Oil and gas contractors, alongside those in core contracting disciplines such as IT and engineering who serve the energy supply chain, look set to benefit from the highest levels of investment in the North Sea for more than 30 years.
This is according to Oil & Gas UK’s 2013 Activity Survey, which identifies investments totalling £100 billion in companies’ plans, which are expected to generate tens of thousands of new contracts and jobs.
Oil & Gas UK’s chief executive Malcolm Webb is naturally delighted: “After two disappointing years brought about by tax uncertainty and consequent low investment, the UK continental shelf (UKCS) is now benefitting from record investment in new developments and in existing assets and infrastructure, the strongest for more than three decades.”
He puts this down to a combination of technological breakthroughs and improvements in the tax regime, which have led to more oil and gas reserves becoming commercially viable for development.
The new investment in production from existing oil and gas fields is expected to reverse the decline in North Sea production, and contracts, experienced as a result of Chancellor George Osborne’s windfall tax on energy companies in the 2011 Budget.
The positive news for contractors, and for the economy, continues, as Oil and Gas UK forecasts that North Sea exploration is also set to increase. According to Webb, during the period following the Chancellor’s windfall tax, “only 21 exploration wells per year on average were drilled over the last three years”.
He predicts exploration will now ramp up significantly, which in turn will generate new contracts throughout the supply chain: “The survey results lead us to forecast 130 exploration wells over the next three years, which, alongside the use of new and improved sub-surface technology, should result in many more barrels being discovered.”
There is a time-lag of two to three years between investment decisions and production coming on stream. But over the short-term, Oil & Gas UK notes that the projects approved in 2011 and 2012 alone will produce more than two billion barrels of oil and gas, generate £100 billion value for the economy and an additional £25 billion in production taxes for the Exchequer. And new contracts will of course flow too.
Webb concludes: “We look forward to the continuation of this collaboration between industry and government ... which will further boost the supply chain’s capacity to create employment and foster innovation.”