Oil & Gas is seen by many as a "sunset
industry" with an unsustainable future,
according to the Government's UK Oil
and Gas Industrial Strategy.
But, as the Strategy makes clear, this is
an energy sector with a major role to play
in Britain's energy mix and "the reality is
that the UK will continue to supply oil and
gas well beyond 2055."
Quite simply, it said: "We want to maximise economic recovery
of oil and gas
from the UK Continental Shelf (UKCS) and
support a dynamic supply chain which
sustains high quality jobs in the UK."
The British economy could receive a potential £200 billion boost over the next
through recovery of an additional 3-4 billion
barrels of North Sea oil and gas, according
to a report published by the UK Government
in early 2014.
This was the long-awaited Wood Review,
containing the recommendations of Sir Ian
Wood for Maximising Economic Recovery
from the UKCS (MER UK) by:
• Improving efficiency in the sector
• Increasing production by one third
• Boosting jobs in an industry already
employing 450,000 - an estimated
200,000 of those in the upstream
The Review followed widespread discussions with operators,
supply chain companies, trade
bodies, Government departments
in Whitehall and Scotland, and with regulators
in other global oil and gas nations
including the USA, Norway, Holland and
Australia. One of the clearest messages from
the feedback, reported Sir Ian, was the need
to move quickly.
AT A CROSSROADS
The sector is at a crossroads. In 2013, said
the Review, UKCS investment reached a
record high of over £14 billion, but industry
expects this to at least half in the second
half of the decade "unless new developments are
Additionally there are some serious underlying problems.
Production was down 38%
between 2010 and 2013 meaning UKCS
produced around 500 million boe (barrels of
oil equivalent) less over the period - 360 million boe of this decline caused by rapid
production efficiency. At the same time there
was a sharp decline in exploration which led
to less than 150 million boe being discovered
in the last two years. It cost the UK
Treasury £6 billion in lower tax receipts.
One of the big issues, said Sir Ian, is that the
light touch regulation applied in the early
days of large fields and large operators,
must now be evolved to take account of a
basin with over 300 fields, much smaller
new discoveries, many marginal fields and
much greater inter dependence on exploration,
development and production.
"I see this as a watershed opportunity to ultimately
reshape the regulatory environment,"
he said, and this was one of the core recommendations given "overwhelming
from Industry" when Sir Ian's Interim Report
was issued for consultation in November.
As we went to Press it was announced a
new Oil and Gas Authority (OGA) will be set
up to implement the MER UK Strategy and
with a new approach that UKCS resources
will be managed on a regional basis. This
contrasts with current arrangements where
operators tend to think in terms of operation
of single fields within their licences. The OGA
ENERGYOIL & GAS
THE 'SUNSET INDUSTRY'
WITH £200 BILLION OF POTENTIAL
UK STRATEGY SUPPORTS DYNAMIC SUPPLY CHAIN
OIL & GAS
Cut-out image, left, courtesy Statoil,
which shows part of its Mariner
project with reservoir. Located in the
North Sea Mariner involves development of ultra-heavy
oil fields at depths
of up to 112m with an estimated
£7 billion investment.
Far left, courtesy BP, is the Valhall
Re-Development project described as
another significant milestone by BP
group chief executive Bob Dudley.
Opposite page: A rig at night,
courtesy Pettersen / Statoil.