OIL and gas industry leaders said the Government needs to do more to ensure the UK makes the most of its resources despite the recent surge of investment in the North Sea.
Commenting after a City brokerage ranked the North Sea as one of the top three areas in the world for oil and gas companies to achieve growth, Oil & Gas UK said three billion barrels could remain undeveloped without support for the industry.
In a report, Seymour Pierce highlighted the fact that capital investment in the UK North Sea hit a record £7.5bn on the back of high oil prices in 2011 and is set to remain at that level for years. They ranked the North Sea alongside Kurdistan and East Africa in terms of the potential for firms to achieve good returns on their investment.
Last year, the UK North Sea received a vote of confidence when BP and Shell decided to proceed with the £3bn redevelopment of the Schiehallion field and the £4.5bn Clair Ridge project west of Shetland.
However, Oil & Gas UK said people should not read too much into the fact these projects were sanctioned despite the hike in North Sea taxes in the Budget last year.
Mike Tholen, Oil & Gas UK's economics director, said: "The wave of significant investment in a few large projects with very robust economics that began in 2011 and will continue for several years was initiated before the last Budget, when the tax rate on new developments rose to 62% and on mature fields rose to 81%. These large projects are also not indicative of the type generally found on the UK Continental Shelf which tend to be smaller and more costly to develop on a per barrel basis."
Commenting five weeks ahead of the 2012 UK Budget, Mr Tholen added: "The tax increase, alongside the capping of tax relief on decommissioning costs, unsettled the industry, and exploration and production have both seen dramatic falls in the past year. Without intervention by the Treasury in the forthcoming Budget, investor uncertainty means projects worth three billion barrels and tens of billions of pounds of investment are likely to remain undeveloped."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article