Brexit Worsens Investment Prospect in North Sea Oil

Brexit Worsens Investment Prospect in North Sea OilBrexit Worsens Investment Prospect in North Sea Oil

The UK’s North Sea oil and gas industry, already reeling from low prices and high costs, now faces a worsening investment drought as the nation’s decision to quit the European Union looks set to trigger a second independence vote in Scotland.

"There may be a pause in investment while companies assess uncertainties, including the possibility of another Scottish referendum," said Ian Thom, senior research manager at Wood Mackenzie Ltd, Bloomberg reported.

The Edinburgh-based consultant estimates that North Sea investment will decline by 79% from 2015 to 2020.

The industry would face an even longer period of turmoil if the UK’s EU exit were followed by a split with Scotland. That would probably mean reserves of oil and gas would be split.

The division would hand the Scots about 96% of annual oil production and 47% of natural gas, according to estimates for 2012 by the University of Aberdeen’s Alex Kemp and Linda Stephen cited by the Scottish government at the time of the 2014 referendum campaign.

The prospect of another Scottish referendum “is not great for the investment climate”, said Alan McCrae, UK head of energy tax at services firm PwC.

“The industry needs both fresh investments and continuation of the existing investments.”

The North Sea has been battered by the slump in oil prices because of its high costs and dwindling resources. Oil and gas producers in the region will spend 40% less this year than in 2014 and by the end of the year an estimated 120,000 jobs will have been lost because of the downturn, Bloomberg reported.

 “The UK oil and gas industry is at a critical juncture and we need to ensure the UK continental shelf continues to attract investment,” industry group Oil & Gas UK said in a statement on June 24.

It urged UK government to “clearly” outline the process of leaving the EU in order to “make this transition as smooth as possible”.