Lack of capital investment and low exploration activity are among the major challenges for the UK oil and gas industry, according to Oil & Gas UK in its Economic Report 2016.
“The UKCS is in urgent need of fresh investment to boost exploration and drive activity, particularly for the supply chain,” said Deirdre Michie, OGUK’s chief executive. “Exploration has fallen to record lows and little new investment has been approved in 2016 and 2017 looks no better.”
In the past 2 years, about 120,000 jobs have been lost, and the supply chain has seen an average 30% fall in revenues (OGJ Online, June 13, 2016).
On the positive side, production was up 10.4% in 2015—the first increase in 15 years. And the cost of extracting oil or gas from the UKCS has dropped 45% since 2014.
“Now it is time for the UK and Scottish governments to reinforce their efforts to promote the UKCS, nationally and internationally, as an attractive investment with world leading capability from front end exploration to late life operations,” Michie said.
OGUK asked the UK government to reaffirm 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.