THE chief executive of Faroe Petroleum has highlighted the effectiveness of Norway's efforts to boost oil and gas exploration activity amid calls that more be done to encourage firms to increase drilling in UK waters.
Graham Stewart said Faroe Petroleum is in good shape despite the plunge in oil prices since June and underlined the company's desire to expand in Norway, where it has become a leading player.
Welcoming news that Aberdeen-based Faroe has been awarded another five exploration licences in Norway, Mr Stewart said the firm remains "robust" due to its strong balance sheet and modest spending commitments.
The company is making money on its production at current oil prices.
Mr Stewart added: "This strength, in combination with Norway's progressive and highly successful fiscal incentivisation, ensures Faroe is well placed to continue to grow its position in Norway as a key part of our value creating strategy."
Mr Stewart's comments look like a prompt for the Chancellor to consider copying some of the measures adopted in Norway as part of official efforts to help the North Sea oil and gas industry cope with the slump in the oil price.
With exploration activity falling sharply in recent years, the UK government was under pressure to try to boost exploration activity in the UK even before the oil price peaked at $115 per barrel in June. Brent crude traded at $49.41 yesterday.
Industry leaders fear exploration budgets will be cut sharply in response to the price fall.
Norway refunds 78 per cent of the costs incurred on qualifying exploration work by oil and gas companies, even if they are not making taxable profits.
Experts say the measure has been very successful in encouraging firms to increase exploration activity. The measure has been especially effective in encouraging niche players that may have limited cash or borrowing power.
In his Autumn Statement last month the Chancellor said he would introduce measures to boost exploration such as helping fund survey work and said he would discuss possible tax credits.
However, he is under pressure to do more and not to wait until the March Budget to implement measures.
Edinburgh-based Cairn Energy also showed its enthusiasm for exploration in Norway by bidding successfully for five licences in the latest round of awards.
The licences are in areas where Cairn already has acreage.
The company made a big find off Norway with the Skarfjell well, shortly after it bought the acreage concerned through the acquisition of Agora Oil & Gas in April 2012, for around £280m.
This was under chief executive Simon Thomson's plan to combine potentially transformational drilling in under-explored areas such as off Senegal with lower risk activity in the North Sea.
Cairn said yesterday it had completed the sake of a 10 per cent interest in the giant Catcher development off North East Scotland and confirmed it still expects the field to start production in 2017.
The company sold the stake to Dyas of Holland, which agreed to carry up to $182m costs, in September. The deal looks to have been well-timed given the fall in the oil price since then.
It will allow Faroe to reduce its share of the costs of developing Catcher by $380m in total, including the initial $182m.
Cairn retains a 20 per cent interest in Catcher. It acquired a 15 per cent stake through the Agora takeover and doubled that to 30 per cent when it bought Nautical Petroleum for £414m weeks later.
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