Over $1.57 trillion (£1 trillion) of investment will be required to recover all of the remaining oil and gas that is thought to exist offshore in British waters, according to the latest industry report from Oil & Gas UK, cited by Natural Gas Europe.
Unless more incentives are provided for drillers to work in the UK Continental Shelf (UKCS) and offset the increase in costs of operating there then the UK will struggle to recover the 20 billion barrels of oil equivalent (boe), or above, that are thought to remain offshore, warned Malcolm Webb, chief executive of Oil & Gas UK.
“Maximising recovery from the UKCS is the collective responsibility of all those who fund, regulate, tax and operate the offshore oil and gas industry and achieving our full potential will require a tremendous effort on the part of everyone involved,” said Webb. “Our industry makes far too important a contribution to the economic and energy security of the nation to be allowed to falter at this critical point.”
The report shows that production in the first half has bounced back after suffering several years of double digit declines. The latest figures cited in the report from the Department of Energy & Climate Change show that output mainly from the North Sea grew by 1 percent in the first six months, compared with a year earlier, after almost $43.8 billion (£28 billion) was pumped into boosting production since the beginning of last year.
Some estimates have placed the volume of oil equivalent, a measure which includes gas and condensate, that could still be recovered in the area known as UKCS as high as 30 billion barrels.
Michael Tholen, Oil & Gas UK’s economics director added: “We need a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration. The outcome of the Fiscal Review, expected to be announced in December this year, must be relevant, radical and robust.”
The North Sea and estimates of how much oil can be extracted from the region was a key economic battle ground during the recent Scottish referendum, with Alex Salmond’s estimates on the region’s potential revenue attacked by leading industry figures such as Sir Ian Wood. However, the latest report from Oil & Gas UK suggests that the North Sea and more challenging areas west of Shetland may only achieve their remaining potential if significant incentives are given to oil companies.
