Page 0020

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

20 years

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

supply chain.

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.


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

fall in

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







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.


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