shelf.
We mustn’t be under any illusion as to the severity of the challenges we now face. To put it bluntly, the UKCS is the most expensive province in which to operate, with costs per barrel having doubled over the last five years.
At the end of 2014, at $50/barrel oil, around 20% of UKCS production was loss-making. To restore competitiveness and win investment dollars in the global marketplace, we need to reduce the cost base and improve the efficiency of our operations. Lifting costs need to be brought down from an average of $30 to $20 per barrel by 2020.
I’ve been asked on a number of occasions since taking the helm at Oil & Gas UK: “Why didn’t the industry start tackling its cost base earlier?”
The truth is this sector has been aware of its cost challenge for some time, noted in our 2014 Activity Survey over a year ago, in late spring 2014 when the Production Efficiency Task Force was established to tackle the fall in the efficiency of assets, and in the Association’s submission to the Treasury’s fiscal review last summer.
This situation has, of course, become all the more acute given current oil prices.
We’ve seen in recent months companies having to take tough decisions. No one here, I believe, is under the impression that times are easy for our sector. However, many, I hope, are in agreement that we have the skills, tenacity, and aptitude for co-operation here to turn our industry around. I believe that spirit will be evident when we meet in June.
This event will, I hope, provide a stimulating and timely forum for the industry to debate the issues, share best practice and spark new ideas.
We have some excellent, informed and insightful speakers lined up to provide you with the opportunity to take part in some expert discussions and to make your own voice heard.
Please do get in touch with my team – events@oilandgasuk.co.uk – if you’d be interested in joining the conversation with hundreds of people from companies across the UK.
By working together we are best placed to ensure we strengthen the UK’s energy security, secure employment and ensure a thriving supply chain – at home and abroad.
Deirdre Michie is chief executive of Oil & Gas UK
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