Industry leader Sir Ian Wood said the “biggest loser” from the current oil price downturn would be the UK public if more was not done to incentivise investment.
The oil tycoon warned the government would likely face having to make further reforms if the oil price stays at its current level for the next few months.
Sir Ian Wood said a recent jump this week in oil price should be “forgotten” as a current price of between $45 and $55 a barrel “just doesn’t work in the North Sea”.
He said although the Conservative led government had come a long way in its understanding of the industry more could be done to incentivise investment which involved some “fundamental rethinking”.
Speaking to the BBC, Sir Ian Wood said: “Consumption hasn’t gone up in the way people expected and actually the present position forget the impact of the large oil price increase yesterday, right now we are looking at a position where $45 – $50, $55 oil just doesn’t work in the North Sea so we are actually facing a very difficult position.
“Depending on how long it lasts the difference is now there’s a feeling it’s going to last for a reasonable amount of time in which case we’ve got to do some pretty fundamental rethinking.
“By far the biggest loser, is the biggest stakeholder is UK Plc – the UK public – so the UK Plc needs to make sure we do the right things to prevent this downturn having a depletion to such an extent that in fact we are badly damaged.”
The former Wood Group chief executive said there had been a marked improvement by Government including in the March budget when a number of incentives were included to help the North Sea.
The creating of the new industry regulator the OGA (Oil and Gas Authority) he said would also have a “significantly positive impact”.
But Sir Ian said the fact remained that a low oil price environment would need a change in maximising production from the UKCS.
He added: “Well a lot is happening, government and industry are working together in a range of ways the North Sea costs will have come down 20% into the next year, production efficiency I’m
pleased to say is improving a bit this year and production is going up a bit this year against the price position but that’s simply because of the number of new fields on-stream .
“The Chancellor’s March budget was helpful. He set out to try and incentivise investment which was the right thing to do and of course we have a new regulator the Oil and Gas Authority (OGA).
“It will have significantly positive impact. The fact remains at $45,50,55 oil for a time, there needs to be some rethinking.
“I think Government now compared to two, three years ago have a much better appreciation of the role they can play in maximinsg economic recovery. I think with some imagintiave thinking at this kind of level of oil price, it’s possible to say at this level of oil price, investments for example undertaken now will get significantly higher allowances. It’s finding ways to incentivise people to invest now and prevent there being too big a fall off and preventing the loss of key people and key resources.
“All I’m saying is if this carries on for the next two, three months then I think government will be forced along with industry to try and work out some format to encourage investment.”
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