LONDON – Oil & Gas UK has written to Britain’s Chancellor asking him to use his forthcoming Autumn Statement to introduce measures to boost investment in North Sea E&P.
The association points out that the North Sea oil and gas industry faces fierce global competition to attract investment, with the combined challenges of a low oil price, a maturing industry, and uncertainty for the sector.
Its Economic Report 2016 found that investment across the UK continental shelf is down from £14.8 billion ($18.5 billion) in 2014 to £9 billion ($11.24 billion) this year, underlining the difficulties investors face in accessing finance for asset development.
Deirdre Michie, chief executive, said: “Exploration and development drilling has fallen to record lows and industry figures reveal a drought of new investment approved in 2016, and 2017 looks no better…
“The UK oil and gas industry is much more globally competitive than it was two years ago. The cost of doing business in the North Sea has come down significantly and production has increased for the first time in 15 years thanks to the industry’s efforts to make its operations more efficient.
“We urgently need to see new entrants encouraged into the market and increased asset trading is one area that could boost activity in the North Sea by facilitating the trading of late-life assets. But investors are also looking for certainty and we can’t underestimate the importance of government sending a strong signal of confidence and support.”
Oil & Gas UK has requested the UK government for four commitments:
- To re-affirm its continued commitment to the “Driving Investment” fiscal strategy which recognizes the need for a more competitive, simple, and predictable fiscal regime as the basin continues to mature
- Promote the increasing competitiveness of the basin as well as the capability of the UK’s oil and gas supply chain, both nationally and internationally, as part of the UK’s new industrial strategy
- Complete work on decommissioning tax relief over recent budgets by introducing measures to enable tax relief to be transferred upon an asset sale. This would unlock the trading of assets by encouraging new entrants to the market and freeing up new investment
- Introduce new measures to extend the investment allowance for operating expenditure that is aimed at increasing production from an asset or keeping it producing for longer. This could include investment in enhanced oil recovery techniques.
Less than £100 million ($124.9 million) of fresh capital has been committed to the basin this year, the association added, with only one new field approved – this compares with five greenfield projects sanctioned last year with associated development capital of more than £4.3 billion ($5.37 billion).