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Wood Group's chief confident over oil industry

SIR Ian Wood said the North Sea oil and gas industry could remain buoyant for another 10 years with the right support from ministers after the oil services giant he developed posted bumper profits for 2011.

Aberdeen-based Wood Group increased underlying profits from continuing operations by 56% to $342 million (£220m), from $219m in the preceding period, helped by strong activity levels off Scotland.

The company is recruiting 430 additional staff to help cope with its North Sea workload.

Aberdeen-based Wood Group said the arm of the business that helps firms develop new assets enjoyed "notable growth in the North Sea". Chaired by Sir Ian, Wood is benefiting from booming investment off Shetland by oil and gas firms like BP.

The company said the Wood Group PSN business, which supports existing assets, also enjoyed strong demand in the North Sea.

Firms want to ensure their facilities are in shape able to capitalise on strong demand in places like China and $100 per barrel plus oil prices.

The unit's strong performance helped vindicate the decision to buy its Aberdeen rival PSN for $955m in 2010, to increase its exposure to brownfield work. It raised $2.8bn by selling its Well Support division last year. Wood said the integration of PSN has gone well, although it has made losses in Oman and Colombia.

The increase in activity occurred despite warnings that the hike in North Sea taxes in the 2011 Budget would lead firms to slash investment in UK waters.

Asked whether the industry had cried wolf about the increase, Sir Ian said: "No, because in terms of the oil price $100 plus in the North Sea is okay, but where the Government got it wrong was the gas price. Gas prices have not increased in line with oil prices."

Sir Ian continued: "I think it's recognised the Government made the decision very quickly at the last minute and didn't take account of the impact it was going to have on gas developments.

"Gas developments are

being undoubtedly held back."

Sir Ian wants the Chancellor to provide targeted help for oil and gas firms in the Budget on March 21.

He said: "2012 and 2013 look pretty good but the Government must take on board the importance of a policy that maximises the recovery from the North Sea, as well as looking at next year's revenue to the Treasury."

Sir Ian said by providing effective tax relief for decomissioning costs the Chancellor could encourage asset transfers between firms, triggering a "lot of additional spend".

He also wants the Government to introduce more field allowances, to encourage investment in marginal developments.

Chief executive Allister Langlands said Wood expects global exploration and production spending to rise by 5% to 10% this year, after rising 10% in 2011.

Reflecting confidence, the group declared a final dividend of 9.6 cents per share. This will bring the full year dividend to 13.5 cents, up 23% on 2010.

Shares in Wood Group fell 8%, 58p to 705.5p, possibly reflecting some profit taking, The price had increased by more than 30% in the last six months.

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