Britain’s rate of oil and gas output will continue to decline unless the government acts swiftly to provide tax breaks for companies involved in North Sea production, an industry association has warned.
Oil & Gas U.K., who represents around 85% of North Sea producers and suppliers, reported that the number of exploration and appraisal wells drilled in the first half of 2009 was down by more than 50% against the first-half of 2008. In this case the figures speak for themselves, with only 29 wells drilled in the first half, down from 61.
As a result the trade body speculated that as many as 50,000 industry jobs were at risk unless ministers acted to improve tax incentives for ailing oil and gas sector businesses.
Laying the blame with Whitehall, Malcolm Webb, Chief Executive Officer of Oil & Gas U.K, said: “There has been a lack of focus in the foundations of energy supply.” He went on to accuse the government of putting too much emphasis on renewables and nuclear energy while taking “for granted” the staple oil and gas sector.
Two-thirds of power demand in the U.K. comes from a combination of transport, heating and power generation, with only a third coming from electricity that could be fed by atomic power or renewables.
The move by Oil & Gas U.K. comes in the wake of Prime Minister Gordon Brown sounding a warning to the world’s major oil producers to not hinder economic revival through volatile oil futures prices.
Industry officials have warned that it is in the previously difficult or inaccessible fields – of which the future of the North Sea oil industry is dependent upon – that billions of barrels will remain un-drilled under the sea bed, unless the government is able to help stimulate investment.
Total investment in the North Sea oil fields is set to fall for a third successive year in 2009, and is more than likely to fall again in 2010. Investment fell to £4.8 billion in 2008 – down by £1.2 billion over a two-year period. A predicted drop of a further £3 billion is forecast for next year.
Playing devils advocate, Oil & Gas U.K. said that in the worst case scenario the North Sea could provide only as much as 500,000 barrels per day (bpd) by Olympic year 2012; equivalent to a measly 12% of the nation’s energy demand. However, if investment is maintained, the body believes that domestic production could still meet 40% of Britain’s energy hunger, by that time.