Oil and gas contractors may benefit from an increased number of contracts alongside improved long-term North Sea prospects, if the government follows the strategy outlined in Sir Ian Wood’s long-awaited final report on extending the life of the UK Continental Shelf (UKCS).
The measures recommended in the report, UKCS Maximising Recovery Review: Final Report, are designed to produce up to 4bn more barrels of oil, sustain and increase employment in the UK’s oil and gas sector, and improve tax revenues.
Wood’s proposed UKCS Maximising Economic Recovery (MER) strategy calls for:
- Closer links between industry and the government to develop a licensing regime that promotes maximising oil and gas recovery, which will in turn generate more contracts and jobs
- Greater collaboration within the industry to share existing infrastructure and geophysical data, alongside a government commitment to cut red tape
- The creation of a new independent regulator to “supervise licensing and ensure maximum collaboration between companies to explore, develop and produce oil and gas”.
As part of what many see as a political bid to out-manoeuvre the Scottish National Party’s claim to “Scotland’s oil” in the run-up to the September 2014 Scottish independence referendum, David Cameron has offered his support to fast-track the proposals.
The prime minister said: “I promise we will continue to use the UK’s broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race.”
Industry body Oil & Gas UK’s chief executive Malcolm Webb believes the report and its strategy to be a “game changer”, highlighting that: “We have the opportunity to secure a bright future for our industry and unlock at least a further £200 billion for the UK economy.”
However, he warns that: “To maximise the recovery of the country’s oil and gas resource will require a much greater degree of collaboration on the part of both industry and the government.”
Declining production and a high tax burden previously placed pressure on the industry, leading to North Sea investments being postponed or cancelled. Tax breaks introduced in the 2013 Budget led to many projects being restarted, and should these new measures be implemented they could lead to a stream of new and profitable contracts for oil and gas contractors.