Positive outlook for future investment in North Sea

Group Business Correspondent

Friday 6 July 2012

OIL prices would have to fall a further 15% before firms would be likely to cut investment in the UK North Sea, according to an industry champion.

COMPETITIVE AREA: The Oil & Gas UK review highlighted the surge in investment in the North Sea last year thanks to the booming demand in China. Picture: Angela Catlin

Custom byline text:

MARK WILLIAMSON

While the price of Brent crude has fallen from $128 per barrel to around $100pb this year, Oil & Gas UK said prices would have to tumble a good way further before there is a significant impact on the multibillion-pound investment plans developed by oil and gas firms.

"At current levels these are prices that make the UKCS [United Kingdom Continental Shelf[ competitive," said Mike Tholen, economics director at the industry body.Mr Tholen added if the oil price fell below the mid 80s, firms would be "a lot less comfortable to invest in the UK".He said there are a trillion pounds worth of opportunities in the North Sea that are still to be developed.Mr Tholen made the comments after Oil & Gas UK published a review that highlighted the surge in investment in the North Sea last year as firms moved to cash in on booming demand for oil and gas in places like China.In its latest annual economic report, Oil & Gas UK noted that investment in new projects in the UK North Sea increased by 40% in 2011, to £8.5bn, from £6bn in 2010. Investment is expected to increase to around £11.5bn this year.Majors including BP and Shell approved a series of bumper multi-year projects off Shetland in 2011.Oil & Gas UK said the report highlighted the scale of the contribution made by the oil and gas industry to the UK's wealth and well-being. It reckons the sector supports 440,000 jobs across the supply chain. Some 45% of these jobs are in Scotland. Mr Tholen said each £1bn of new investment created or sustained 10,000 to 15,000 jobs.Oil & Gas UK says the industry pays one-quarter of total UK corporation tax.Chief executive Malcolm Webb said: "The UK oil and gas industry's economic contribution is to be celebrated and supported, especially in the current challenging global environment. With up to 24 billion barrels of oil and gas equivalent [boe] remaining to be extracted from beneath our seabed, the industry must, and with appropriate, targeted incentives, can, do more."Mr Webb said Oil & Gas UK was pleased by moves made by the Coalition Government to help stimulate investment following the outcry over the surprise hike in North Sea taxes in the 2011 Budget.However, he said more needs done to boost spending on existing fields and finds that have not been brought into production.Oil & Gas UK said firms would invest up to a further £5bn with the right support.The report notes that production from the North Sea fell by a record 19% annually in 2011, to 1.8m barrels oil equivalent daily. Oil & Gas UK said this was due to a range of factors including the tax increase in 2011, unplanned shut downs and increased maintenance activity.Production is expected to fall further this year, partly because of the leak at the Elgin-Franklin platform in March.This shut off production from a field that accounts for 3% of UK production. The Rhum gas field is closed due to European Union sanctions against Iran, who national oil company owns 50% of the field.

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules, which are available here.

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

Positive outlook for future investment in North Sea

Commenting & Moderation

MOST READ

SPONSORED LINKS

MOST COMMENTED