THE Government's improvements to the North Sea tax regime in its March budget helped drive higher levels of investment and risk-taking, says a survey.
Offshore drilling activity on the UK Continental Shelf (UKCS) rose 64% in the second quarter of 2012 compared to the same period last year, according to Deloitte. The report shows 18 exploration and appraisal wells were drilled on the UKCS during the period – a 64% rise on the first quarter.
Graham Sadler, managing director of Deloitte's Petroleum Services Group, said: "Announcements in the Government's March budget with regards to the extension and change in field tax allowances should encourage further exploration, appraisal and development activity."
Greater certainty on decommissioning tax relief, if implemented, should allow companies to switch cash flow previously tied up in financial guarantees into investment, he added. "We are also seeing a reversal in terms of drilling activity levels in the UK compared to Norway which is down 33% in the last quarter. This may suggest the recent tax changes introduced by the UK Government are encouraging organisations to look at the North Sea in a more positive light."
The report says eight new fields have come onstream in 2012, higher than the 2011 total and more than double the numbers in 2009 and 2010. Deal activity was up with 25 transactions in the second quarter, 47% up on the same period last year.
Graham Hollis, energy partner at Deloitte in Aberdeen, said a year ago deals were strongly dominated by farm-in activity. Across north-west Europe, only nine farm-ins had occurred during the second quarter of 2012, a 58% drop on the same period last year. "Instead, we have seen a 58% rise in the number of asset transactions ... as companies feel the benefit of increased liquidity and are increasingly willing to take risks and spend money on full asset acquisitions."
l Royal Dutch/Shell has abandoned the battle for control of gas explorer Cove Energy, shocking investors and clearing the way for Thai rival PTT Exploration Production to acquire it.
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